11

Making strategy actionable

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What you will learn in this chapter

• How to turn strategy into initiatives, business plans and budgets
• How to communicate your strategy
• How to link your strategy to your organisation, systems, processes and what people do
• How to monitor, measure and correct strategy

Congratulations. You’ve led the creation of a strategy that you are convinced is simple, sound and will enable you to win. But that’s the easy part. As I said in Chapter 10: no one ever sees the strategy, only the execution. So if you cannot make the strategy happen, you won’t succeed. Executing strategies successfully is one of the top skills managers can have.

To convert strategy into effective execution, you need to have a strategy that can be broken down into a framework of activities that people can understand, and that you can communicate easily. You also need to have an organisational structure that will enable you to deliver, as well as systems and processes in place to support it. Finally, you need to have tools and mechanisms that will help you assess whether you are making progress and when to change course. This has been summarised into six steps by Harvard Business School Professor Robert Kaplan.

1. Develop the strategy.
2. Plan the strategy.
3. Align the organisation.
4. Plan operations.
5. Monitor and learn.
6. Test and adapt.

Although I don’t use his framework here, it is useful for thinking about what needs doing and you may want to find out more about it. We’ll also talk about Kaplan in the Balanced Scorecard section in Chapter 13.

Turn strategy into business plans and budgets: frameworks for scoping strategic initiatives

Usually it is easiest if you try to articulate your strategy in a series of initiatives. It is very easy to come up with a whole raft of initiatives that don’t really address your strategy, but are just convenient, or things you think need doing because you have always done them. So it is key throughout this process that the initiatives you are scoping are relevant to the strategy. Like: Who are we selling to? What will we do to be better than our competitors? How will we use our key competencies to deliver this? What capabilities, processes and systems do we need? And how will we measure our progress? If you aren’t sure whether your strategic initiatives are actually addressing these, and are supported by evidence and examples, then refer back to Chapter 10.

A strategy in and of itself is not something that you can do. You need to break it down into a series of initiatives. There will likely be several key themes you will need to address: some of these may involve products, positioning or partnerships you may need to launch or deliver. Some will involve new routes to market or customer insights you may need to create, or digital transformations – moving from paper to online, or from servicing face-to-face to servicing online. Some will also involve organisational redesign – such as combining several functions to reduce costs or reorganising to create a new capability. One of the hardest tasks is to determine just exactly what you will – or won’t – need to accomplish to achieve your strategy.

A helpful discipline is to classify these initiatives. Most will fall into one of five types: growth, efficiency, enabling, entrepreneurial and organisational. In addition, you should be aware of risks or potential obstacles and have a plan to overcome these.

1. Growth initiatives May include launching new products through existing channels; targeting existing customers with new propositions; or modifying propositions to target new customers or markets. Always try to tie these back into a discreet target group of customers, and a compelling proposition. You should be able to articulate these initiatives in terms of the number of customers who will buy and how much they will spend, or in terms of additional revenue and number of products sold or in terms of improvement to the delivery of your service as measured by increased customer retention and/or spend.
2. Efficiency initiatives Include cost reduction programmes, sales and marketing realignment, single operating models, lean process redesigns and digital transformation. This is usually about stopping non-value-added work, so you can redeploy resources to value-added work. I look at this further in Chapter 13.
3. Enabling initiatives Include better data, customer insight, boosting digital capability, better targeting and positioning. The most important of these will always be about understanding what your customers are buying and why they are buying from you. I discuss this further in Chapter 19.
4. Development or entrepreneurial initiatives Include things that are going to create new revenue streams in new markets or small things that are currently insignificant but might become very big in the future. They are inherently higher-risk and higher reward.
5. Organisational Your structure must follow your strategy and you will need to have the capability and culture to execute. For example, you might need to consider how your various departments are going to work together to achieve your strategy. Is that clear? If it is not, you will need to address this. You may need to create new capabilities. For example, if you have no current way to understand the customer, you may need to create a customer insight capability.
6. Obstacles and risks Things that may get in your way that you need to be cognisant of overcoming – that is, key risks that could derail you. These can be, and usually are, both internal and external.

Try breaking down your strategy into initiatives, categorised under the five headings above. Most likely you will require at least one or two of the first three, plus one of the fourth to keep focused on innovation and the future. You will also need to identify your two greatest risks or obstacles and have plans to overcome them. This means you will end up with a maximum of ten initiatives, or a minimum of five. You may end up combining the initiatives. Or varying the time frame. You cannot do them all at once, so you need to sequence them.

Once you have broken down your strategy into a series of initiatives it becomes more doable. Be careful not to have too many, and to think about the interdependencies of each. For example, you may not be able to attract new customers without better data or digital capacity. You will also need to prioritise. It may be that partnering and fixing your route to market is essential before you can realistically develop and launch new products. Try creating an overall roadmap with each initiative on it. An example of a roadmap is given in Figure 11.1.

Once you have identified your key initiatives, and set priorities, it will be useful to have a framework for flushing out and communicating. Table 11.1 shows an example of a one-page framework.

Table 11.1 Strategy framework

1. Name of project/initiative	Customer Insight
2. Brief description	To support the growth strategy, specifically: xxx xxx
3. Strategic objectives supported	Growth in sales to employers
4. Measurable outcomes	Identified significant opportunities with respect to: xxx yyy zzz
5. Sponsors	xxx
6. Project manager	xxx
7. Key dependencies	Availability of resource to support the activity Activities fall within budget and timescale
8. Key milestones	Quarter 2 budget review Launch of new ecommerce system
9. Business Case available	By 1 November 1 xxxx
10. Business Case approved by xx	By 31 December xxxx

Once you have completed this document you can shorten it to fit on a single PowerPoint slide.

You should also have a framework to express all your initiatives and see whether they fit together. Visualising or mapping the strategy is an important process that will help you to understand how all the initiatives are interrelated. Think of the strategy as an activity system (this builds on the visual framework identified in Chapter 10). Activity systems or maps are a tool first created by strategy guru Michael Porter and now widely used to identify in a visual way the interconnected activities that your organisation, brand or company is using to create value and focus on outcomes for your customers. They help to prioritise and show how things are interconnected.

Figure 11.2 is an example of an activity system for IKEA – which is a great example of a strategy well executed.

Activity systems are easy to understand and communicate. They can help you to have a great reference point, prioritisation and mapping of your strategy for all to see. However, sometimes, we can get far too caught up in defining the map and lose sight of the overall outcome. I remember once being locked away with an executive team for two days and producing a horrendously complicated activity system that ended up being of little use.

Another approach is to use a one-page diagram to draw out your business model. This should focus on the key customers, propositions, channels, activities and partners you use to create value. See www.businessmodelgeneration.com/downloads/business_model_canvas_poster.pdf

Communicating your strategy

There is little point in keeping strategies top secret, because they will only happen if people in the organisation understand them well enough to be able to execute them. You would be surprised how often lengthy strategy documents end up filed away in a drawer and never used. A great deal of time needs to be invested by the leadership to communicate how people’s work fits with the overall objectives. These sorts of frameworks are more and more difficult with large multinational companies and multiple business units. But basically everyone has a role at every level within the organisation.

Of course it’s best if the CEO communicates the overall strategy to everyone at the same time in an open session followed by a Q&A. In small companies this may well be possible. In large or dispersed organisations this may happen in a video or other format. But all managers need to know what the strategy means for them and their people at various levels. They should be given summaries and there needs to be a plan to communicate the specific messages to the various groups in an organisation as well as the overall ‘big message’ from the CEO. And the two should work in partnership.

One major retailer uses what they call balcony briefings. These are monthly updates on key priorities. They are then recorded and shared with thousands of stores. These are followed up with individual pocket-size cards that every store manager can place in their shirt pocket, so that they can refer to them when they are walking around the shop floor. These cards change regularly. Another organisation, a global business services business, followed up the message from the CEO with presentations on what the strategy meant for their region or business unit. But they all used the same slides, so that there was visual and verbal consistency.

Strategies often work well as pictures, or simple cards (as described above). If you can depict your strategy on one page using simple visuals it will help to communicate it. Try drawing a one-pager. Here is a version we use at CMI. It makes you think about things differently and understand how they are interrelated.

Linking strategy to initiatives that are then reflected in everyone’s work is often the missing piece of the strategy puzzle. Even companies that are reasonably good at communicating strategies often don’t do a decent job showing how everyone’s work is linked to the overall strategy of the company. But the best companies do this.

When you set your team’s objectives you should understand how your work and their work will contribute to the overall strategy and the different initiatives. If you do not understand this it is very important that you sit with your line manager and review. In a big company it will be the case that your work may only touch on one or two of these. In a smaller company you may be responsible for many of them. But your objectives and your activities should be contributing. It is vital you understand the critical success factors which will deliver your strategy.

Budgeting the numbers: top–down versus bottom–up

At some point, all strategy gets translated into numbers. The trick is not to rush into the numbers; a mistake that is often made. Remember, a strategy is NOT a series of numbers. However, all strategies can be translated to numbers eventually.

Typically, strategy frameworks last for three years. Some companies use five-year frameworks, but given the world keeps changing faster it seems wiser to stick to shorter time frames. For your three-year time frame, you will need to put forward an overall financial shape and framework that you expect to achieve by the end of the three years in terms of revenue, costs and profits. If you work backwards from Year 3 in this way, you will end up with Year 1 of your strategy being next year’s budget. Almost every strategy I’ve been involved with, whether for big multinationals, FTSE 100s or small charities, has worked in this way.

Later, I’ll explore more about how to prepare budgets (in Chapter 18).

The other approach to strategy is to Win Big and Fail Cheap. In this approach you may set a BHAG (Big Hairy Audacious Goal) that you really don’t yet know how to achieve, but you want to focus the organisation on doing it. A great example of this is Unilever’s Sustainable Living Plan, which seeks to double the size of the company whilst halving its environmental impact. CEO Paul Polman didn’t know how to achieve this but by announcing it he set the company on the way. As he has said, if he achieves 48 out of 50 initiatives in this endeavour, isn’t that still a great result? Similarly, Peter Ayliffe at Visa set a BHAG of taking over a 50 per cent share of debit payment transactions in Continental Europe when he became CEO (they were starting from zero). He had no idea of how to achieve it but over the next several strategic planning periods he led his teams to craft initiatives that delivered against this strategic objective.

Whether you set your strategy top-–down in an incremental or breakthrough fashion, it is always a very good idea to benchmark it with a bottom–up approach to the numbers. This means asking your folks what exactly they are going to do in terms of outputs and revenue, and what it is going to cost, and the profit it will contribute. Remember to break it down into specific activities. And then review the top–down and bottom–up approaches. Do they align or are there huge gaps? The bigger the gaps, the more important it is to clearly communicate the strategy and ensure that everyone’s objectives are aligned.

Monitoring your strategy

You will need to think about how you will monitor the success of your strategy (see also Chapter 13). You should look at four sets of KPIs:

1. Customer Market share, customer satisfaction, number of customers, average value
2. Employee Employee engagement, productivity per employee
3. Brand Brand equity versus competition, effectiveness of communication and marketing mix
4. Financial Incremental revenue, contribution, cash

It’s very important to realise that a strategy is not engraved in stone. Have milestones where you check whether it is working and correct or change course if it is not. If it is a new strategy, or an entrepreneurial initiative, make sure you consider doing pilots before launching something broad scale. Once a month go back to your key strategic initiatives roadmap and one-page tracking document. Take a look at what’s working, and what’s not, and make the necessary adjustment. I suggest a format for this in Chapter 13 on measuring.

Strategies are living documents. They will change. They must change in response to changing environments, competition, or because the initiatives aren’t working as well as you hoped. Make sure you agree with your organisation to review strategy at set intervals and adjust. The idea is to win big and fail cheap. Said differently, feed your success and starve your failures.

Top tips, pitfalls and takeaways

Top tips

• Illustrate your strategy on one page and use this in communicating.
• Draw a one-page diagram of your business plan, including customers, propositions, channels, activities and partners.
• If you’re going to be ambitious, be really ambitious: a ‘Big Hairy Audacious Goal’ can lead to transformational benefits.
• Continually monitor success of the strategy.

Top pitfalls

• Don’t confuse a financial objective with a strategy. If you say you want to double your business size that’s fine, but it’s not a strategy and people will not understand how to do it.
• It can be unhelpful to use a mission statement or catchphrases. They can become empty slogans. I once worked in an organisation that had a global strategic initiative called SGE – Strengthening Global Effectiveness. But it involved consolidating divisions and shutting factories. It was quickly dubbed ‘Say Goodbye Everybody’.
• Don’t have too many strategic initiatives. People will get confused.

Top takeaways

• A strategy in and of itself is not something that you can do. You need to break it down into a series of tangible initiatives.
• Most initiatives fall into one of five types: growth, efficiency, enabling, entrepreneurial and organisational.
• Make sure you can turn your strategy into a series of initiatives or projects that people can deliver to achieve the strategy.