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Strategy Planning and Execution

What is strategy?

To be successful, your organization needs to set a clear, sound strategy. Strategy is how your

organization chooses to deliver its products or services to meet your customers’ needs. It’s the
unique way that your organization carries out its purpose and separates itself from the
competition.

A good strategy consists of two major elements:

 The value proposition—what makes your organization’s products or services distinctive

so customers want to do business with you instead of your rivals

 The value chain—the combination of organizational activities that makes your unique

value proposition possible *

Strategy is usually developed through a strategic planning process. Strategic planning helps
ensure that:

 A strategy is sound
 All units are aligned with the strategy
 Strategy implementation is effective

The result of the planning process is a strategic plan.

Strategic Planning, however, is not the same as Strategic Thinking

Strategic plans vary, but they usually contain:

 Direction statement—a summary of the organization’s vision, mission, and values that
guide the strategy

 Strategic objectives—goals and outcomes that represent achievement of a strategic

vision *

 Priority issues—key issues (weaknesses to be addressed or opportunities to be seized)

that the organization needs to tackle to be successful

 Action plans—specific steps the organization needs to take to accomplish its priority
items and reach its objectives
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An organization may use different terms for these elements of a strategic plan. However, most
organizations document their strategy and, in broad terms, explain how they plan to achieve it.

Strategic Management should recognize that the planning process, while valuable, is somewhat
rigid, not fluid, and static. Planning makes assumptions that do not take into account the dynamic
nature of the environment. Structured and rigid processes often lack connection with the fluidity
of real-life scenarios and unwillingly hinder creativity, adaptation and flexibility.

Much new thinking in strategy argues that the fast pace of change in modern business (perhaps
nowhere more obvious than in the app world) means no competitive advantage is sustainable, so
companies must continually update their business models, strategies, and communications to
respond in real time to the explosion of choice that ever more sophisticated consumers now face.
To keep your customers—and to attract new ones—you need to remain relevant and superior…
Even if a value proposition is what first attracted them, it is not necessarily what keeps them
coming. Change proactively.

The strategic planning process

Strategic planning involves:

 Understanding what you currently do

 Determining what you want to become 

 Planning how to get there

EXAMPLE
A technology company builds proprietary mobile apps for financial services companies. It
decides that one of its top priorities is to extend its brand presence globally. The company’s
strategy therefore focuses on developing a unique way to expand its business in the United States
and Asia over the next three to five years.
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Strategic planning is a blend of art and science. It is an art in that it requires creative thought, an
ability to identify different potential outcomes, and strong communication skills to engage those
who will implement it. It is also a science in that it requires managers to collect and analyze
information that they can then turn into action.
A typical strategic planning process looks like this:

Senior managers in your organization generally begin strategic planning by gathering data and
researching the world in which your organization operates. They then narrow in on the top three
or four priority issues that the organization needs to tackle to be successful in the long term. 

For each priority issue, units and teams create high-level action plans. Senior managers use these
action plans to further clarify the organization’s strategic objectives. Senior managers and units
go back and forth several times to examine, discuss, and refine the plan. The overall strategy
then feeds into planning at different levels in the organization.

Execution

BSC

Resources

Ask these questions when assessing resource needs: 

 How will the strategic action plan affect our unit’s ongoing day-to-day work? 
 Can the existing resources cover strategic action plans in addition to business as usual?
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 If not, what additional resources will we need? With what expertise and skills?
 What new skills will people need to carry out the strategic action plan?
 What training will be required? At what cost?
 What new systems or technology will be required to support the action plan? At what
cost?

Collaboration

Communication and Alignment

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Nota del Instructor: Cuidado con los “mensajes” que enviamos por medio de las decisiones y
comportamientos de nuestra organización. Todo comunica.

Structure and Decision making. Clarify decision rights

To successfully execute your action plans, people in your unit need to make good decisions and
implement them quickly. * To ensure effective decision making in your unit, specify:

 Who “owns” each decision

 Who must provide input
 Who must be informed
 Who is responsible for follow-through 
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 Start with the right people. Through hiring and training, make sure people have the
right skills, attitude, and resources to do their jobs well. For example, look for managers
with an entrepreneurial spirit only if you plan for your new hires to run things their own
way rather than following established processes and procedures.

 Ensure that activities align with your strategy. Make certain that all unit actions
support the organization’s strategy. For instance, if your organization is competing on the
basis of low-cost service, make sure that unit members are managing costs as planned.

 Align your organization’s structure. Ensure your unit is optimally organized to achieve

your goals. For instance, if it needs to be responsive to new opportunities, limit hierarchy
so that people can make decisions quickly and monitor outcomes locally.
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 Align culture and leadership. Model the behaviors and values you would like your
direct reports to adopt. For instance, if you aim for greater customer focus, spend more
time talking with customers. Engage people in building consensus and commitment to
change. Celebrate when your unit achieves milestones.

 Develop incentives. Design a rewards and recognition system that aligns employees’

interests with the success of the strategy. Every employee and the unit as a whole should
have measurable performance goals with clear rewards for achieving them.

Build flexibility into your plans to allow for some surprises and adjustments. You can’t foresee
with certainty what resources every aspect of a project will require. Often, it is only by putting a
plan into action that can you determine all the requirements. And when your unit receives new
information, you need to be able to learn from it and adjust your plan accordingly.

Understanding misalignments

Even the most carefully thought-out action plans can fall victim to misalignment or become
derailed. Misalignment and derailment can happen for various reasons: 
 
 Plans are expanded. During execution of action plans, a project may increase in scope.
For example, a product development group decides to add features to a new product. The
time spent on additional features then cuts into the resources intended to carry out the
original plan.

 Plans are trimmed. Senior managers may cut back a project to trim costs or speed up
implementation. Such measures may cause an action plan to fall short of achieving its
original objectives.

 Resources are inadequate. Because of day-to-day responsibilities, people may not have

enough time to work on strategic initiatives. This may be a result of inaccurate resource
estimates, an increase in project scope, or competing priorities. Or everyone takes on too
much, and resources are strained.

 Collaborative relationships change. A group that your unit depends on for a deliverable
may alter its own plans and be unable to fulfill its obligations to your unit. The cascading
effect may make it difficult for your unit to meet its commitments and objectives.

 Work processes change. The way a task is being handled isn’t generating the desired
results, so your unit needs to change a work process. This change may require additional
funding and time that wasn’t budgeted in the original plan.

 Original estimates are inaccurate. Your unit’s original estimates for the time, effort,
and costs involved in carrying out an initiative turn out to be different from the realities. 
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 Politics interfere with progress. People who didn’t buy into a priority issue fail to be
responsive, causing delays and complications.

 Leadership changes. A new CEO, president, or unit head comes in and undoes
everything his or her predecessor implemented, including strategic initiatives.

Refine action plans

You may find that your action plans have lost focus or are no longer aligned with the
organization’s larger strategy. To refine your action plans:

 Accept that changes to your action plans are inevitable.

 Be clear about who has final approval of changes. Establish a checks-and-balances
system by ensuring that those who propose changes are not the ones who approve them.
 Ask yourself, “Does this proposed change support our organization’s strategy and
priority issues?” If not, consider setting the idea aside and addressing it in the future.
 Clearly define all the ramifications—for both your unit and your organization—of
accepting and implementing a change to your action plans. Consider how the change
will impact your deadlines, overall costs, and team members’ workloads.
 If a proposed change requires additional funding, people, or time not included in
your original action plans, determine where those extra resources will come
from. You may be able to redirect existing resources within your group without causing
too much disruption to the rest of your plans. Or you may need to lobby senior
management for additional resources.
 Document all accepted changes. These records will prove valuable in the future, when
you evaluate completed action plans or create new action plans to advance your
organization’s strategy.

Recognize and reward results

When individuals and your unit as a whole meet their goals and perform well, you want to
recognize their efforts. Well-designed reward systems motivate employees, reinforce progress
toward goals, and align the organization’s strategy with the work people are doing.

 
How are results rewarded?

Different organizations handle the question of how to reward and compensate people for good
performance in different ways. 
In some organizations, managers have control over salaries, bonuses, stock options, and other
forms of financial reward to offer to their direct reports. In other organizations, top management
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determines the compensation system for the entire organization, and unit managers have less say
over how they reward their employees financially. 
Whatever reward system your organization uses to reinforce excellence, be sure your direct
reports understand how the system works. Specifically: 
 What exactly is expected of them, and what exactly will they receive if they perform
well? 
 Is the reward system permanent, or will it be modified or discontinued once strategic
initiatives are fully implemented?
 Will everyone be eligible for rewards? For example, if the reward system features
bonuses for sales of a new product, how will the product development people be rewarded
for their contribution to the successful product?

Characteristics of effective rewards

According to Steve Kerr, former president of the Academy of Management, effective rewards
are: *
 Available and eligible. Define rigorous performance criteria, and then make rewards
available to a wide group instead of to an exclusive few. 
 Visible. Make financial and nonfinancial rewards visible to those who are eligible to
receive them.
 Contingent on performance. Base rewards on performance, not on seniority, title, or
role.
 Timely. Give rewards as soon as possible after the accomplishment.
 Reversible. Award bonuses, incentive pay, and variable compensation instead of
permanent raises. By doing so, you aren’t obligated to make future payments unless you
choose to do so based on continued high performance.

Reward types
Most people value some form of financial reward for their work, including:
 Pay raises 
 Bonuses 
 Stock options
 Commissions
 Profit sharing

Find equitable ways to dole these out to deserving individuals. But keep in mind that many
people look for other kinds of reward from their work as well—which is helpful if financial
rewards are limited. For example, recognize top performers by inviting them to participate in a
management training program designated for high-potential employees.
Don’t underestimate the power of nonfinancial rewards

People may value the following nonfinancial rewards:

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 Recognition—earning praise from peers and superiors, receiving opportunities to show

off an accomplishment or talk about a creative approach, gaining visibility within the
organization
 Promotion or new responsibilities—earning a new job title or taking on high-profile
tasks
 Intellectual challenge—working on mentally demanding projects
 Power and influence—making important decisions
 Affiliation—working with colleagues who share similar skills and interests
 Managing people—directing other people’s efforts
 Positioning—gaining access to experience and contacts that will open doors to
subsequent career moves
 Lifestyle—having the time to pursue other important interests through such perks as
flexible work schedules, work-share arrangements, and ample personal days
 Autonomy—working with little supervision
 Variety—working on a mix of different projects

By combining financial and nonfinancial rewards—and tailoring them to individuals’ unique

preferences—you foster an environment and culture in which people strive for excellence again
and again.

Avoid rewarding the wrong behavior

Many organizations inadvertently design reward systems that discourage the behaviors they want
and promote actions they would like to avoid.
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