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The Execution Premium

Highlights by David Willden


I deeply respect the works of Kaplan and Norton. In 1992 Robert and David published the
book Balanced Scorecard. "The Execution Premium" emphasizes on
the what organizations should focus on. It introduced four organization perspectives that if focused
on and measured in a balanced manner, would lead to better organizational results. The perspectives
are: financial, customer, internal process, and learning and growth.

The authors then spent years refining their ideas in the area of strategy
management and published a book titled Strategy Focused Organization.
The book concentrates on the how. The book introduced five key
management principles:
1.
2.
3.
4.
5.

Mobilize change through executive leadership


Translate strategy into operational terms
Align the organization to the strategy
Motivate to make strategy everyones job
Govern to make strategy a continual process

The third book the authors published was Strategy Maps which focuses on
the how of creating a strategy and a balanced, attentive organization. The
book introduces a framework for translating a strategy into tightly aligned
objectives.
Robert and David then published a fourth book called Alignment. In this
book, the authors demonstrate how an organization would use scorecards
and strategy maps to achieve alignment throughout the organization.
The Execution Premium is the latest book from the authors. It addresses
what needs to be done on a day to day basis in striving to reach the goals of
your organization.
Few organizations have organized systems in place to effectively manage the
execution of strategy. Many organization look to the budget to track
performance, and dont conduct strategy reviews. A strategy review gets into
how the strategy is being translated into the practical operational elements
of the organization. Organizations that align their strategy with their
operations do better than their competitors.
Many organizations focused on process improvement initiatives to help them,
still have problems. The reason, the authors explain, is because they lack an
overall plan and performance management system. There are six stages that
an organization needs to go through to develop an effective plan:

Develop the Strategy


Strategic planning is vital in identifying a clear understanding of priorities.
This process includes clarifying your mission, values and vision. It also
involves looking at both internal and external factors. Tools such as PESTEL
( political, economic, social, technological, environmental and legal) can be
used to identify issues. Value Chain Analysis is used to assess your internal
processes. SWOT analysis is used to pinpoint your strengths, weaknesses,
opportunities and threats. Scenario planning helps you to look at various
situations that may occur, and to think through the best ways with others to
identify the best strategy in moving forward.
It is important to document your strategy, objectives, and plans. The
documentation process helps you to think, clarify, and to communicate.

The Execution Premium

Plan the Strategy


The next step is to develop plans to put the strategy into action. Steps
include translating objectives into targets and initiatives. A strategy map is
an excellent way to visualize and create tight alignment with the various
strategy components to increase your chances of achieving your goals.
Typically a strategy map is developed with a focus on the four areas
emphasized in the Balanced Scorecard, namely, financial, customer, process
and growth and learning. Prospective initiatives are identified in each of
these areas, then rated basing their ability to contribute to the strategy, and
then finally selected.The next step is to develop plans to put the strategy
into action. Steps include translating objectives into targets and initiatives. A
strategy map is an excellent way to visualize and create tight alignment with
the various strategy components to increase your chances of achieving your
goals. Typically a strategy map is developed with a focus on the four areas
emphasized in the Balanced Scorecard, namely, financial, customer, process
and growth and learning. Prospective initiatives are identified in each of

these areas, then rated basing their ability to contribute to the strategy, and
then finally selected.

Align the Organization with the Strategy


Higher level strategy maps and scorecards help here and are used to create
lower level organizational maps and scorecards.
Plan Operations

Building the strategy into the operations is a key to success. There are
various tools available to help here (e.g., six sigma, lean, time-driven activity
based costing). Focus on operations or processes first that will have the
highest impact in helping the organizations ability to achieve the strategy.
Monitor and Learn

Continuously review the performance of your organization, to ensure you are


meeting your objectives. Keys here are to hold regular review and problem
solving meetings.
Test and Adapt the Strategy

Strategies and plans need to be tested and adjusted continuously. An


executive strategy testing and adaptive meetings would be established to
analyze, review and update the strategies and plans. The PESTEL tool,
economic models, statistical models, input from front-line employees, are
example of helpful instruments.
Managing Strategy from a Central Office

A CFO owns the budgeting process in an organization. An Office of Strategy


and Management should be established that owns strategy execution. Their
role should be to help plan and coordinate with all of the organization units
to ensure maximum results. Moreover, they should set up execution
feedback sessions.

Seniorexecutiveslovetoplanstrategies.Theybelievethisputsthemintheexaltedcompanyof
Napoleon,SunTzuandClausewitz.Indeed,forCEOsandtheircorporatecolleagues,developing
strategyistheheartofexecutiveleadership.
Unfortunately,mostcompaniesendupwithstrategiesthatarenotlinkedtotheiractual
operations.Theresult?Strategythatisnotstrategic,sincecompaniesareunabletoimplementit.
StrategyexpertsRobertS.KaplanandDavidP.NortoncreatedtheBalancedScorecardand
StrategyMapsandhavenowdevelopedaversatile,sixstageprogramyourcorporationcanuse
tomeshitsstrategywithitsoperations.Theirapproachalreadyworksfornumeroustopflight
organizations.

KEYPOINTS
Meshstrategyandoperationstoattainyourgoals.Mostorganizationstrytodothisinanad
hocfashion,butthatseldomworks.Youneedaspecialdepartmentthatisresponsiblefor
strategyimplementation.
Useadeliberatesixstagesystemsmanagementprocesstounitestrategyandoperations.
Thestagesare:Developstrategy,planstrategy,alignthefirmwiththestrategy,plan
operations,monitorandlearnfromoperations,andthentestandadaptyourstrategy.
BalancedScorecard,themostpopularperformancemanagementsystem,workswellinthis
context.
Todevelopsoundstrategy,youmustunderstandyourfirmsmission,valuesandvision.
Achievestrategicobjectivesbyusingspecific,targetedinitiatives.
Strategymapsandscorecardspresentyourstrategyasgraphic,quantifiedinformationthat
motivatesanddrivesperformance.
Tomakeyourstrategywork,employeesmustunderstandandsupportit.Meshingstrategyand
operationsrequiresstrongleadershipfromtheCEO.
UsingaSystemsApproachtoMeshStrategywithOperations

Achievingyourcorporategoalsrequiresacoherentstrategyandsuperioroperations.Bothare
crucialandtheymusttietogether.Whentheydo,yourcompanywillearnanexecution
premiumofnotableadvantages.Ofcourse,leadersunderstandthatitiscriticaltomatch
strategywithoperations,yetfewfirmshaveorganizedsystemsinplacetodoso.Instead,most
approachthiscriticallinkonanadhocbasis.Somecompaniesdonthavestrategyreviews.
Insteadtheyrelyonbudgetstotrackperformance.Thisisunfortunate.Researchindicatesthat
companiesthatcoordinatetheirstrategywiththeiroperationsdobetterthantheircompetitors.
Aformalsystemsapproachisthebestwaytomeshstrategyandoperationsthatis,toexecute
yourstrategy.Numeroussophisticatedsystemsexisttohelp,includingSixSigma,theEuropean
FoundationforQualityManagement(EFQM)andBalancedScorecard,themostpopular
method.However,manyorganizationsthatalreadyusesuchsystemsalongwithotherplanning
toolsstillhaveproblemscoordinatingstrategyandoperations.Theycantmakeeverythingwork
togetherbecausetheylackanoverallplan,aperformancemanagementsystemwiththeright
tools.Suchaplanunfoldsinsixstages:
Stage1:DeveloptheStrategy
Strategicplanningrequiresafirstthingsfirstmentality.Firstnaildownyourfirmsmission
(purpose),elucidateitsvalues(howitfulfillsthemission)andspotlightitsvision(future
aspiration).Onceyouestablishorreassertthesecentralconcerns,reviewanyinternaland
externalfactorsthatmayaffectthem,suchasindustrytrendsorinitiativesfromyour
competitors.
ThenperformaPESTELanalysis,examiningpolitical,economic,social,technological,
environmentalandlegalissues.Useavaluechainanalysistoassesstheinternalprocesses
thatdeliveryourproductsorservices.DoaSWOTanalysis,measuringyourstrongpoints,
weakpoints,opportunitiesandthreats.Researchanyotherissuesthatcouldaffectyourstrategy.
Theseanalysesprovidetheinformationyouneedtodevelopyourstrategy,whichusuallyfocuses
onyourcustomersorcoremarkets.Analternativeistoconductscenarioplanning,whereyou
roleplaypossibleresponsestocompetitorsmovesormarketplacechanges.Thisisonewayto
prepareforyourcompetitorsresponsestoyourstrategicactions.Whicheverapproachyouuse,
theendresultshouldbetheformulationofaplanthatgivesyourorganizationastrong
competitiveadvantage.Documentyourstrategy,includingitsobjectives,howyouwillachieve
them,anditsscope,whichisyourareaofoperation.Organizationsnormallyupdatetheir
strategicplansannually.

Stage2:PlantheStrategy
Havingformulatedyourstrategy,nowmakeplanstoactualizeit.Translateyourstrategic
objectivesintospecifictargetsandinitiatives,thatis,shorttermactionplans.Createanoverall
strategymap,aneasytograsp,onepagegraphic.Thiscanhelpyouvisualizeyourstrategic
objectives,theactionsyouwilltaketowardthem,andtheresourcesyouwillneed.Organizeyour
strategymapaccordingtostrategicthemes,subjectclustersthatshowtheprimarycomponents
ofyourstrategy.ThisBalancedScorecardapproachinvolvessettingspecifictargetsandusing
therightmetricstoassesscauseandeffectlinksinfourstrategicareas:
1.FinancialOperatingprofit,returnoninvestment,costperunitandsoon.
2.CustomerNumberofcustomers,increasesinyourcustomerbase,customersatisfactionand
thelike.Thisareaalsodetailsyourcompanysvalueproposition,howitoffersdistinct
advantagestocustomers.
3.ProcessOperations,productdevelopment,facilitiesmanagementandotherareasrelatedto
thefinancialandcustomergoalsthatestablishyourfirmsstrategicdifferences.
4.GrowthandlearningSystems,personnelandsimilarorganizationalresources.This
categoryandtheprocessareabothcallforstrategicimplementation.Usingyourglobalstrategy
mapasanoutline,convertthegoalsitdisplaysintospecificmeasuredtargets,likequantifiable
revenuegrowth.Identifythegapsyoumustclosetoreachthesetargetsandtheinitiativesyou
willimplementtobridgethegaps.Bymanagingstrategicplanningwiththismeasurementbased
approach,youdetailyourobjectives(thewhat),anddepicttheinitiativesneededtoattainthem
(thehow).Suchinitiativesdependonspecialfunding,andonconceptualownersand
teamstostaff,manage,andtakeresponsibilityforthem.Rateeachinitiativeonthebasisof
howitaidsstrategyandthenimplementitaccordingly.Thissystemsapproachisavast
improvementoverstandardizedstrategicplanning,whichoftenfocusesonthewhattothe
exclusionofthehow.Itenablesyourfirmtoclarifyitsstrategicgoals,translatetheminto
initiatives,andexecutethem.Itestablishespriorities,accountability,andvisibility.