Innovation Reactor

A quick guide to successful strategy execution

Many companies hire expensive consultants, agency planning teams or innovation “gurus” to develop  new strategies but surprisingly many plans fall down due to poor execution.

So here’s a quick guide to help improve your strategy execution using my experience implementing large company-wide marketing strategies, major advertising campaigns and new product launches.

1. Inform people on the rationale for the change and improve the flow of information

Strategy execution is often ineffective in large organizations because a lack of vital information results in poor decision making.  Frequently, information is hoarded by corner-office executives, protected by gatekeepers or never transmitted beyond various business unit silos. The key steps to strengthen the information flow are;

• Communicate and supply information about your new strategy to your employees so they understand the major components of the plan and the projected benefits the strategy will deliver to your company and people
• Provide your employees up-to-date market intelligence on competitors, customers and key driver metrics that measure company performance
• Develop an internal communications plan comprising of management meetings, emails, conference calls, employee newsletters
• Setup informal Q&A forums to improve data visibility and use your company intranet or shared drive to post critical business information, competitor and customer research or important presentations.

2. Build ownership of the strategy at all levels

Strategy execution can fall down when there’s uncertainty around people’s roles and responsibilities, fuzzy accountability or ambiguity about the ownership of decision rights. Clarity around decision-making is important because people need to know who’s accountable and senior management need the ability to track achievement and success.

An important building block is to create ownership of the new strategy by using employee workshops because this makes the planning process inclusive and builds collaboration, teamwork and trust. Moreover, develop a blueprint and roadmap so people understand the strategy, new direction for the business and timelines for implementation. Finally, improve execution efficiency and remove decision making paralysis by documenting people’s roles and responsibilities, assigning accountability for critical projects and communicating these to the wider organization.
 
3. Create a sense of urgency to overcome challenges and maintain momentum

Motivation is a critical factor for effective execution since it can seem like an insurmountable task to suddenly change direction. As people, processes and products that are rooted in the past need to transform quickly, do you have the optimal organizational structure, best talent and a diverse rage of expertise on your team?

An important enabler for effective execution is to create cross-functional teams and assign process owners and project managers to coordinate strategy execution across business lines. Changing the organizational structure is difficult, so a good approach is to search your company for talented managers and functional experts to create your project teams.  Remember to keep employees motivated by using team performance awards and recognise individual achievement or top performers for their great work.

Every plan has its execution challenges but improving the flow of information and sharing best practices throughout the business can help overcome difficult problems, improve efficiency and maintain momentum. It’s a great idea to create a centre of excellence to distribute best practice and improve oversight, strategy delivery and cooperation between business units. Lastly, always be realistic about your organization’s capabilities and capacity for change; tackle small projects first and aim for bite-sized successes.

4. Inspire people to embrace change and lead by example

You cannot execute a strategy with an email, a few employee meetings or pep-talks. But how often have we seen senior management try it – or alternatively we see a big-bang new strategy launch followed by silence after just a few weeks.

To get your people inspired so they can champion the gameplan, leaders must be in tune with the pulse of the business. This starts with setting clear goals and priorities and getting to know your people and business inside-out. A critical element is for leaders to follow through on deliverables, anticipate roadblocks and obtaining timely performance feedback.

I’ve mentioned the importance of communication, improving the flow of information, recruiting the best talent and sharing best practices. With these tools in place, leaders should then support decision-making at lower levels since front-line employees usually have the best knowledge about customers, clients and suppliers. The result is empowerment that delivers faster speed-to-market and execution.

Acknowledgments:

Execution: The Discipline of Getting Things Done (2002), Larry Bossidy, Ram Charan and Charles Burck.

Harvard Business Review (June 2008), “The Secrets to Successful Strategy Execution”, Gary Neilson, Karla Martin and Elizabeth Powers.

Achieving strategic agility in unpredictable markets

 

Some companies seem to have a knack of embracing new ideas and innovations faster than others. In many industries growth and profitability is determined by speed-to-market with new product development. So what makes these companies better at seizing opportunities?

To answer this question I attended a great lecture on strategic agility by Professor Don Sull, from London Business School. He proposes that organizations start off as nimble and agile, but when they grow large it’s how they transition between agility and absorption that determines success.

• Agility - the capacity to seize opportunities faster
• Absorption - the capacity to sustain change and deliver long-term shareholder return

To use a boxing analogy, Mohammad Ali early on in his career had great agility to “float like a butterfly and sting like a bee” but later on lost some of that speed and had to absorb more punches from his competitors, eventually losing the title. 

My research found Abercrombie & Fitch, the fast-fashion company, a great example of agility. While growing to over 1,035 stores worldwide they have developed processes to seize opportunities faster. Their new in-house Innovation Design Center produces flexible designs for quick approval and production, enabling reduced time to market for the latest fashion trends. While also reducing costs and limiting the competition’s ability to copy its designs. These capabilities has allowed Abercrombie & Fitch to post 16 years of earnings increases and deliver superior Total Shareholder Return over the last 5 years, vis-à-vis Gap their largest competitor.

When companies become larger, growth begins to stall as markets mature. Professor Sull suggests that firms can develop absorptive capabilities allowing them to seize opportunities when the perfect storm arises. Some examples are;

• Diversified cash-flow (General Electric)
• A war-chest of cash (Microsoft)
• Powerful tangible and intangible assets (Procter & Gamble)
• Excess resources and staffing (JPMorganChase)
• Lock-in via exclusive partnerships or integration (Oracle)
• Compete in protected markets (Royal Bank of Canada)
• Strong local market or low cost position (Cemex)

These absorptive capabilities mean companies can outlast others in a war of attrition or scale new innovations quickly. Diversification, strong brands or patents can provide the beachheads to reinforce and attack other customer segments. Strict government regulation and exclusive partnerships can limit new entrants. Finally, a strong local market or low cost position may allow you to absorb price volatility and downturns in international markets.

To increase agility in your business you can outsource or acquire it. Outsourcing requires you find the right partnerships that compliment your core business. Whereas acquiring agility involves you keeping the hardware and rewriting the software by changing organizational structure, key management personnel and culture.

How Waitrose competes with a differentiated business model

 

I attended a great presentation from Mark Price, Managing Director of Waitrose Supermarkets and was fortunate to have a quick conversation with him afterwards.  The UK supermarket business is fiercely competitive and recent statistics by TNS show Waitrose has a 4% market share compared to their main rivals Tesco (31.5%), Asda (16.6%), Sainsburys (16.2%) and Morrisons (11.2%). In this competitive industry structure, how does Waitrose grow market share against such strong competition?

Waitrose have created a strategy focused on two specific market segments of affluent consumers

• Baby boomers looking to trade-up to better quality
• Pre-children Gen-Xs that want quality food and drink to match their lifestyle

Then utilizing a differentiated business model, focused on quality Products, Service and Store Environment, they have created a premium brand and differentiated customer experience. This makes it difficult for price-led competitors such as Tesco or Asda to replicate the Waitrose strategy.

Products: Waitrose maintains product quality by investing in the supply chain since they made a strategic decision to invest in organic farming (production) and take a long-term approach with supplier relationships. By paying dairy farmers above-market prices for milk they locked in exclusive relationships. These farmers could then invest in better technology and upgrade equipment, while other farmers struggled to reduce costs and lowered quality. Subsequently, Waitrose then repeated for pig farmers and organic growers.

Service: Waitrose isn’t owned by shareholders, but all employees are partners so profits that usually go to shareholders are paid in bonuses to employees. All employees receive a 20% annual bonus regardless of seniority; the company is open with information like sales data and store performance, publishing this every week; managers are empowered to make decisions to optimize sales and service in their store; while employee committees are elected to consult with the board on strategic decisions. By placing employees first in the value chain, Waitrose has generate higher levels of employee satisfaction, created better customer engagement and increased service levels, resulting in superior levels of customer satisfaction with profitability. 

Store Environment: Waitrose creates a unique customer experience through cleaner stores, wider isles, shelves setup to promote the products and not sales posters or promotions, and established store locations are convenient to the target market with easy car parking.

I asked Mark “how is Waitrose innovating to beat the competition?”

“Waitrose is investing over £10 million in product development each year. We do not outsource our product development to suppliers like other supermarkets rather we employ top master chefs to create new Waitrose-branded product lines. Because of our business model, our produce buyers are more tenured and experienced so they understand the product categories better. This has allowed us to shift from organic to new segments, such as locally grown fresh produce, which grew 170% last year, faster than our competitors. We’ve also invested in online supermarket Ocado acquiring a 25% stake in the company, that’s helping Waitrose expand coverage into new geographic regions and gain a 16% share in online food retailing in the UK.”

Like Waitrose, a challenger brand aiming to steal market share from strong competitors, can start by developing a strategy focused on niche customer segment, then use a differentiated business model to win.