Execution excellence. A straight answer to strategy implementation problems
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Mai 2011 |
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HORVATH & PARTNERS MANAGEMENT CONSULTING S.R.L. |
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Strada Cretei, Nr. 12
014154 Bucureşti, Sector 1
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+40-31-620.18.89
Website
www.horvath-partners.ro
Rethinking strategy execution
INITIATIVES - THE HEART OF THE STRATEGY EXECUTION
It is a common belief that strategies fail because they were not elaborated properly. But in reality, strategy development is less than half the battle. In the majority of cases – we estimate 70% – the real problem is not bad strategy. It is bad execution [Charan/Colvin: Why CEOs Fail].
When we talk about strategy execution we think of hundreds of different initiatives defined to transfer abstract strategy into tangible business reality. In turn, every single initiative contributes to strategy execution. Hence the equation is simple: if a set of initiatives fails, strategy fails.
Within strategy execution we distinguish between smaller initiatives constantly developed and executed in daily business, and major strategic initiatives executed in a project setting. Companies with poor results in strategy execution might have trouble with the implementation of one or both kind of initiatives.
To make the myriad of smaller initiatives support a strategy we need to be ensured that individuals within the company are clearly committed to the strategy. Thus, employees have to know the company’s strategic directions and must be willing to accept them. It is also important to give individuals proper and strategically aligned incentives to fostertheir willingness to implement strategy.
Management tools like the Balanced Scorecard can significantly help to improve strategy execution in this field. To be good at executing major strategic initiatives many managers pursue the plan that with “strong (multi-)project management” and “appropriate management attention” the successful execution of core projects must be a matter of course.
Quite the opposite is the case!
We found that although top-performing companies realize 85% of their core projects successfully, low performers achieve success in only about 40%. On average, almost every second strategic project does not achieve the originally intended objectives. Since strategy execution is fundamental to competitive advantage, we think companies should strive to do their utmost in project execution and should question harder why their projects fail.
THE MYOPIA OF PROJECT MANAGEMENT REGARDING STRATEGY EXECUTION
We found that managers tend to underestimate the success factors of project execution which are not exclusively based on hard facts like budget or timeline adherence – which typically are the cornerstones of project management. Clear directions, right accountabilities and visible leadership, for example, play a greater role in project success nowadays than traditional project management tools for financial monitoring.
A representative inter-sector study of 82 different companies reveals that projects are often bound to failure because essential internal success factors (shown below) are missing.
The survey implies that by overcoming these weaknesses a major boost in strategy execution is possible. However, we also need to consider the fact that external reasons could also affect the success of core projects.
Imagine your project target is to launch a new professional hair care product at a lower price than your competitors. The business idea is to sell a professional hair care product in retail instead of in hairdressing salons or wholesale. Imagine you had a great resource plan, total management commitment, clear communication, the very best staff and brilliant project organization. Your project seems to be on track.
Unfortunately, the environment has changed since you started. A new competitor you did not see coming has already launched a comparable product at a more favorable price. Additionally, retail stores intend to stop selling hair care products to reduce complexity and to improve their margins. In this new environment, how successful do you think this project might be? It is a safe bet it will land on the list of strategic project failures.
HORVATH & PARTNERS EXECUTION EXCELLENCE MODEL
Companies which want to improve their success rate regarding major strategic projects should not look at single reasons for project failures. They should try to manage the different crucial factors of successful execution in a comprehensive way. In order to support managers to do this, we have developed the “Execution Excellence Model” based on our experiences with top-performing companies. The model combines traditional project management techniques with internal and external project success factors that can help to increase project success rate.
We are convinced that project execution success factors can be clustered in six main categories (see Horvath & Parners Execution Excellence Model) which are all crucial but can be weighted differently according to corporate relevance. To execute a project successfully it is imperative to review these factors at the beginning of and during every single project:
PROJECT EXECUTION SUCCESS FACTORS
Direction! In this category we analyze whether your project targets are clearly set and understood by all project stakeholders. Furthermore, we check the consistency between the strategic intent of each project and resource allocation.
Leadership! Projects often fail if they are not backed sufficiently by management. For example, if an organization senses different opinions within the management team regarding the necessity of a specific project, the organization’s willingness to support this initiative will diminish drastically. As far as leadership within project teams is concerned, project leaders should be trained in team management and leadership techniques. They must be able to arouse the fighting spirit and teamwork necessary to accomplish the respective project successfully.
People! The success of a project is often due to its brilliant project team. Suitable competencies and unequivocal accountabilities are mandatory to accomplish the desired project results in the end.
Setting! Without an organizational and process framework a project cannot exist. Projects must be positioned clearly in an overall vision in order to ensure that they are not regarded as “disturbing”, “distracting” or even “counterproductive” to daily business.
(External) Environment! In this category the relevant corporate environment is analyzed and monitored at the beginning and during the project. In case of change in project premises, single milestones or the whole project must be rethought.
Professional Project Management! Professional project management is obviously not the only enabler of successful project execution, but excellent project management techniques are a fundamental pillar of project execution. These techniques assure that time, budget and quality targets are met. Alert functions may help to provide early warnings in case of deviations.
Enhancing execution success
We firmly believe that top management should be informed continuously about the execution success rate of its core projects. Continuous information supply is crucial as factors influencing execution success vary significantly during project lifetime.
