5
From Strategy to Implementation
Seeking Alignment
Key Topics Covered in This Chapter
- The profound differences between strategy creation and strategy implementation
- Alignment for implementation
- The elements of successful implementation: people, incentives, supportive activities, organizational structure, culture, and leadership
MANY EXECUTIVES ENJOY strategizing. SWOT analysis involves lots of hard work, but once that’s done, these executives can play the part of the armchair general, develop bold initiatives to outflank rivals, corral customers, and conquer markets. Strategy, however, is nothing but hot air if equal or greater attention is not given to the harder and less glamorous work of implementation. Implementation describes the concrete measures that translate strategic intent into actions that produce results. Implementation requires continuous managerial attention at all levels. Unlike strategy creation, which is entrepreneurial and market-oriented, implementation is operations-oriented. Implementation excellence is both absolutely essential and capable of providing enormous rewards. (See “Two Very Different Activities” for characteristics that define strategy versus implementation.)
Consider the case of Herman Miller, Inc. The Michigan-based company is a leader in the North American office-furniture industry and a vendor to major corporations. In the early 1990s its leadership recognized that small businesses represented a fast-growing and underserved market. Unlike deep-pocketed corporate clients, these small enterprises watched every penny and had short planning cycles; they were less interested in Miller’s countless feature choices for workstations, desks, chairs, and fabrics than in office furnishings that were relatively inexpensive and delivered quickly and on time.1
Two Very Different Activities
The differences between strategy creation and strategy implementation are profound. Even the vocabulary used to describe them is very different.
| Strategy Creation | Implementation |
|---|---|
| Analysis and planning | Execution |
| Thinking | Doing |
| Initiate | Follow through |
| At the top | Top-to-bottom |
| Entrepreneurial | Operational |
| Goal-setting | Goal-achieving |
Herman Miller’s management responded in 1995 with a new strategy that aimed to provide these smaller customers with a limited range of basic, mass-customized office furniture that fit these requirements. This was a great strategy for addressing a growing market segment, but more than good intentions were needed to make the strategy successful. Operations within Herman Miller had to change. It couldn’t simply throw orders from its small business customers into its existing fulfillment machinery and expect it to deliver what had been promised. But what had to be done?
Company managers approached the implementation problem by first standing back and looking at its current key processes, from order taking to order filling to delivering and installing finished products. Based on that analysis, they energized a lean new operating unit, which they called SQA (for simple, quick, affordable). They also created a new supply chain for SQA capable of delivering on their promise to customers. All participants in that chain, including outside vendors, were linked through a new, state-of-the-art information system that assured both speed and accuracy. Managers and supervisors then went to work, making sure that everyone from the sales staff to assembly personnel to delivery and installation employees understood the importance of being fast, error-free, and on time.
Herman Miller’s efforts produced exceptional results. Once implementation was complete and fine-tuned through practice, SQA had collapsed the normal order-to-delivery cycle from the six-toeight-week industry average to two weeks or less. On-time error-free delivery, which Miller’s traditional business had achieved only 70 percent of the time, stabilized above 99 percent. Still better, SQA’s sales growth rose to 25 percent per year, three times the industry average.
We tell the Herman Miller story to make an important point—that strategy in the absence of effective implementation is pointless. Some believe that strategy is actually less important than implementation in the sense that strategy is becoming a commodity in many industries—something that any rival can duplicate. In this case strategy is not a tool for differentiation. What matters more than strategy, in their opinion, is the ability to execute exceptionally well. Stanford’s Jeffrey Pfeffer puts it this way: “It is more important to manage your business right than to be in the right business.”2 Success, in his view, comes from successfully implementing one’s strategy, not just having one. The ideal, of course, is to have both a great strategy and outstanding implementation!
Getting from strategy to implementation requires attention to a number of structural, personnel, and resource issues. (See “The Seven S Framework” for one possible model for strategy implementation.) Any successful strategy must be formed around a coherent and reinforcing set of supporting practices and structures. Most people call this alignment. For a business, alignment is a situation in which organizational structures, support systems, processes, human skills, resources, and incentives support strategic goals. In their excellent book on this subject, George Labovitz and Victor Rosansky identify four elements of alignment: strategy, processes, people (employees), and customers. “When the four elements of alignment are simultaneously connected,” they write, “each element is supported and strengthened by the others . . . and great things happen.”3
Declaring a strategy won’t get you far if you fail to create alignment between it and the many large and small things that constitute how your company operates. Companies that fail to achieve alignment fail to get the results they seek. This chapter examines elements of alignment that implementers must consider.
The Seven S Framework
Over the years, attempts have been made to create a model for successful strategy implementation. One of the first—and best—of these first appeared in The Art of Japanese Management, authored by Richard Pascale and Anthony Athos and published in 1981. Their model was adopted by McKinsey & Company, a global strategy consulting organization; many now refer to it as the McKinsey Seven S Framework. The “S” in this framework are Strategy, Structure, Systems, Style, Staff, Skills, and Superordinate goals. If you’d like to learn more about this framework for strategy implementation, refer to Richard Pascale’s Managing on the Edge. (See “For Further Reading” at the end of this book for the bibliographic details.)
Elements of strategy alignment involve people, incentives, supportive activities, organizational structure, culture, and the leadership of the business, as represented in figure 5-1. Notice in that figure how each element is aligned with strategic goals and with each of the other elements, forming a solid platform for implementation and eventual success.
Alignment for Implementation
People and Incentives
Every manager and every employee—from the executive suite to the loading dock—must be involved with implementation. Senior management has a responsibility to communicate strategic intent to employees, and mid- and lower-level managers must reiterate that intent and translate it into the way their subordinates work. Management must also ensure that the company has:
- People with the right skills to make the strategy successful (this is accomplished through hiring and training)
- People with attitudes that support the strategy
- The resources that people need to do their jobs well
Companies don’t always get the people side of implementation right. Consultant/author Dwight Gertz has described one company that operated a chain of fresh-baked cookie shops in shopping malls and other high-traffic areas across the United States. Years of experience had helped management learn which cookies to bake, when, in what quantities. Its executives knew that if store managers simply followed their published operating procedures, sales and profits would follow—they always had.
Unfortunately, the cookie company’s human resource department was advertising for store manager candidates with the theme of “Be your own boss.” Not surprisingly, this attracted entrepreneurial people who wanted to run things their own way. That would be just fine in some situations, but not this one. These people didn’t follow the company’s success formula, and, not surprisingly, profitability plummeted where the new entrepreneurial recruits ran things. They made the wrong cookies, or they made too few or too many at different times of the day or week.4
In this case, the company had a sound strategy and a proven set of operating procedures. But its personnel selection process was out of alignment; it was hiring people who were temperamentally indisposed to follow those procedures. The mind-set of key employees was not aligned with the company’s formula for making money; instead, it was neutralizing the power of the company’s formula.
Incentives are another big part of the people side of implementation—and perhaps the most important factor in implementation overall. Unless employees have real incentives to implement the strategy, they will not commit to it, and the strategy will probably fail. Have you ever worked in a situation in which there were few incentives to work toward key goals? A financial services company, for example, wanted to differentiate itself from local competitors by promising top-quality financial planning services delivered by knowledgeable customer-facing personnel. In a field in which all competitors offered basically the same products and services, this strategy aimed to attract the most valuable customers (i.e., high-net-worth individuals and families). To implement the strategy, this company needed employees who had substantial training and experience in financial planning. Unfortunately, this company’s incentive system failed to support the strategy. People with advanced training were not paid any more than their peers; nor was greater experience rewarded. Consequently, highly trained and experienced customer-facing employees routinely left to join other firms—where their skills earned higher pay. They were replaced with inexperienced personnel, a practice that undermined the company’s strategy. (See “The Say-Do Problem” for a further examination of strategy/ implementation misalignment.)
The best assurance of implementation is a rewards system that aligns employees’ interests with the success of the strategy. That is nothing more than common sense. To accomplish this, every unit and every employee should have measurable performance goals with clearly stated rewards for goal achievement. And the rewards should be large enough to elicit the desired level of employee effort.
Where does your company stand on the people part of strategy? Do its incentive programs and HR practices measurably support the strategy? Do its hiring and training practices aim to get the right people with the right skills into positions where they can make a difference? Does it have a say-do problem?
The Say-Do Problem
Misalignment between incentives and strategy is often the result of what experts at Mercer Human Resources Consulting describe as the “say-do” problem. A company says one thing but does another. As described in a study of human capital measurement, these experts cite the example of one high-tech company that touted its pay-for-performance policy. Examination of company HR data, however, indicated something entirely different: Only 5 percent of total pay was directly linked to individual performance. In fact, people in the lowest quartile of performance were getting almost as much from the annual bonus pool as the company’s top performers.
Similar say-do contradictions were found in other companies. In each instance, incentive mechanisms were failing to support explicit company strategies and goals. Does your company suffer from the say-do problem?
SOURCE: Haig Nalbantian, Richard Guzzo, Dave Kieffer, and Jay Doherty, Play to Your Strengths (New York: McGraw-Hill, 2004), 36–43.
Supportive Activities
Misalignment on the human resources front is a common impediment to effective implementation. But there are others, including activities that few of us would think essential to the success of a particular strategy. Corporate-level strategy, according to Harvard professors David Collis and Cynthia Montgomery, “is a system of interdependent parts. Its success depends not only on the quality of the individual elements but also on how the elements reinforce each other.”5 Michael Porter has used the example of Southwest Airlines to illustrate how success is more likely when many seemingly unrelated activities reinforce each other and the overall strategy: “Southwest’s . . . competitive advantage comes from the way its activities fit and reinforce one another.”6 For example, the company’s strategy is to compete on the basis of low-cost, frequent service. As figure 5-2 illustrates, many primary activities make that strategy feasible, and these are supported by other activities. Keeping ticket prices very low, for instance, is a primary activity of the strategy; it is supported by high aircraft utilization, the limited use of travel agents, a standardized fleet of aircraft, highly productive ground crews, and so forth. In the absence of any one of these linking activities, Southwest’s low-cost strategy would be jeopardized. But together they make it work. Southwest’s traditional rivals have periodically tried to emulate its strategy by offering low fares and frequent departures, but because they lack supportive activities, all have failed. According to Porter, “Southwest’s activities complement one another in ways that create real economic value....That is the way strategic fit creates competitive advantage and superior profitability.”7
Southwest Airlines’ Activity System
Source: Michael E. Porter, “What Is Strategy,” Harvard Business Review, November–December 1996, 73. Reproduced with permission.
Take a minute to review your own strategy and ask, How well is it supported by the organization’s other key activities? For example, if rapid and accurate order fulfillment is a key element of your strategy—as in the Herman Miller case described above—you’d want to coordinate sales, order-processing, manufacturing, and delivery activities, and purge them of errors and wasted time. Do hiring, training, logistics, pricing, and other activities create an interlocking support system for strategy? If they don’t, what could be done to link strategy and these supportive activities more effectively?
Organizational Structure
Successful military leaders have always organized their forces in terms of their battlefield strategies. In the first days of World War II, for example, German army commanders opted for a strategy of blitzkrieg—highly mobile, or “lightning,” warfare. This strategy aimed to counter the static trench warfare strategy that their Belgian and French rivals had carried over from World War I. Speed, surprise, air support, and the concentrated power of fast-moving armored units were the key elements of the new German strategy. Instead of slogging it out from fixed positions in a long battle of attrition—as both sides had done in World War I—the Germans aimed to pierce or outflank fixed defenses, causing havoc and collapse in the enemy’s rear. In some cases, paratroopers would be dropped behind or on enemy flanks to produce a similar result.
This new battlefield strategy demanded a new organization. Instead of the traditional model of deploying a small armored unit in support of the much larger infantry, the roles were reversed. Armor formed the tip of the spear; infantry, artillery, and supply units were organized in its support. Each of those support units was mechanized to keep pace with the fast-moving armor, and all were linked through field communications.
The blitzkrieg strategy was the main contributor to Germany’s victories early in World War II. U.S. General George Patton was among the first on the Allied side to appreciate its power, and he is credited with reorganizing his own forces to meet and defeat mobile German armies in North Africa, Sicily, and France.
As much as business people like to see military analogies in what they are doing, business is not warfare. Nevertheless, the military example of reorganizing people and material in support of a new strategy is instructive and useful. Our earlier story about Herman Miller makes it clear that that company would not have succeeded in its strategy of fast, dependable delivery of mass-customized office workstations and furniture without a reorganization of its human, supplier, and manufacturing assets. Like every other enterprise that pursues agility and speed, Miller had to shift the work into a lean, nonhierarchical unit in which production decisions could be made swiftly and monitored more effectively.
Take a minute or so now to think about your company’s organization. Are its people, resources, and units aligned with company strategy? How about in your own unit? Company strategy has created goals for your unit—these are your contributions to the top-level strategy. Is your unit optimally organized to achieve those goals? If it isn’t, what could you do to make it so?
Culture and Leadership
Culture and leadership are the last elements of strategy implementation you need to consider. These must be supportive of both the strategy and the day-to-day work that implements it.
Business literature refers often to company culture. We have, for instance, many references to 3M’s culture of innovation and its 15 Percent Rule, which allows R&D personnel to spend 15 percent of their time pursuing whatever ideas appeal to them, as long as they have some commercial potential. We also hear of Wal-Mart’s culture of dedication to customer satisfaction and driving down costs. And then there’s eBay’s more playful, collegial, and “can-do” culture.
Culture refers to a company’s values, traditions, and operating style. It is one of those vague qualities that is difficult to measure or describe with precision, but it nevertheless exists and sets the tone for managerial and employee behavior. In a sense the term describes how people view their workplace and how things are done. One company may be highly male and engineering-oriented, pride itself on its tradition of technical innovation and problem solving, and operate with a command-and-control style. Another company’s culture, in contrast, may be gender-neutral, value service quality above all else, and operate in a collegial, nonhierarchical manner.
One way to understand a company’s culture is to ask, “Who are your company’s heroes, and what stories do people tell about them?” These heroes might be super-salespeople, or master organizers, such as General Motors’ Alfred Sloan. St. Paul–based 3M Company counts Dick Drew and William McKnight among its heroes, and even though these individuals passed from the scene many decades ago, current employees know who they were, recognize their contributions, and tell their stories.
Dick Drew, the developer of masking and cellophane adhesive tapes in the 1920s and 1930s, was an accomplished inventor—a man who could both recognize a customer problem and craft a profitable technical solution. His many successful products made him a legend within the company. William McKnight spent his entire career (1907–1966) with the company, eventually rising from assistant bookkeeper to president, and then chairman. McKnight’s great contribution to 3M lore was as a business philosopher whose management principles continue to guide the company. He described that philosophy as follows:
As our business grows, it becomes increasingly necessary to delegate responsibility and to encourage men and women to exercise their initiative. This requires considerable tolerance. Those men and women, to whom we delegate authority and responsibility, if they are good people, are going to want to do their jobs in their own way.
Mistakes will be made. But if a person is essentially right, the mistakes he or she makes are not as serious in the long run as the mistakes management will make if it undertakes to tell those in authority exactly how they must do their jobs.
Management that is destructively critical when mistakes are made kills initiative. And it’s essential that we have many people with initiative if we are to continue to grow.8
Culture may be strong or weak. Strong cultures are difficult to change without great effort, time, and substantial disruption. Thus, companies with strong cultures are wise to adopt strategies consistent with their cultures. Doing otherwise creates implementation problems. For example, it is advisable for 3M, Hewlett-Packard, Nokia, and Siemens to stick to strategies consistent with their cultures of technical innovation; their cultures will naturally support implementation. Companies that find themselves in competitively dead-end positions, however, may have to adopt strategies that are at odds with their existing cultures. The traditional air carriers (United, BOAC, Delta, and so forth) are prime examples of companies that must change their strategies or go under. Yet the strategic options before them will require a difficult set of cultural changes. For some, the “us versus them” culture of contentious labor relations problems will have to give way to something more collaborative. In these cases, culture and strategy must be reinvented simultaneously—a truly difficult proposition.
Changing company culture to better align it with a new strategy is the responsibility of the CEO and the senior management team. It is a top-down job. Here are a few ideas for approaching the task:
- Identify the aspects of culture that must change in support of strategy implementation—for example, product quality, greater customer focus, the elimination of command-and-control management. Concentrate on these and leave less critical aspects of culture alone. You can only do so much.
- Model the behaviors and values that you’d like employees to adopt. For example, if you aim for greater customer focus, visibly spend more of your time visiting customers. Bring the most imaginative and demanding users of your products into the company for focus group discussion with employees. If adopting a low-cost model is called for, cut your own travel and entertainment expenses before you ask others to do the same. Remember, people are watching you.
- Engage employees in “town meeting” forums to build consensus and commitment to change. A personal connection between the leadership and rank-and-file employees is essential.
- Sponsor celebratory events when change milestones are met.
- Set high performance standards.
- Reward people for the results you seek.
How well aligned is your company with its chosen strategy? Do you have the right people and clear incentives? Is your organization structured in a way that supports the strategy? Do other key activities support the strategy? Do your business culture and business strategy fit well together? Table 5-1 is a checklist you can use to re-view the alignment concepts explained in this chapter and to answer these questions.
Alignment Checklist
Summing Up
- Implementation describes the concrete measures that translate strategic intent into actions that produce results. It requires continuous managerial attention at all levels.
- Successful strategy is aligned with a coherent and reinforcing set of supporting practices and structures.
- Alignment is a situation in which organizational structures, support systems, processes, human skills, resources, and incentives support strategic goals.
- Be sure that you have the people with the skills, resources, and attitudes to make the strategy work.
- Activities such as pricing, distribution, order fulfillment, and the like should support the strategy.
- Structure the organization to align with strategic goals.
- The organization’s culture should be appropriate for the strategy—and vice versa.