Great strategies often go to waste because they cannot be properly executed. In this article, the authors share not only how to make sure your strategies are executed but also improved by input from the functions responsible for implementing the strategy.
Many strategies look great on paper, but stumble during execution. A common problem is that functions such as HR, IT, Finance, Operations, R&D, Purchasing, Supply Chain and Communications do not fully support the organisation’s strategy.1 These functions are often seen as operating in a world of their own; the cartoon character Dilbert has to deal with “the Trolls” in Accounting – a label that might be applied to other functions, and not just Finance.
A recent survey found that “Only 9% of managers say they can rely on colleagues in other functions and units all the time, and just half say they can rely on them most of the time.”2 This is a major problem because, as the survey also describes, “…execution lives and dies with a group we call “distributed leaders”, which includes not only middle managers who run critical businesses and functions but also technical and domain experts who occupy key spots in the informal networks that get things done.” The message coming through is that functions are failing to support the organisations that they are there to serve.
In our experience, it is rarely the case that a function leader does not want to do the right thing. More commonly, the problem lies in the design or implementation of the strategy for their function. Strategy execution is often managed carefully as it is rolled out at one or two levels below the Board. But execution often gets stuck at the function level. As a result, functions end up ploughing their own furrow, independent of what the rest of the organisation is doing.
Take the disguised example of a major Industrial company, whose Board had decided on a cost leadership strategy. They instructed the functions in the business to avoid adding cost, and standardise where possible. The Supply Chain function, which served the needs of all the business units, implemented this strategy by automating processes and applying a “one touch” philosophy to all transactions.
When the function reviewed its strategy a few years later, it realised that this emphasis on reducing their own costs had resulted in some missed opportunities. There were some opportunities to slightly increase their own costs in ways that would lower the overall costs of the organisation, or provide benefits for customers which they would be willing to pay a small premium for. For example:
- A Logistics Network Optimisation function was created which was tasked with developing new tools and techniques that could be used to significantly reduce total company-wide costs at the same time as improving customer service levels.
- Rather than have one, low cost interface with customers, a set of differentiated “interaction models” were developed – each of which was customised to let a particular customer segment interact with the company in a way that helped them order, schedule, receive and pay for deliveries. These interaction models improved customer experience with limited additional costs.
Also, the drive for low cost had led to some deficits in the company’s focus on safety, which could have put its “license to operate” at risk – so selected investments in safety management were made.
If the function had been more involved in the initial strategy debate, these nuanced opportunities to create value through carefully selected investments could have been added to the overall cost leadership strategy. Valuable time had been lost, but the function did finally have a robust strategy.
A few years later the Board launched another strategy review. Whilst preparing for this, the head of the Supply Chain function learned that the business units were interested in additional services beyond those currently being provided by the function. After a series of interviews, with stakeholders from across the organisation, it became clear that the strategy of selectively investing where customers particularly valued the improvement in service levels was the right one, however it had never been fully implemented. On reflection he realised that this was because the function had not set itself clear, measurable targets and had not strictly monitored its progress towards achieving those targets. The Board had not provided sufficient challenge and was, in any case, more focussed on the overall strategy of visible cost reduction. Several years had passed since the original strategy cycle, and only now did the function get a grip on not just what to do, but also how to make sure it got done.
This case illustrates a common problem. All too often, functions underperform in their contribution to the overall strategy of the organisation. All too often they do not take an expansive look at their strategy and, even if they do create a robust strategy, they fail to execute it fully.
About the Authors
Jo Whitehead is a Director of Ashridge Strategic Management Centre and conducts research into Corporate, Business and Function Strategy. He teaches on the Strategy Tools and Strategic Decisions courses at Ashridge Business School.
Anita Hunt and Debbie Rogerson are consultants at Market Focus. Market Focus is a boutique consulting group which has been challenging and coaching management teams of large industrial companies in strategy and marketing planning for more than 25 years. Our consultants come from senior management roles in industry. They are expert practitioners combining an understanding of the academic theory with experience of real life situations and practical approaches which deliver results. For more information follow this link http://www.mfc-online.com
1. “Functions” can include functions that are embedded in business units, such as some HR or Finance departments, functions that carry out activities that are embedded in the value chain of several businesses such as a shared supply chain, Operations, Production, Purchasing, R&D or IT, and functions such as Corporate HR or Treasury that operate largely at a corporate level, supporting broad corporate initiatives. Our work, and this article, is concerned with all types of functions.
2. Sull, D. Homkes, R. and Sull, C. (2015). “Why Strategy Execution Unravels – and What to Do About It” in Harvard Business Review, March.
3. See also Sven Kunisch, Günter Müller-Stewens and Andrew Campbell, (2014). “Why Corporate Functions Stumble” in Harvard Business Review, December.
4. Campbell, Andrew, Gutierrez, Mikel, and Lancelott, Mark. (2017). Operating Model Canvas; Aligning operations and organization with strategy. Van Haren Publishing.