Strategy Execution

Strategy Execution and the Balanced Scorecard

Companies often manage strategy in fits and starts. Though executives may formulate an excellent strategy, it easily fades from memory as the organization tackles day-to-day operations issues, doing what HBS professor Robert S. Kaplan calls “fighting fires.”

A new book by Kaplan and David P. Norton aims to make strategy a continual process. The Execution Premium: Linking Strategy to Operations for Competitive Advantage shows managers how to weave organizational principles into a more effective management system that respects the differences between strategy and operations yet integrates them in a powerful way. Kaplan and Norton introduced the Balanced Scorecard, a performance measurement system, in 1992. The Execution Premium is their fifth book as coauthors.

Kaplan recently explained the ideas behind The Execution Premium and how they bridge the common divide between strategy and operations.

Martha Lagace: What particular issues around execution need to be better addressed in business?
Robert Kaplan: There are two key issues. First is leadership. Without strong visionary leadership, no strategy will be executed effectively.

Companies often manage strategy in fits and starts. Though executives may formulate an excellent strategy, it easily fades from memory as the organization tackles day-to-day operations issues, doing what HBS professor Robert S. Kaplan calls “fighting fires.”

A new book by Kaplan and David P. Norton aims to make strategy a continual process. The Execution Premium: Linking Strategy to Operations for Competitive Advantage shows managers how to weave organizational principles into a more effective management system that respects the differences between strategy and operations yet integrates them in a powerful way. Kaplan and Norton introduced the Balanced Scorecard, a performance measurement system, in 1992. The Execution Premium is their fifth book as coauthors.

Kaplan recently explained the ideas behind The Execution Premium and how they bridge the common divide between strategy and operations.

Martha Lagace: What particular issues around execution need to be better addressed in business?
Robert Kaplan: There are two key issues. First is leadership. Without strong visionary leadership, no strategy will be executed effectively.

The second key issue is to recognize that strategy and operations (or tactics) are both important but they are different. The normal course of events is for companies to focus on day-to-day operations and short-term problem solving. Management meetings focus on fighting fires and fixing problems. Often little time and few resources get committed to strategic issues.

We don’t advocate abandoning an intense focus on operations and their improvement. But we do advocate planning strategy, not just describing it as important. The senior management team needs to have regular, probably monthly, meetings that focus only on strategy. We describe in the book the different roles, frequencies, participants, and agendas for operational review meetings and strategy review meetings. We open the book with a great quote often but perhaps inaccurately attributed to Sun Tzu in The Art of War: “Strategy without tactics is the long road to victory; tactics without strategy is the noise before defeat.” This quote highlights the importance of integrating strategy and operations, a central theme in our strategy execution system.

Q: What are typical challenges and pitfalls when linking strategy with operations? Why is a formal strategy execution system valuable?

A: One challenge or pitfall is that few companies align their operational improvement activities to strategic priorities. Many companies today are practicing Total Quality Management, Six Sigma, or other continuous improvement activities. But these are done across the organization with no sense of priorities or impact from process improvements. Consequently, much effort does not show up in tangible results. Companies need a formal process for using strategic objectives to set priorities for where operational improvements can have the largest impact on strategy execution. We note that quality and process improvement programs are like teaching people how to fish. Strategy maps and scorecards teach people where to fish.

Another pitfall occurs when budgeting and financial planning are done separately from strategic planning. We advocate that the operational plan and budget be driven from the revenue targets in the strategic plan. In The Execution Premium, we describe how a time-driven activity-based cost model provides the previously missing link between the revenue growth targets in a strategic plan and the authorization for spending to supply the quantities of resource capacity that are necessary to fulfill the sales and production needs of the strategic plan. Without this coupling, operational plans either provide too little or too much capacity for the strategic plan.

A third challenge is that most management meetings get consumed with discussions about short-term operational and tactical issues. It is important to meet to discuss and solve operational problems. But companies err when they devote all their time together for fire-fighting and coping with near-term issues. The formal strategy execution system schedules strategy review meetings at a different time from operational review meetings. In that way, each meeting has its own frequency, agenda, information system, and participation, as best meets the goals for that meeting.

Q: Given the proliferation of tools, how should management choose the right one to formulate strategy and improve operations?

A: We don’t have a preferred position on strategy formulation methodologies. We have seen each approach lead to success in different circumstances. If, for example, the company has low capital utilization, then some use of a value-based management approach would help to define a financial strategy. If the company does not have a distinctive brand or market presence, a focus on identifying an attractive customer segment, such as through Harvard University professor Michael Porter’s positioning framework, W. Chan Kim and Renee Mauborgne’s Blue Ocean approach, or C. K. Prahalad and V. Ramaswany’s customer co-creation process might prove most relevant.

If the company has distinctive capabilities in important business processes— operations management, customer data mining, or product features and innovation—that are superior to or not possessed by competitors, then the resource-based view and identification of core competencies are effective frameworks for strategy formulation. If the company has a great human capital base, with skilled, experienced, and highly motivated employees, then striving to create a learning organization and encouraging emergent strategies to be proposed can identify promising new strategic approaches.

While we are agnostic with respect to which strategy methodology a company uses to arrive at its strategy, we do believe that creating a strategy map and scorecard for that strategy is the logical and proven next step for putting the strategy into action. That is why we have placed strategy analysis and formulation as Stage 1 of our management system, with planning and translating the strategy as Stage 2.

We take the same position with the various operational improvement methodologies. We don’t want to be caught debating the relative merits and shortcomings of TQM, Six Sigma, lean management, and reengineering. We do believe, however, that these methodologies are most effectively applied to the strategic processes identified in a company’s strategy map and scorecard. That is why we place planning operations in Stage 4 of the management system, downstream from the Stage 2 processes of translating and planning the strategy. You can’t focus on the critical processes for improvement until they have been identified in the strategic planning and translation stage.

Q: What is an Office of Strategy Management, and why is it necessary in a company?

A: The OSM is analogous to a military general’s chief of staff. The general is responsible and accountable for developing the strategy to win wars and battles. But a general almost always has a chief-of-staff, often several ranks junior, who leverages the general’s time and attention. The chief-of-staff does not create strategy or operational tactics and has no authority or accountability for its execution. A chief-of-staff schedules the general’s meetings, ensures that the appropriate people show up at the meeting, attends and takes notes at the meeting, and follows up after the meeting to ensure that the actions decided upon are carried out. The chief-of-staff leverages the general’s time by making sure that all the information, people, and follow-up are in place for the general’s strategy and tactics to be effectively executed. We recommend that a similar, but expanded, set of tasks be carried out by a small cadre of professionals to orchestrate the various strategy management processes for the executive team.

The Office of Strategy Management has multiple roles and responsibilities. First, as an architect, the OSM designs and embeds any missing strategy and operational management processes into the six-stage strategy execution system. The OSM ensures that all the planning, execution, and feedback processes are in place, and that they are linked together in a closed loop system.

The OSM also serves as the process owner for several strategy and operational management processes, such as those to develop the strategy, translate the strategy, and orchestrate the senior management strategy review meetings. Many of these processes are new to the organization. Since they cross existing business and functional organizational lines, it is natural for the OSM to be their owner. Assigning responsibilities for their execution to the OSM fills a gap in management practice without infringing on the current responsibilities of any existing department or function.

Finally, the OSM is the integrator of many existing activities. This aspect is challenging because organizational and functional units already have primary responsibility for processes such as budgeting, communications, human resources planning and Performance Management, IT planning, initiative management, and best practice sharing. The OSM must work with the existing owners of these processes to ensure they become aligned to the strategy.

Q: What is the role of leadership in sound execution?

A: While not an explicit part of any of the six strategy execution stages (described below), executive leadership pervades every stage of the management system. Throughout The Execution Premium, we describe organizations that have successfully implemented their strategies. They operate in varied regions and industries, including manufacturing, financial services, consumer services, nonprofit, educational, and public sector. Their strategies differ; some produce low-cost commodity products and services, others deliver complete solutions to their customer, and still others innovate with high-technology products. About the only common element all these diverse successful strategy implementers have in common is exceptional and visionary leadership. In every example, the unit’s CEO led the case for change and understood the importance of communicating the vision and strategy to every employee. Without such strong leadership at the top, even the comprehensive management system we introduce in this book cannot deliver breakthrough performance.

In fact, leadership is so important to the strategy management system that we make a rather bold claim that leadership is both necessary and sufficient for successful strategy execution. The necessary condition comes from our experience with the more than one hundred enterprises around the world who have become members of the Balanced Scorecard Hall of Fame. In every instance, the CEO of the organizational unit implementing the new strategy management system led the processes to develop the strategy and oversee its implementation. No organization reporting success with the strategy management system had an unengaged or passive leader.

For Stage 1, the CEO leads the change agenda and drives it from the top to reinforce the mission, values and vision. Leadership sets the ambitious vision and stretch targets. In Stage 2, the executive leader validates the strategy map as an expression of the strategy articulated in Stage 1 and challenges the organization with stretch targets that take all employees outside their comfort zones. In Stage 3, leadership drives alignment of organizational units and is essential for communicating vision, values, and strategy to all employees. Leadership, in Stage 4, supports the cross-organizational unit process improvements. In Stage 5, the leader’s openness and skill in running the strategy management review meeting determines its effectiveness for fine-tuning the strategy throughout the year. And in Stage 6 the leader must allow even a well-formulated and executed strategy to be challenged in light of new external circumstances, data collected about the performance of the existing strategy, and new suggestions from employees throughout the organization. Being willing to welcome and subject existing business strategies to fact-based challenges is one of the hallmarks of effective leadership.

Our sufficiency claim, however, is even bolder. The management processes we describe in The Execution Premium give an effective leader a framework for effective strategy execution. None of the six stages in the management system is simple or brief. But collectively, the management processes in the six stages provide leaders with a comprehensive, proven system for managing the development, planning, implementation, review, and adaptation of their strategies.

We believe that our 18 years of observation and work with enterprises in all sectors and regions of the world has led to an emerging science of strategy execution. Each of the six stages in the strategy management system is doable, especially when guided by a senior strategy management office. The one component we cannot provide a blueprint for is visionary and effective leadership. That is why we have come to believe that executive leadership is now both necessary and sufficient for successful strategy implementation.

Q: You have written four other books touching on the Balanced Scorecard (BSC). How has your thinking and your work with this innovation evolved along the way?

A: Our thinking has really evolved from performance measurement, the focus of our first Harvard Business Review article and the first half of the original Balanced Scorecard book, to using the BSC as the cornerstone of a comprehensive management system to help enterprises execute their strategies. We learned early that the BSC was much more than just a better performance measurement system; it can become the basis for a new strategy management system.

Our second book, The Strategy-Focused Organization, identified the five principles we saw successful companies using with the BSC for strategy management: Mobilize, Translate, Align, Motivate, and Govern. In the next three books, including our most recent book, The Execution Premium, we went into more depth in these principles. Strategy Maps focused on principle #2, translate. We described and illustrated how strategy maps and scorecards could be customized to many different strategies. The fourth book, Alignment, described principle #3, how to create and capture corporate synergies through vertical and horizontal alignment of business and support units. The fourth book also contained material on principle #4, aligning and motivating employees for strategy execution in their business or support units.

Our most recent book started out as an in-depth articulation of principle #5, governing to make strategy a continual process.” But along the way, my coauthor Dave Norton and I realized that this book was really a synthesis of all our prior work. It encapsulates the latest development in the other four strategy-focused organization principles and integrates them into a comprehensive closed-loop management system that links strategy and operations. Beyond integrating all our prior work, the new book also integrates a wide range of other proven management tools, including mission and vision statements, strategy formulation, target-setting, dynamic budgeting and resource allocation, process improvement, quality methodologies (Six Sigma, lean management, catchball), dashboards, the learning organization, analytics, and emergent strategies.

Q: What’s next for you?

A: I have recently become sensitive to a gap in our strategy map/BSC framework by not paying sufficient attention to enterprise risk management (ERM). Obviously, many large financial institutions, despite having risk management departments, have suffered massive losses from failure to understand the risks they took on. All companies, not just financial ones, need to have better methods to assess and monitor their risks. Quantifying financial, operating, technological, and strategic risk is far from trivial, and much needs to be learned to make enterprise risk management more effective. Risk management also requires effective systems for internal control, management control, and governance.

ERM objectives and metrics could certainly have a home in the financial BSC perspective for increasing and sustain shareholder value, along with the traditional objectives of revenue growth and productivity improvements. And companies should have objectives in the process perspective to manage and mitigate the risks associated with their strategies. I am persuaded that embedding risk management objectives in strategy maps and scorecards should be a high priority for where increases in knowledge and professional expertise could add substantial value to an organization. And reviews of a company’s risk position should be part of the monthly strategy review meetings. I plan to spend some time in the next few years exploring this issue and hoping to make some progress.

Execution is a key to success

It also struck me in those early days with AT&T that, although execution is a key to success, it is no easy task. Here was a company with an ingrained culture and structure, a set way of doing things. For the company to adapt to its new competitive environment, major changes would be necessary, and those changes would be no simple cakewalk. Obviously, developing a competitive strategy wouldn’t be easy, but the massive challenges confronting the company made it clear to me early on that:

Making strategy work is more difficult than the task of strategy making

Execution is critical to success. Execution represents a disciplined process or a logical set of connected activities that enables an organization to take a strategy and make it work. Without a careful, planned approach to execution, strategic goals cannot be attained. Developing such a logical approach, however, represents a formidable challenge to management.

Even with careful development of an execution plan at the business level, execution success is not guaranteed. Tobias’s strategic and execution plans for the Consumer Products division were well thought out. Yet troubles plagued the division’s progress. Why? The problem was with the entire AT&T corporation. The company was about to go through a huge metamorphosis that it simply was not equipped to deal with and make work. Execution plans at the business level founder or fail if they don’t receive corporate support. AT&T was, at the time, a slow-moving behemoth in which change was vehemently resisted. Well-prepared and logical plans at the Consumer Products business level were hampered by a poor Corporate Culture. Tobias’ insights and potentially effective execution actions were blunted by corporate inertia and incompetence.

Although execution is critical to strategic success, making strategy work presents a formidable challenge. A host of factors, including politics, inertia, and resistance to change, routinely can get in the way of execution success.

Fast forwarding to the present, I just finished a few weeks working with managers from Deutsche Post, Aventis Pharmaceutical, and Microsoft, talking to them about execution problems. I also just participated in a Wharton executive program on strategic management and was debriefing with a few of the participants.

The major point cutting through all the conversations is the importance and difficulty of executing strategy. Two decades after my conversation with Randy Tobias, managers are still emphasizing that execution is a key to success. They are arguing that making strategy work is important and is more difficult than strategy making. Plans still fail or wither on the vine because of poor execution.

The striking aspect of all this is that managers apparently still don’t know a great deal about the execution of strategy. It is still seen as a major problem and challenge.

Management literature has focused over the years primarily on parading new ideas on planning and strategy formulation in front of eager readers, but it has sorely neglected execution. Granted, planning is important. Granted, people are waking up to the challenge and are beginning to take execution seriously.

Still, it is obvious that the execution of strategy is not nearly as clear and understood as the formulation of strategy. Much more is known about planning than doing, about strategy making than making strategy work.

Is execution really worth the effort? Is execution or implementation truly a key to strategic success?

Consider one relatively recent comprehensive study of what contributes to company success.ⁱⁱ In this study of 160 companies over a five-year period, success was strongly correlated, among other things, with an ability to execute flawlessly. Factors such as culture, organizational structure, and aspects of operational execution were vital to company success, with success measured by total return to shareholders. Other recent works have added their support to this study’s finding that execution is important for strategic success, even if their approach and analysis are less rigorous and complete.ⁱⁱⁱ These works then, in total, support the view I’ve held for years:

Sound execution is critical—A focus on making strategy work pays major dividends

Despite its importance, execution is often handled poorly by many organizations. There still are countless cases of good plans going awry because of substandard execution efforts. This raises some important questions.

If execution is central to success, why don’t more organizations develop a disciplined approach to it? Why don’t companies spend time developing and perfecting processes that help them achieve important strategic outcomes? Why can’t more companies execute or implement strategies well and reap the benefits of those efforts?

The simple answer, again, is that execution is extremely difficult. There are formidable roadblocks or hurdles that get in the way of the execution process and seriously injure the implementation of strategy. The road to successful execution is full of potholes that must be negotiated for execution success. This was the message two decades ago, and it still is true today.

Let’s identify some of the problems or hurdles affecting implementation. Let’s then focus on confronting the obstacles and solving the problems in subsequent chapters of this book.

Managers Are Trained to Plan, Not Execute

One basic problem is that managers know more about strategy formulation than implementation. They are trained to plan, not execute plans.

In most MBA programs I’ve looked at, students learn a great deal about strategy formulation and functional planning. Core courses typically hone in on competitive strategy, marketing strategy, financial strategy, and so on. The number of courses in most core programs that deal exclusively with execution or implementation? Usually none. Execution is most certainly touched on in a couple of the courses, but not in a dedicated, elaborate, purposeful way. Emphasis clearly is on conceptual work, primarily planning, and not on doing. At Wharton, there is at least an elective on strategy implementation, but this is not typical of many other MBA programs. Even if things are beginning to change, the emphasis still is squarely on planning, not execution.

Added to the lack of training in execution is the fact that strategy and planning in most business schools are taught in “silos,” by departments or disciplines, and execution suffers further. The view that marketing strategy, financial strategy, HR strategy, and so on is the only “right” approach is deleterious to the integrative view demanded by execution.

It appears, then, that most MBA programs (undergrad, too, for that matter) are marked by an emphasis on developing strategies, not executing them. Bright graduates are well versed in strategy and planning, with only a passing exposure to execution. Extrapolating this into the real world suggests that there are many managers who have rich conceptual backgrounds and training in planning but not in “doing.” The lack of formal attention to strategy execution in the classroom obviously must carry over to a lack of attention and consequent underachievement in the area of execution in the real world.

If this is true—if managers are trained to plan, not to execute—then the successful execution of strategy becomes less likely and more problematic. Execution is learned in the “school of hard knocks,” and the pathways to successful results are likely fraught with mistakes and frustrations.

It also follows logically that managers who know something about strategy execution very likely have the advantage over their counterparts who don’t.

If managers in one company are better versed in the ways of execution than managers in a competitor organization, isn’t it logical to assume, all other things being equal, that the former company may enjoy a competitive advantage over the latter, given the differences in knowledge or capabilities? The benefits of effective execution include competitive advantage and higher returns to shareholders, so having knowledge in this area would clearly seem to be worthwhile and beneficial to the organization.

Let the “Grunts” Handle Execution

Another problem is that some C-level and other top-level managers actually believe that strategy execution or implementation is “below them,” something best left to lower-level employees. Indeed, the heading of this section comes from an actual quote from a high-level manager.

I was working on implementation programs at GM, under the auspices of Corporate Strategic Planning. In the course of my work, I encountered many competent and dedicated managers. However, I also ran across a few who had a jaundiced view of execution. As one of these managers explained:

“Top management rightfully worries about planning and strategy formulation. Great care must be taken to develop sound plans. If planning is done well, management then can turn the plans over to the grunts whose job it is to make sure things get done and the work of the planners doesn’t go to waste.”

What a picture of the planning and execution process! The planners (the “smart” people) develop plans that the “grunts” (not quite as smart) simply have to follow through on and make work. “Doing” obviously involves less ability and intelligence than “planning,” a perception of managerial work that clearly demeans the execution process.

The prevailing view here is that one group of managers does innovative, challenging work (planning) and then “hands off the ball” to lower levels for execution. If things go awry and strategic plans are not successful (which often is the case), the problem is placed squarely at the feet of the “doers,” who somehow screwed up and couldn’t implement a perfectly sound and viable plan. The doers fumbled the ball despite the planners’ well-designed plays.

Every organization, of course, has some separation of planning and doing, of formulation and execution. However, when such a separation becomes dysfunctional—when planners see themselves as the smart people and treat the doers as “grunts”—there clearly will be execution problems. When the “elite” plan and see execution as something below them, detracting from their dignity as top managers, the successful implementation of strategy obviously is in jeopardy.

The truth is that all managers are “grunts” when it comes to strategy execution. From the CEO on down, sound execution demands that managers roll up their sleeves and pitch in to make a difference. The content and focus of what they do may vary between top and middle management. Nonetheless, execution demands commitment to and a passion for results, regardless of management level.

Another way of saying this is that execution demands ownership at all levels of management. From C-level managers on down, people must commit to and own the processes and actions central to effective execution. Ownership of execution and the change processes vital to execution are necessary for success. Change is impossible without commitment to the decisions and actions that define strategy execution.

The execution of strategy is not a trivial part of managerial work; it defines the essence of that work. Execution is a key responsibility of all managers, not something that “others” do or worry about.

Planning and Execution Are Interdependent

Even though, in reality, there may be a separation of planning and execution tasks, the two are highly interdependent. Planning affects execution. The execution of strategy, in turn, affects changes to strategy and planning over time. This relationship between planning and doing suggests two critical points to keep in mind.

Successful strategic outcomes are best achieved when those responsible for execution are also part of the planning or formulation process. The greater the interaction between “doers” and “planners” or the greater the overlap of the two processes or tasks, the higher the probability of execution success.

A related point is that strategic success demands a “simultaneous” view of planning and doing. Managers must be thinking about execution even as they are formulating plans. Execution is not something to “worry about later.” All execution decisions and actions, of course, cannot be taken at once. Execution issues or problem areas must be anticipated, however, as part of a “big picture” dealing with planning and doing. Formulating and executing are parts of an integrated, strategic management approach. This dual or simultaneous view is important but difficult to achieve, and it presents a challenge to effective execution.

Randy Tobias had this simultaneous view of planning and doing. Even as he was formulating a new competitive strategy for his AT&T division, he was anticipating execution challenges. Competitive strategy formulation wasn’t seen as occurring in a planning vacuum, isolated from execution issues. Central to the success of strategy was his early identification and appreciation of execution-related factors whose impact on strategic success was judged to be formidable. Execution worries couldn’t be put off; they were part and parcel of the planning function.

In contrast, top management at a stumbling Lucent Technologies never had this simultaneous view of planning and execution.

When it was spun off from AT&T, the communications, software, and data networking giant looked like a sure bet to succeed. It had the fabled Bell Labs in its fold. It was ready to hit the ground running and formulate winning competitive strategies. Even as the soaring technology market of the late 1990s helped Lucent and other companies, however, it couldn’t entirely mask or eliminate Lucent’s problems.

One of the biggest problems was that management didn’t anticipate critical execution obstacles as they were formulating strategy. Its parent, Ma Bell, had become bureaucratic and slow moving, and Lucent took this culture with it when it was spun off. The culture didn’t serve the company well in a highly competitive, rapidly changing telecom environment, a problem that was not foreseen. An unwieldy organizational structure, too, was ignored during Lucent’s early attempts at strategy development, and it soon became a liability when it came to such matters as product development and time to market. More agile competitors such as Nortel beat Lucent to market, signaling problems with Lucent’s ability to pull off its newly developed strategies.

One thing that was lacking at Lucent was top management’s having a simultaneous view of planning and doing. The planning phase ignored critical execution issues related to culture, structure, and people. The results of this neglect were extremely negative, only magnified by the market downturns in 2000 and thereafter.

Execution Takes Longer than Formulation

The execution of strategy usually takes longer than the formulation of strategy. Whereas planning may take weeks or months, the implementation of strategy is usually played out over a much longer period of time. The longer time frame can make it harder for managers to focus on and control the execution process, as many things, some unforeseen, can materialize and challenge managers’ attention.

Steps taken to execute a strategy take place over time, and many factors, including some unanticipated, come into play. Interest rates may change, competitors don’t behave the way they’re supposed to (competitors can be notoriously “unfair” at times, not playing by our “rules”!), customers’ needs change, and key personnel leave the company. The outcomes of changes in strategy and execution methods cannot always be easily determined because of “noise” or uncontrolled events. This obviously increases the difficulty of execution efforts.

The longer time frame puts pressure on managers dealing with execution. Long-term needs must be translated into short-term objectives. Controls must be set up to provide feedback and keep management abreast of external “shocks” and changes. The process of execution must be dynamic and adaptive, responding to and compensating for unanticipated events. This presents a real challenge to managers and increases the difficulty of strategy execution.

When the DaimlerChrysler merger was consummated in 1998, many believed that the landmark deal would create the world’s preeminent carmaker. Execution since has been extremely difficult, however, and the six years after the merger have seen many new problems unfold. The company has faced one crisis after another, including two bouts of heavy losses in the Chrysler division, a series of losses in commercial vehicles, and huge problems with failed investments in an attempted turnaround at debt- burdened Mitsubishi Motors.^iv Serious culture clashes also materialized between the top-down, formal German culture vs. the more informal and decentralized U.S. company. Angry shareholders at the 2004 meeting created and mirrored internal dissent and issued an ultimatum to Jurgen Schrempp to turn things around fast.

The six years after the merger presented problems unforeseen at the time of the merger. Execution always takes time and places pressure on management for results. But the longer time needed for execution also increases the likelihood of additional unforeseen problems or challenges cropping up, which further increases the pressure on managers responsible for execution results. The process of execution is always difficult and sometimes quarrelsome, with problems only exacerbated by the longer time frame usually associated with execution.

Execution Is a Process, Not an Action or Step

A point just made is critical and should be repeated: Execution is a process. It is not the result of a single decision or action. It is the result of a series of integrated decisions or actions over time.

This helps explain why sound execution confers competitive advantage. Firms will try to benchmark a successful execution of strategy. However, if execution involves a series of internally consistent, integrated activities, activity systems, or processes, imitation will be extremely difficult, if not impossible.^v

Southwest Airlines, for example, does many things differently than most large airlines. It has no baggage transfer, serves no meals, issues no boarding passes, uses one type of airplane (reducing training and maintenance costs), and incents fast turnaround at the gate. It has developed capabilities and created a host of activities to support its low-cost strategy. Other airlines are hard pressed to copy it, as they’re already doing everything Southwest isn’t. They’re committed to different routines and methods. Copying Southwest’s execution activities, in total, would involve difficult trade-offs, markedly different tasks, and major changes, which complicates the problem of developing and integrating new execution processes or activities. This is not to say that competitors absolutely cannot copy Southwest; indeed, other low-cost upstarts and traditional airlines are putting increasing competitive pressure on Southwest. This is simply arguing that such imitation is extremely hard to do.

Execution is a process that demands a great deal of attention to make it work. Execution is not a single decision or action. Managers who seek a quick solution to execution problems will surely fail in attempts at making strategy work. Faster is not always better!

Execution Involves More People than Strategy Formulation DOES

In addition to being played out over longer periods of time, strategy implementation always involves more people than strategy formulation. This presents additional problems. Communication down the organization or across different functions becomes a challenge. Making sure that incentives throughout the organization support strategy execution efforts becomes a necessity and, potentially, a problem. Linking strategic objectives with the day-to-day objectives and concerns of personnel at different organizational levels and locations becomes a legitimate but challenging task. The larger the number of people involved, the greater the challenge of effective strategy execution.

I once was involved in a strategic planning project with a well-known bank. Another project I wasn’t directly involved in had previously recommended a new program to increase the number of retail customers who used certain profitable products and services. A strategy was articulated and a plan of execution developed to educate key personnel and to set goals consistent with the new thrust. Branch managers and others dealing with customers were brought in to corporate for training and to create widespread enthusiasm for the program.

After a few months, the data revealed that not much had changed. It clearly was business as usual, with no change in the outcomes that were being targeted by the new program. The bank decided to do a brief survey to canvas customers and branch personnel in contact with customers to determine reactions to the program and see where modifications could be made.

The results were shocking, as you’ve probably guessed. Few people knew about the program. Some tellers and branch personnel did mention that they had heard about “something new,” but nothing different was introduced to their daily routines. A few said that the new program was probably just a rumor, as nothing substantial had ever been implemented. Others suggested that rumors were always circulating, and they never knew what was real or bogus.

Communication and follow-through for the new program were obviously inadequate, but the bank admittedly faced a daunting task. It was a big bank. It had many employees at the branch level. Educating them and changing their behaviors was made extremely difficult by the bank’s size. Decentralized branch operations ensured that problems were always “popping up” in the field, challenging employees’ attention and making it difficult to introduce new ideas from corporate to a large group of employees.

In this example, the number of people who needed to be involved in the implementation of a new program presented a major challenge to the bank management. One can easily imagine the communications problems in even larger, geographically dispersed companies such as GM, IBM, Deutsche Post, GE, Exxon, Nestlé, Citicorp, and ABB. The number of people involved, added to the longer time frames generally associated with strategy execution, clearly creates problems when trying to make strategy work.

Execution-Word history

mid-14c., from O.Fr. execution, from L. executionem, agent noun from exequi/exsequi “to follow out,” from ex- “out” + sequi “follow” (see sequel). Sense of “act of putting to death” is from M.E. legal phrases such as don execution of deth “carry out a sentence of death.” Literal meaning “action of carrying something into effect” is from late 14c. John McKay, coach of the woeful Tampa Bay Buccaneers (U.S. football team), when asked by a reporter what he thought of his team’s execution, replied, “I think it would be a good idea.” Executor and executioner were formerly used indifferently, since both are carrying out legal orders.