The strategy-execution gap
Understanding the dynamics of change within an industry and being able to leverage the uncertainty this brings for profitable advantage is critical to entrepreneurial success.
Many entrepreneurs are good strategists, able to intuitively sense and respond to change. This innate grasp of the big picture, however, does not always translate into well structured strategic thought or detailed plans, prime for execution.
Unfortunately, the causes of this ‘strategy-execution gap’ remain largely invisible to entrepreneurs, with the result being that they pull the wrong levers in their attempts to improve execution – they press for improved execution when further work is required on strategy, or they change or abandon a good strategy rather than focus on improved execution.
The strategy-execution gap is by no means an affliction exclusive to entrepreneurial start-ups: the research of David Norton, co-inventor of the ‘Balanced Scorecard’, indicates that less than 10 percent of strategies are effectively executed. Nevertheless, poor execution poses unique hazards for resource-poor start-ups, where a delay in generating revenue can prove fatal.
An execution plan must incorporate five elements:
- Communication: the underlying strategic concepts must be communicated. Every member of the organisation needs to understand the end goal and the role they are expected to play in achieving it.
- Deconstruction: long-term objectives must be broken down into discrete, congruent, short-term goals that are deliverable.
- Integration: to a marketer, every challenge is a marketing problem. To an accountant, every challenge is a resources problem. Effective execution requires a holistic view of the organisation, its functions and parts, and what is required to meet the objective(s).
- Ownership: all levels of the organisation, from senior managers to frontline staff, must commit to and own the processes and actions central to effective execution.
- Incentives: appropriate incentives, controls and feedback loops must be built into each major milestone of the execution plan, to ensure fluid progression.
Many businesses separate strategic planning from execution planning. Typically, the first step is gathering a group of key thinkers together to discern new ideas, strategies and products. The outputs are then captured in a document and handed to another group of people within the organisation to execute.
This is a fundamentally flawed process. Strategic planning must be directly tied to an organisation’s ability to deliver on its plans. As such, the availability of resources and internal capability must inform the strategising process. If the strategic plan does not match internal resources/capabilities, then either the strategy must be amended, or steps taken to secure the appropriate resources. It is too late to address these issues once the strategic plan is etched in stone and major commitments made.
The final hurdle in bridging the strategy-execution gap is committing to on-going measurement of performance. Few companies routinely track performance relative to their plans over an extended period of time. After an initial burst of activity, they assume all is travelling well, with the result that entrepreneurs, or their managers, are blind to performance bottlenecks or, worse, emerging signals of strategy defects.
A related problem is measuring the wrong outputs: while it is appropriate to monitor tangible performance parameters (cash flow, burn rate, productivity etc.), other intangible factors must also be considered (employee commitment, communication effectiveness, leadership etc.).
The absence of performance monitoring may explain why some businesses persist in funding poor strategies, or are reluctant to review earlier decisions. Without access to solid data concerning actual performance relative to projected performance, even the most intuitive entrepreneur can come unstuck.
About the author
Mark Neely is a lawyer, technology commercialisation consultant and the author of 10 books, including “The Business Internet Companion”.