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A Roadmap for Making Business Strategy Actionable
B European businesses are often faced with the challenge of deploying centrally developed business strategies in a uniform manner, while at the same time accommodating local customer, market and regulatory differences. It is risky to assume that interpretations and adjustments across diverse European business geographies will simply happen. Likewise, it is unwise to believe that a well-defined business strategy will implement itself. No matter how well conceived by senior management, business strategy becomes virtually worthless when others in the organization misinterpret it, block it or simply do not know how to act on it. Business leaders and practitioners need a framework for guiding the mobilization of an organization around its strategic plan. Such a roadmap enables business leaders and members to clearly understand each element for rolling out a strategy. It details what decisions need to be made, who needs to make them and when. This approach is translated into a project plan, specifying the nature of work in each of the associated phases of construction. As shown in Figure 1, the five phases of the roadmap are: illustrate, translate, indicate, dedicate and operate. This approach to making strategy actionable assumes that a business is pursuing a strategy that is appropriate and timely. Methods used to develop a business strategy are broad, complex and well beyond the scope of this article. But regardless of the business's level of maturity or the approach with which it executes its strategy, the roadmap is designed to illustrate the elements which a business needs to consider when making strategy actionable. It is not necessarily designed to be prescriptive in terms of the precise sequence in which these elements are addressed. It does, however, acknowledge the inter-dependencies of the elements and can serve as a framework for developing a plan for executing strategy. As the business evolves in the necessary capabilities and systems, the roadmap can be more thoroughly integrated into the existing planning cycles.
Phase 1 – IllustrateHow is value really delivered to customers? In almost any business, products and services for customers are produced not by departments, but by processes which tend to cross functional lines. These are referred to as value delivery or core processes. Core processes have all the elements of the business processes (suppliers, inputs, boundaries, outputs and customers), but are far more significant in scope. They tend to be the way the customers identify with the company. Their effectiveness is directly tied to the extent they can satisfy customer needs and achieve the objectives of the business. Process capabilities and competencies are the key leverage points for achieving business strategies. It also is important to remember that core business processes allow the various elements of an organization to link its activities to the delivery of value to the market. Then, if businesses define themselves in the market based on their core processes, where is it that the rest of the organization can make a difference? The answer lies in support, or enabling processes. These are the critical business activities that are required for an organization to operate, sustain and continually improve. Enabling processes provide their service to core processes, or internal customers. In this way, they provide the inputs, information and resources that "enable" the core processes to deliver value to external customers. If poorly performed, enabling processes can "disable" the core processes from being successful. Examples of enabling processes include recruiting, skills development, marketing, performance management and compensation, information technology, and administrative support services. Just as external customers have demands of products and services, enabling processes are expected to meet internal customer critical-to-quality factors (CTQs). They must have measurement systems to evaluate and continuously improve their ability to meet core process requirements. Phase 2 – TranslateDefining and agreeing on the strategy of a business is the responsibility of senior leadership. It is about making choices regarding what processes will be developed to deliver what products and services to what customers. Equally important, the top tiers of leadership must translate strategic objectives into operational terms. They must communicate the strategy in a manner that is meaningful to every member of the organization, for these are the people who must execute the strategy. This requires a business to consider its operations in the context of a whole – processes that are designed and linked to one another. Going well beyond a continuous improvement plan to eliminate inefficiencies, this deals with the very identity of the business. One key to building accountability for the strategy is to be able to define the financial impact of each element of the strategy. In other words, if a business is to attempt a sustained 10 percent increase in revenue during the next three years, what is important is that the 10 percent annual growth in sales be translated into a net income figure. The "how" of the increase is what the strategy is all about. The "by" what means is what the strategy translation is all about. It is critical that leadership define the strategy to this level of detail prior to attempting to communicate it to the business. The message must be crafted and communicated in a manner that each stakeholder perceives it to be relevant to him or her. If this cannot be done, it is a good indication that the strategy has not been sufficiently defined or thought out. It can be beneficial to include trusted members from different areas of the business to help in the translation process. This insures a cogent message delivered in a consistent way. Also key to translating strategy is to identify and develop the areas of current operations that have the most significant impact on the business's ability to achieve its strategic objectives. Randomly chosen operational improvement efforts may result in increased efficiencies and elimination of cost and non-value-adding activities, but they may have little or no strategic impact. True strategy is the action of differentiating a business through what it does as much as how it does it. Differentiation is achieved by performing value delivery processes in a unique and complementary fashion. Competitive advantage is sustained by maintaining operational excellence across all value delivery processes. Once operations are prioritized according to strategy, a business can assess the current levels of performance relative to the levels desired. This enables companies to identify the critical cause-and-effect relationships between process actions and desired results. Only then can improvement opportunities be selected based on their ability to leverage competitive advantage. One key to building accountability for the strategy is to be able to define the financial impact of each element of the strategy. Phase 3 – IndicateIn order for the strategy to be made actionable, measurement systems and data must be developed to show the link between process performance and the business and customer objectives. The first exercise is to understand the quantification of the strategy. If the strategy is achieved, what will the business processes be able to deliver? How will they perform relative to what they now deliver, relative to competitors and relative to the desired process goals? Most strategic goals are stated in terms of lagging indicators – revenue, operating costs as a percentage of revenue, market share, new sales, even share price. But there are an infinite number of ways to effect those measures – some that may be in direct conflict with the desired direction of the business. These lagging indicators are used to define, establish and communicate the strategy of the business. The challenge, however, is to direct and coordinate every member of the business into activities that have a cause-and-effect relationship with the desired outcomes of the business. Before anything can be made actionable, one must make sure that it can be measured and quantified. Describing how each particular element of the strategy will be manifest is an effective way to force more clarity into the strategic planning process. If the leadership of the business cannot describe what a particular aspect of the strategy will look like when it is achieved, how could that translation be expected of the business? Understanding how the business improves on the delivery of value to its customers is only the first step of integrating improvement with strategy. Management must have real-time information on how well the processes are performing relative to the process performance levels required by the strategy. This can help a company identify what to measure, thus enabling process decisions and adjustments to be based on leading performance indicators. Awareness of the strategy is not sufficient to ensure its achievement. Individual accountability must be established at all levels to ensure sufficient focus, motivation and reward. This includes operational and organization development performance indicators as well as more traditional financial and customer satisfaction measures. Phase 4 – DedicateThis step in the roadmap is designed to create an organizational culture which fosters alignment with every organization department and member. Leaders themselves demonstrate the process and data-based decision-making behaviors that serve as models for the rest of the business. Activities in this phase include:
Executive leaders must first recognize that they are not just responsible for the output and costs of their respective functional areas. Each executive must both share accountability for the performance of the value delivery processes and ensure proper integration and coordination of the processes across the business. Phase 5 – OperateProcess performance defines the extent that a business will win or lose in the marketplace. In the final phase of the roadmap, process management systems are integrated as a decision-making tool and discipline to continually adjust and direct the improvement efforts of the business. Not only does the approach compel organization-wide improvement that is linked to achieving strategic business priorities, but it fosters a high-involvement, high performance culture that can become self-sustaining without reliance on external consultants. Process management systems can vary greatly in terms of complexity and organizational scope. While the effort and resources required to develop variously sized systems can be significant, there are some fundamental aspects that are common to all process management system deployments. It is these fundamental components that can best be addressed using a standardized approach, or roadmap, to assure that the right people are involved in answering the right questions at the right time. It also serves as a framework for the project plan that will effectively manage the many contributions by organization leadership and members. Some of the activities associated with the operate phase of the roadmap include:
Conclusion: Answers for the Right QuestionsBy having a framework for mobilizing an organization around its strategy, European business leadership can better direct resources to answer the right questions about how a strategy can be deployed in a consistent but flexible fashion across diverse market and cultural geographies. About the Author: Victor Cascella, a partner at Valeocon Management Consulting, is responsible for the firm's strategy deployment center. As an expert in strategy and operations consulting, he works with executive-level leadership teams to translate business strategies into operational goals, and helps them develop leadership competencies and measurement systems to improve strategic clarity and accountability for business performance. Mr. Cascella has worked in a wide range of industries including pharmaceuticals, manufacturing, services and financial. Recent clients include Johnson & Johnson, Alstom, EDS, GE, Penske and Prudential. He is based in Washington, D.C., USA, and can be reached at victor.cascella@valeocon.com. Reproduction Without Permission Is Strictly Prohibited – Copyright Requests Publish an Article: Do you have a Six Sigma tip, learning or case study? Share it with the largest community of Six Sigma professionals, and be recognized by your peers. It's a great way to promote your expertise and/or build your resume. Read more about submitting an article. "The Bottom Line" Links
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