This chapter is from the book
This chapter is from the book
This chapter is from the book
Execution Is a Key to Success
Execution clearly is a key to success, but it is no easy task. Here was a company back then with an ingrained culture and structure, a set way of doing things. For AT&T 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 strategy making.
Making Strategy Work Is More Difficult Than the Task of Strategy Making
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’ 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. A host of factors, including politics, inertia, and resistance to change, routinely can get in the way of execution success.
In the years since this first encounter with strategy execution or implementation, I have worked with numerous managers and many organizations from different and diverse industries, I’ve worked with many different companies or organizations—large and small, service organizations and nonprofits, government agencies—and the message has remained entirely consistent and clear: The execution of strategy is vital to company or organizational performance, but pulling it off successfully is a huge challenge and difficult task.
One striking aspect of all this, even in the present, 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, strategy formulation, and so on 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 and other management issues. Much more is known about planning than doing, about strategy making than making strategy work.
An obvious question that presents itself is: Is execution really worth the effort? Is execution or implementation truly worth managerial time and attention?
Consider some relatively recent comprehensive studies of what contributes to company success.ii In one 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 found to be vital to company success, with success measured by total return to shareholders. Focusing on execution, the study found, is definitely worthwhile, leading to increased profitability.
Another, more recent study of CEO abilities and the effects on company performance is even more striking in its findings.iii The authors of the research published in 2012 found, shockingly, that CEOs who were good listeners, team builders, or great communicators did not lead successful companies. What was most significant were the top manager’s execution and organizational skills. Managers who focused on details, the integration of long-term and short-term goals and performance metrics, and analytical thoroughness were the ones leading successful companies. Coordination and follow-through were more important than being an enthusiastic colleague. The people or social skills, one can infer, can add to the top manager’s execution prowess, but they alone are insufficient to guarantee company success.
This and other studies suggest that the market wants top management to fill an organizational role more than a social one.iv What’s desired from leaders is a relentless and even mind-numbing focus on execution and incremental changes in performance. Charisma and charm help, but the delivery of performance metrics and the ability to execute a plan are what really counts. The methodical manager whose relentless focus is on execution and the organizational design capabilities supporting it is the man of the hour. Making strategy work is the mark of the successful CEO and his or her staff.
Other recent works have added their support to these studies’ findings that execution is important for strategic success, even if their approach and analysis are less rigorous and complete.v These works then, in total, support the view I’ve held for years: A focus on execution pays dividends.
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 many 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 many managers have rich conceptual backgrounds and training in planning but not in “doing.” 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? This certainly seems to be the message in the studies cited previously. 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.
The real and difficult question, of course, is how to get the “doers” involved in the planning process. Top managers who formulate strategy cannot talk to or seek advice from thousands of lower-level personnel spread out around the globe. So, how do the planners pool the doers and get them involved?
Methods can be used to foster interaction and knowledge sharing, and these are discussed in greater detail later in this chapter. These methods include meetings and direct contact (e.g., GE’s “Work-Outs,” strategic management meetings with representatives of key businesses and functional areas) and the use of surveys. The latter involves the collection of data from key managers whose commitment to execution is vital. E-mails collected from a sample of managers worldwide can provide valuable information for planners and increase the commitment of the doers to chosen plans of action. The task is to derive ways to reach out to the doers in some way to get them involved in the process of strategic thinking and planning.
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.
The methods used to foster interaction and knowledge sharing just mentioned can help to foster this simultaneous view of planning and doing. A survey instrument or questionnaire collected from a sample of managers globally can raise issues related to competitive strategy. However, it can also generate thoughts and opinions about what resources or capabilities are needed to make the strategy work. Generating a strategic “wish list” is helpful; creating a realistic view of implementation needs or requirements simultaneously aids by attaching priorities to that wish list and identifying which strategic thrusts are most likely to succeed.
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 the 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 beat Lucent to market, signaling problems with Lucent’s ability to pull off its newly developed strategies.
One thing 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 that followed the Lucent spinoff.
There are many examples of poor simultaneous thinking. I’ve seen companies change or tweak strategies, only to find that they lack the capabilities down the line to pull them off. A charge against Avon Products, Inc., in light of its years of poor performance, was that it changed its strategic course and didn’t see the problems that would materialize because of it. The company slowly, but inexorably, moved away from its core approach of direct selling and tried to be more like the big “beauty” companies, like P&G and L’Oreal. The move was problematic because top management and the board didn’t see that their direct selling model, their capabilities, especially in sales, and their culture would get in the way of such a move. The lack of forward-oriented, simultaneous thinking led to troubles that at first were unforeseen.
In April 2012, the Avon board announced that Sherilyn McCoy would be Avon’s new CEO after 30 years at J&J. Can she improve Avon’s performance? She’ll need to focus on Avon’s core business and capabilities and make decisions driven by both a strategic and short-term point of view. She’ll virtually have to act as both a CEO and COO, with a simultaneous view of needed quick actions and the long-term implications of those same actions. Also needed is a handling of organizational culture that supports a move focusing on returning to the company’s lost core capabilities. This, of course, will not be an easy task.
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 usually plays 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.
I recently was involved in the planning and execution of strategy with a medium-size company whose headquarters is close to Philadelphia. The company is really a division of a larger corporation, but it enjoyed autonomy and flexibility as it was formulating a strategy in 2010 for implementation in 2011 and a few years thereafter.
The plan involved the expansion of most strategic business units (SBUs) into Europe. Questions about strategy dealt with which products to push, where, and how, with emphasis on cost position or differentiation. Implementation issues dealt with the organizational structure (for example, centralization versus decentralization in foreign markets), coordination requirements of capabilities and units, and talent acquisition to support the expansion.
For present purposes, the point is that the planning stage was much shorter and controllable than the implementation or execution stage. Working with the top management of the business and SBU managers at home and abroad, the strategy was laid out nicely in just a couple of months. The execution of the plan, however, was projected to require, at minimum, two to three years. The longer time frame for implementation clearly would increase the difficulty of execution efforts. Why is this true?
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, many believed that the landmark deal would create the world’s preeminent carmaker. Execution, however, was extremely difficult, and the years after the merger saw many new problems unfold. The company 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.vi Serious culture clashes also materialized between the top-down, formal German culture versus the more informal and decentralized U.S. company. The merger was doomed; what looked good at the outset turned into a catastrophe. The long time frame for execution, coupled with a lack of simultaneous thinking, led to major problems and disaster. Problems and issues originally unanticipated and not discussed popped up as formidable barriers to the effective execution of strategy.
Another example is the case of J.C. Penney. After years of poor performance at the embattled company, Ron Johnson was appointed CEO and charged with the responsibility of turning things around. In 2012, he promised significant change, committing to doing for Penney what he had done previously for Apple stores.
Some changes were done quickly, for example, a new three-tiered pricing structure and limitation on the number of expensive major advertising promotions. But other elements of strategy execution inevitably will take time. Johnson faces the need to reinvent 1,100 retail stores, many of which aren’t very attractive. This is an old chain—110 years old—and many changes will come slowly. Doing too many things at once can create confusion and perhaps resistance to needed change. Care must be taken to recognize that some aspects of reinventing the department store chain are best done over time with careful preparation and thought. It also must be recognized, however, that the long time frame devoted to execution can breed some of its own problems. Johnson indeed faces challenges as he tries to turn around the lumbering giant.
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 and uncertainty 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.vii
Southwest Airlines, for example, does many things differently than the few larger, long-established airlines. It has no baggage transfer, serves no meals, 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 when the potential imitators have already committed to routines and activities that Southwest or other low-cost carriers aren’t committed to or doing.
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
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 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, GE, Exxon, Nestle, 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.