“A recent survey of more than 400 global CEOs found that executional excellence was the number one challenge facing corporate leaders in Asia, Europe, and the United States, heading a list of some 80 issues, including innovation, geopolitical instability, and top-line growth. Studies have found that two-thirds to three-quarters of large organizations struggle to implement their strategies.” We came across this article – Why Strategy Execution Unravels on Harvard Business Review.
So what goes wrong when it comes to translating strategy into its expected results? Here’s our take on the 5 major challenges for strategy execution and examples of how business simulation interventions can help.
Challenge #1: Driving Horizontal Alignment
When asked how they drive execution, most managers talk extensively about steps to enhance alignment within their functional hierarchy – breaking down objectives, communicating them down the line, measuring and rewarding performance. However, when it comes to cross-functional alignment, only 9% of managers say that they can rely on colleagues in other functions and units all the time, and 50% most of the time. They are not viewed more reliable than external partners – say a vendor or a supplier. This actually undermines execution because a lot of unnecessary time and effort is spent in duplication, delays and conflicts.
While hierarchy can drive alignment within a functional unit or a team, it cannot drive horizontal alignment across functions. For cross-functional teams to work together, they should share a common vision. They need to believe that collaboration will help them perform better and achieve more.
In a senior management simulation intervention, we group our participants into cross-functional teams (virtual companies) and they take over senior management roles. As the simulation progresses and at the time of core decision making, not only do they experience real-time challenges of other functions, they also get to see the overall business impact of their decisions visually. This drives a sound cross-functional perspective.
Challenge #2: Adapting To Dynamic Circumstances
People view deviations as hurdles to a process, that could slow execution, and increase the risk of failure. There is a reason why everybody wants to stick to the plan – when a plan is passed on, along with its associated budget, everyone is aware that an enormous amount of time and effort has been invested in formulating it.
However, it is impossible to factor all execution challenges during planning. Unforeseen challenges and new opportunities are bound to crop up. Strategy execution should include responding creatively to unforeseen problems or making the most out of new opportunities. Managers need to be agile and adapt to new circumstances quickly to achieve the desired end outcomes.
One of our clients, a global leader in the automobile industry, was facing challenges in the Indian market due to rapid market fluctuations. Their marketing team did not take a quick and definite decision on the features for a newly launched vehicle that would beat the fast-moving competition. This resulted in a huge loss of market share. The organization linked it to a let-me-play-safe culture, which discouraged executives from thinking out of the box in a challenging situation to avoid the probability of failure.
In this case, to make them experience the overall business impact of delayed decisions , we simulated a very dynamic market, with aggressive competition and fast changing customer needs. The winning teams were the ones who not only stuck to their overall strategy, but also pro-actively adapted to the changing trends – instead of waiting for market feedback to hit them.
Challenge #3: Communicating Strategy Effectively
Many leaders believe that relentlessly communicating strategy is a key to success. However, less than half the CEO’s direct reports actually have total clarity on what their organization strategy really means.
For effective execution, it is very important that the meaning and essence of strategy reaches down to the last level of employees in the organization. To do this successfully, you should be able to communicate the core strategy differently for different levels of employees – without diluting it with additional messages.
The country manager of a reputed pharma company wanted us to drive just two outcomes – improving profitability and cash-flow. However, the challenge was to communicate it effectively across three levels in such a way that each participant was mindful of these two outcomes in their different roles and functions.
We built concept sessions around each role’s key result areas, and let the simulations demonstrate financial impact of their decisions around these areas. Post the intervention, senior business managers spoke with clarity about the company strategy and financial implications of decisions taken. The area sales managers spoke about realistic forecasting, working on profitable product mix, bringing down inventory etc. The field sales managers mentioned increasing average selling price, and bringing down credit period and discounts, as their outcomes.
Challenge #4: Looking Beyond The Performance Metric
Emphasis on performance alone can take away the effectiveness of execution. The key is to recognize and reward other aspects such as agility, teamwork, and ambition during hiring or appraisals as well.
If the organization focuses only on performance as a metric, managers operate under pressure. Fear of failure and its professional consequences drives them to follow a proven track to execution. This impacts their ability to experiment with new opportunities. Agility, teamwork, and leadership qualities take a back seat, which leads to managers committing lesser than their actual potential and not willing to stretch goals for innovation.
We have observed time and again that participants having an “only performance” mindset tend to take decisions for short term revenue. When they don’t invest in long-term parameters like people capability development, R&D, quality improvement processes etc, they experience the adverse impact of their decisions a few virtual quarters later.
Challenge #5: Breaking Away From The Top-Down Approach
A top-down approach, where a bigger share of decision making is concentrated right at the top, draws good results in the short term. However it undermines execution in the long run. As the organization grows, it not only slows down decision-making, but also diminishes the confidence, skills, and initiative of middle managers.
But why don’t senior leaders delegate decision making to their subordinates? To a large extent, it has got to do with lack of trust and their belief- that a middle manager does not have the required skill set to take complete ownership.
Running a virtual business in a simulated environment puts middle managers into a business leader’s shoes, and helps them take strategic decisions in a risk-free environment. This on one hand builds competency and confidence in middle managers, and on the other hand demonstrates their capability to take on future roles, to their reporting managers.
Have you experienced any other major challenges while executing your organization’s strategy? Share your story with us.