The great Sir Winston Churchill once said: “However beautiful the strategy, you should occasionally look at the results “. This old wisdom undoubtedly shifted from the battlefields in World War II and found its way to dynamic and competitive markets of today. Most recent research from the Fortune magazine revealed quite discouraging results that only 10% of companies who have effectively formulated their strategies, succeed in effectively executing them.
Regardless the strategic framework the company might consider using for management of its strategy, such as a Balanced scorecard, Office of Strategy Management or some internally developed framework, it is instrumental to ensure success in both strategy origination and strategy deployment.
It is here where all the beauty is born. Starting from their mission, vision and values, and based on thorough strategic analysis derived from both external and internal environment, at this stage companies craft their strategy map, consisting of different strategic themes that are stretched across four major layers in the strategy map, namely: financial, customer, internal processes and development layer. Each strategic theme outlines key value drivers that are crucial for strategy execution, along with KPIs associated with respective value drivers, which measure a success in realisation of the strategy. If we take, for example, ultimate customer loyalty as a strategic theme, then the company might consider to set key value drivers defined for each of the four layers, such as revenue growth in the financial layer, increasing customer spending and upgrading existing customers in the customer layer, implementing Loyalty Management System (LMS) in the internal processes layer and organising appropriate LMS training for company’s employees in the development layer.
Unlike the standard planning & budgeting process, where only financial figures are regularly tracked against the plan and where strategic and business plans often end up in the desks of CEOs and CFOs until the next year’s planning & budgeting cycle, driver based planning & budgeting process calls for continuous progress tracking of realisation among all relevant strategic value drivers, as well as of the action plans and initiatives, coming from each of them. Strategy deployment consists of three key steps.
Step 1: Cascading driver based action plans and initiatives throughout the organisation
Depending on the organizational design and maturity of it’s business and supporting functions, different companies
will use different approaches in cascading action plans and initiatives.
For example, a company operating with several divisions with mature business and supporting functions, will want to have one strategy map for each division, with segments on the strategy map that outline value drivers for specific departments of the respective
division. In that case, next step would mean creating sound action plans, initiatives and projects for each of the departments, with clearly defined responsibilities, accountabilities and deadlines for execution of each of the action plans/initiatives/projects. In parallel with translating value drivers into action plans and initiatives, it is also necessary to set a blend of smartly defined KPIs to be tracked on all relevant organisation levels. In that way, the company ensures that both business planning and business reporting are inevitably focused on strategy.
Step 2: Ensuring strong interlock between business and support functions
Each strategy map shows a clear cause and effect relationship between the business and support function actions. In
other words, a strategy map of a business division that in the internal processes layer points out an immediate need to improve a lead time of ordering process will on the other side mean that IT, as a supporting function, should develop appropriate applications aimed towards solving this issue. From that moment this business requirement becomes one of the targets for enabling functions, such as IT function, which will also have its internal strategy map consisted of similar targets and KPIs to be realised, in order to enable smooth strategy execution. That is called the interlock between business and support functions and it seeks for an efficient coordination within the company.
Step 3: Linking personal goal – setting process with the strategy execution
Finally, once key value drivers from strategy maps have been successfully cascaded in the form of departmental
action plans and initiatives, with proper interlock defined between business and support functions, in the last step the company will need to ensure that the driver based plans and budgets are also being translated into personal targets for its employees and that the strategy has been clearly communicated to them. This will ensure that people are focused on their contribution to strategy execution, provided that proper incentive schemes are triggered in order to motivate the staff in striving towards great performance, because remember that no matter how beautiful the strategy, it could never be as powerful as people who execute it.