If you’re chugging away as an organization and are either leveling off in overall performance or sensing things starting to slip, chances are there are a few things you can tighten up in the strategy department. For many leaders, strategy is a nebulous concept that they can’t correlate to improvement in financial performance. This is unfortunate because it’s the only way you can actually bring it to pass in an organization of any size. Many leaders focus only on financial metrics, while not acknowledging the fact that it is only a lagging indicator of the areas that actually need your attention.
The various components of an overall corporate strategy need to be sequenced in the correct order as there’s a contextual relationship. Some of these things sound like work you may not benefit from, but if they’re not done well, every piece below it (hierarchically speaking) will under-perform their potential. Here’s an approach that works well:
Generate executive support
It’s more common that you might think for executive to so distracted with “the business” to be keenly focused on the actual strategy. Unfortunately, most executives spend less than a few hours a month talking about the strategy. What this means is that in many cases, no one is talking about the strategy. This IS a big deal because the strategy is how you’re 1) progressing toward your long-term end state and 2) strengthening your core business today.
Vision, mission, values
Vision is a more important piece of the puzzle than most people realize. It’s often used as a motherhood statement and quite often is barely understood across most of the company. As the highest piece of directional context, it’s worth every second you spend to clarify this and have every employee understand it. Lots of people are operationally focused, even at the higher levels of the org chart. Their natural tendency is to move beyond planning and get into the “meat” (operational discussions). This probably happens because that’s how they were successful in jobs leading up to the one they now hold.
Companies that lead their industry are relentless about aligning business model and understanding what is transformational about their business. This all stems from the clarity that is created through well defined direction.
Long term direction
Knowing what your organization is moving toward helps all of your resources prepare your organization for success. A business plan without the context of long-term direction and short-term business improvements is a scary thing. Primarily because it leaves such a large gap and secondly because no one noticed. Long-term direction should consider strategic positioning and how to achieve a form of competitive advantage.
Build and maintain a strategy map
Many companies don’t understand to a great deal of specificity what they exist to create. This is a common symptom of companies that have been in existence for a long period of time. Build a strategy map. It not only defines what the company is there to build, but it also allows you to theorize then understand what linked chain of improvements actually drive your business. This comes in particularly handy when you’re building metrics or even more so when investing/divesting, making structural changes by determining what the linkage between the various components of your business model are. Always tie decisions back to “how is this going to impact our ability to achieve the outcomes we exist to achieve.” If you can’t make something fit on the strategy map, you need to question why you’re doing it.
A strategy map will help you identify and remove things your business is currently focusing on that are less relevant to your success. Something that is only 50% relevant to your outcomes is a distraction.
Establish the mechanisms that enable strategy
All of the direction in the world won’t help you if there’s no internal accountability to talk about it. Build simple plans across that organization that include the context for the plan, the desired state (what you’re working to change or achieve by year end) and a simple action plan. People readily understand and can act on this. Require every team to talk about their progress toward the desired state regularly. When people are constantly focused on the change they’re working to create, it starts to happen. It sounds simple, but is incredibly powerful.
Establish strategy review meetings where you share emerging factors in your business environment that have the potential to support or resist your ability to be successful. Require updates from core strategy leads. Talk about what your measures are telling you. Identify barriers and task people with removing them.
For larger companies, maintain an environmental analysis system where you identify +/- factors across all focus areas and then constantly mature them. Use them as both input and output of every planning discussion within the company. Rate them for potential impact and your ability to control them. Develop a predictive component to this and involve subject matter experts from across your company. You’ll walk into every planning session already working with the collective knowledge of the company, and the extent to which every factor with the potential to impact your business is moving.
Definition of a value discipline
Many business plans focus on things that have to be done, but they don’t directly describe HOW you’re strengthening your core business. A huge gap in many business plans is the lack of a defined value discipline. If your organization hasn’t gone here… go here. The value discipline is your competitive strategy. It’s the form of value you are competing on in your market. Without an understanding of this, all internally focused strategies are suspect. There are three value disciplines, all of which require such completely different technology, culture, processes and systems to support that if you have a culture that supports a different value discipline, it resists yours. An allocation system that drives the right behaviors in an operational excellence focused company could form a huge barrier in a customer intimate organization.
Class leading companies align absolutely every dimension of their business and operations to support a single value discipline. I’ll use the term relentless one more time. Without defining this, people will make decisions that just make sense to them. It happens every day in your company. This is a huge opportunity for strengthening your business, by removing aspects of your business that are resisting your success from within. Lack of consistency in form of value makes it very hard for your potential customers to understand why they should deal with you.
Define the customer experience
Based on your value discipline, break it down, involve employees, tie it back to best practice around value disciplines. Write a set of statements that define the attributes of the desired customer experience. Every customer facing team needs to align what they do to make this happen. Internally focused teams need to ensure they enable this and create processes that drive behaviors that support this. You now have a focal point for the people that work in your company to connect to.
Aligning the culture
Once you have a defined customer experience, it’s much easier to connect your culture to that. At this point, competency frameworks can be built if you so choose. At the very least, you can define the type of culture that your supervisors can foster and you can hire to enable. Competency frameworks fail when they’re not closely tied to a strategy. People don’t understand why they’re relevant. There’s a short distance between competency frameworks and enabling the strategy, but you have to first make the connection.
Balanced scorecard alignment
At this point, you can align your balanced scorecard. Measurement drives behavior, and creates decision making information. If your measures are safe and have no real stretch, this doesn’t do either of those things. Employees should be able to read your scorecard and be able to tell you what your value discipline is and what some parts of your strategy map might look like. If it doesn’t, you haven’t dialed the measures in to motivate the right things.
Aligning the core strategies
I have long recommended the use of core strategies in a business plan. A core strategy is a major functional area that HAS to align to enable your business to succeed. Marketing, HR, Technology, Sales, etc… By requiring each of these teams to demonstrate understanding of how they’re going to align their functions to enable the strategy (as part of every business plan) and then holding them accountable all year long, you have much more control over the progression of the company. Assuming this is happening without managing it is dangerous.
Take it down to the personal level
Once you have all of this in place, teams can be building plans that both position you to be able to achieve the long-term direction as well as strengthen the core business today. Integrate this into performance plans, motivate with variable comp and you are on your way.
Eliminate corporate distraction – find and kill
Corporate distraction comes in many forms. Too many committees, too great a focus on something that doesn’t drive your business, building excess equity in some aspect of your brand, being distracted with things outside your company. If you aren’t treating your business with an intensity of focus, you’re taking your customers for granted.
The bottom line with strategy is that people cannot support what is not defined. The more clearly you define your objectives, the more of your corporate resources will be aligned to make this happen.