Strategy execution: the holy grail of business
Cedar Chairman, Sanjiv Anand discusses his latest business title Execution Excellence: Making Strategy Work Using the Balanced Scorecard.
Tell us about your latest book, Execution Excellence: Making Strategy Work Using the Balanced Scorecard.
Strategy execution is the holy grail of business. A general once said, “Don’t fight a battle you can’t win”. Similarly, don’t formulate a strategy you cannot execute, which unfortunately, even today, 50 per cent of firms cannot execute. So I’ve focused my book on strategy execution, which I have done for the last 30 years. Successful strategy execution is about the ability to map your strategy and focus on it. It’s about your ability to develop ownership within the firm, identify a great set of lead and lag measures, and lastly set targets right–pushing only the right buttons harder.
The Balanced Scorecard, or BSC, was developed by Prof. Kaplan of Harvard Business School, whom I worked with at the same firm. I believe the BSC is the most appropriate framework to successfully execute strategy. This book is less about the theory of the BSC, but more about how to effectively use the BSC to execute strategy based on the over 300 scorecards designed by me, and the Cedar team.
Most importantly, the book has real world examples of strategy maps and scorecards across 10 different industries, along with case studies of successful implementation of the BSC. Many of these examples relate to the UAE and Middle East, including banks.
What makes this book relevant today?
While the world continues to provide opportunities to grow, it is not without challenges. Firstly, customer expectations around products, relationships and brands have risen over years, driven by extremely high levels of competitiveness. This has resulted in the need for firms to develop multiple strategies that address different customer segments. Additionally, competition is now local, regional, national and global. This requires a more nuanced and complex competitive strategy. All of this additionally drives complexity in process, and people.
Global organisations or markets require processes to work well in a centralised and decentralised manner, and lastly organisations have become complex as even medium sized enterprises could have employees across geographies. All of this has made strategy, and more importantly the execution of strategy, more relevant than ever before.
When you were writing this book, who did you have in mind as typical readers that would be interested in the content? Briefly tell us what you have included in the book that will be of specific interest to them.
The book is focused on three main audiences:
- Board Members and Shareholders. The primary responsibility of management teams is to ensure shareholder financial expectations are met. The book can help boards better understand the challenges in executing strategy, and how they may be able to hold management accountable in meeting financial and non-financial expectations.
- CEOs and heads of divisions and business units, and the Head of Strategy. They are responsible for formulating and executing strategy. This book is designed to make them successful. It talks about using the BSC to create focus and design a strategy map and BSC that allows them and the management team to identify the top 20-25 financial and non-financial objectives, and create a strategy map. It then allows them to build a balanced scorecard identifying ownership of strategic objectives, the right set of performance measures, and the art of target setting. Most importantly the book has sample strategy maps and scorecards from over 12 of the most common industries as a reference that will also the readers to quickly learn with examples from their own industry and build their BSC.
- HR Heads. The Balanced Scorecard is often used by HR Heads to drive enterprise and individual performance and create ‘performance oriented organisations’. The BSC is an enterprise performance management framework. In addition, the book covers Individual Performance Management, helping readers create an individual performance management framework aligned to enterprise strategy.
Having worked on strategies for companies around the world, is there a common roadblock or struggle that you’ve seen at both large and small companies?
As Tom Friedman said, “The world is flat”. That means that everybody can access any market, anytime, and the competition is local, regional and global. A company doesn’t even need to be on the ground to be a competitor–the internet has instantly added a hundred competitors to every business. In light of this, the roadblocks are almost the same for large and small companies: the ability to rapidly read market trends, position oneself in those markets for very short market cycles, and have a people and process framework that allow for focus and execution speed. Long term planning is nearly dead. If you cannot survive the short term, what’s the point?
What are the elements of a strategy that works?
Never build a strategy that cannot be executed. The problem starts there. Most organisations build strategies that are complex, difficult to understand, and hard to execute. Here are a few elements that can help avoid this typical pitfall: A strategy that works needs to be balanced. It needs to focus on the drivers to financial performance rather than just the financial outcome. People and technology helps drive process excellence. Process excellence helps meet or exceed customer expectations. And meeting customer expectations delivers financial performance. Therefore, all of these elements are critical for strategy that works. Combined with a clear sense of ownership across the leadership team, a set of performance measure that are lead indicators to performance, and a set of targets that focus performance and not overwhelm. Focus, balance, ownership, measurement, and the right targets are the elements that make strategy work.
When setting targets, how do corporate leaders balance between the actionable and the aspirational?
Organisations often make the following mistakes in setting targets: either they only focus on financial targets, or they tend to set too many aggressive targets. If one looks at an organisation’s strategy, one will find in an average year that out of the 20-25 key targets to set, only 4-5 need to be aspirational, the rest can be actionable/realistic and easy. Too many stretch targets break an organisation’s back, which results in an accelerated depletion of its people, financial and other resources, with no real guarantees of benefits.
For example, if the strategic theme for the year is customer excellence, then the 4-5 areas that drive customer excellence should carry the aspirational targets. An opposite example is that if the organisation is going through a re-organisation, and headcount is being released, it is not the time to set an aspirational target for employee satisfaction.
When do you reopen the strategy and make a change? How do you balance between staying on course and reopening a decision?
Since Brexit happened, it is an excellent example of a scenario to relook at strategy. The UK has decided to walk away from the EU. Currency markets have moved, equities are down, trade agreements will be torn up and redone, new tariffs will become applicable, the logic of where one manufactures and where one sells–all of this will now need to be relooked at.
Something like this, an M&A event (in your own firm, or your competitor), and in the worst case, an act of nature, are the only reasons I would recommend a drastic relook at the strategy. Otherwise it’s better to keep the strategy focused and consistent, and use the target to fine-tune some of the intensity and directional change that may be needed for other event. Too much movement of strategy and target all the time is like a compass with no direction.