How Strategy Becomes Execution… and the Many Reasons It Doesn’t

Tight linkage between Strategy and Execution can be very challenging for a number of reasons. Sometimes the strategy is based on inaccurate or incomplete assumptions about the business’s capabilities and the opportunity being pursued. In other cases, unexpected developments make execution more challenging or even render the strategy obsolete.

But even when the strategy is spot-on, moving it into execution can be difficult. Strategy is forward-looking, anticipating future developments that are far from certain. Strategy by definition also demands change of the organization, and we all know about human resistance to change. Finally, strategy is usually expressed at higher levels of abstraction than execution, creating translation challenges between the “clouds” and the “weeds.”

How can you practice strategy in a way that makes the linkage to execution more effective and efficient?  Here are five important principles to consider, including what might get sideways along the way.

1. Develop strategy collaboratively.

A collaborative process not only improves the quality of the strategy, by benefitting from the perspective of all participants, but perhaps more importantly increases the buy-in of the leaders, and their enthusiasm for execution. The strategy development process must be intentionally designed to account for collaboration and buy-in in addition to producing high-quality strategic substance.

How this can go wrong:

• The “strategy” becomes merely a combined wish list of all participants, with no difficult choices made, in the interest of buy-in.
• There are perceived winners and losers to the extent that the losers will at best half-heartedly support the strategy and at worst try to sabotage it.
• There are “strategy heroes” who dominate the process.

2. Express the strategy in compelling, engaging ways.

Strategy is fundamentally an exercise in communication and persuasion. Whether in the form of written documents, discussion decks, or other artifacts, the “raw strategy” has to be packaged and delivered with specific audiences in mind, with appropriate levels of detail and abstraction. Having bought in to the strategy in Step 1, all members of the leadership team should be capable of presenting strategy and equipped with the communication assets necessary to engage core audiences (board/investors, customers and partners, middle management, employees at large). Careful thought should be given to the intentional engagement of each audience, with specific intentions and outcomes in mind.

How this can go wrong:

• Leaders talk past their audiences, being too technical, too abstract, or otherwise failing to connect and inspire. There will often be a “train’s leaving the station” aspect to the communication of strategy, so care must be taken to make the destination sound appealing.
• Multiple audiences hear inconsistent and/or incompatible messages on strategy, leading to confusion and uncertainty in the execution phase.

3. Strategy sets a multi-year destination and demands specific change.

An effective strategy describes a 3-5 year “era” for the company where a significant milestone is accomplished, requiring a substantial change. The era may involve accelerated revenue/profit growth, market expansion, new product development, acquisition and integration, preparation for recapitalization, or other significant corporate events. The time frame balances the significance of the change (which can’t be accomplished in 1-year increments) with the need for urgency and immediacy (“realizing our mission” being too distant). The strategy makes clear how the company will be different at the end of this era, and that the status quo will be insufficient to reach the destination. Further, it identifies 5-7 specific change initiatives over the life of the strategy, defined by executive leadership, to ensure arrival at this destination. This portfolio of change initiatives provides the basis for measuring progress toward the destination.

How this can go wrong:

• The destination and related change is either over-estimated (making it sound unrealistic) or under-estimated (failing to generate urgency).
• The starting point or current state is inaccurately characterized, creating dissonance with stakeholders.
• The description of the destination and journey fail to appreciate the company’s “legacy” strategic assets and capabilities – sometimes called the crown jewels – and account for how these will be preserved, extended, or changed over the life of the strategy.

4. Strategy drives the annual planning and budgeting process.

This is the direct point of interface between strategy and execution, as the portfolio of change initiatives described above drives resource allocation and funding for the annual planning cycle. Leadership must determine what “acceptable progress” toward these initiatives is required over the next year in order to ensure the company arrives at its multi-year destination. This forward-looking, strategy-driven viewpoint must drive the annual planning process, rather than accounting-driven, year-over-year analysis.

For example, one of the change initiatives over the life of the strategy (2023-2026) might be to increase the average contract value (ACV) for net new customers from $50,000 to $200,000. Leadership agrees that on the road to a $200,000 ACV in 2026, an appropriate milestone for 2023 would be an ACV of $85,000. In developing the operating plan and budget for 2023, the resources to achieve that level of performance must be available to the organization, along with an understanding that the target for 2024 will be rising again, perhaps to $130,000. Specifically, what programs are in place to ensure the ACV rises from the current level to $85,000 for 2023?

How this can go wrong:

• Strategy can be completely disconnected from the development of annual operating plans and budgets, or simply be reflected in certain line items in the budget. There is no multi-year, transformational perspective driving the planning process.
• Strategic initiatives are not properly ring-fenced, and become relatively easy targets for resource raiding in the name of more urgent opportunities or challenges.
• Incentives are misaligned with the advancement of strategic initiatives, allowing parochial interests to drive behavior and resource allocation.

5. Strategy seeks and responds to feedback in a timely way.

Strategy starts becoming obsolete the moment it is “approved.” As underlying assumptions and hypotheses are either validated or refuted, leaders must contemplate changes to course and speed, redirecting resources as necessary. More broadly, every strategy has a useful life, and leaders must evaluate when a strategy has lost its compelling nature, whether because a destination has been reached, or needs to be described in an updated way; or because certain aspects of the journey have changed.

How this can go wrong:

• Leadership waits too long to refresh its strategy, and the organization loses faith because it sees the strategy as disconnected from reality.
• Leadership alters the strategy too frequently, so the organization never commits to execution.
• Leadership ignores or refuses to acknowledge feedback that questions assumptions and hypotheses on which the strategy is built.

Before questioning the commitment and ability to execute the company strategy, I would look at whether the leadership team is following these principles in defining the company strategy. How does this play out at your company? How would you describe the dynamic between strategy and execution?