Developing a strategy is critical for any organization, and equally important is having a mechanism to translate that strategy into action. However, given the complexities of the European market, there is a special need for a business implementing its strategy to allow its local business unit leaders to adjust the tactics to local needs and requirements. This needs to be done while at the same time providing for feedback on local opportunities that could impact the company’s overall direction.
In short, the challenge is to find a mechanism that engages and commits to action while allowing flexibility for local differences when justified.
Developing a business strategy is the act of aligning operations and improvements with business goals and objectives. Research and experience has illuminated three primary considerations that must be taken into account when determining how to mobilize a business for implementing its strategy.
Processes are the primary vehicles for propelling strategy into action. Though most businesses organize themselves around functions and departments (R&D, operations, finance, sales and marketing), the products and services their customers receive are produced by processes that require coordination between these functional lines. These are often called value delivery or core business processes. Like “new product development” and “order generation,” for example, these core processes strongly impact a customer’s perceptions of the business.
Businesses in the same industry tend to have basically the same core processes. But how a business performs these processes often determines its competitive advantage, or disadvantage, in the marketplace and ultimately determines its prosperity or failure.
No matter what strategies a business decides to pursue, achieving many of them requires making targeted improvements in those processes that are inherently linked to strategic goals. For every business, some aspects of its operation will be more critical to a particular strategy than another. Identifying where the process-to-strategy relationships are strongest – and what needs to be done differently within those processes – helps a business to prioritize its improvement efforts, focus on those that will have the greatest strategic impact, and translate the strategy into operational terms that everyone can understand and act upon.
Once these improvement opportunities are identified, the leaders of the business can then create detailed action plans and equip high-powered teams to recommend and implement changes in strategically critical areas. In many cases, these changes will require that new capabilities be developed (or existing ones improved) in core business processes. But they also may involve changes in non-core, or what are sometimes called “enabling” processes (such as “information management” and “talent acquisition”). These processes often provide vital services internally and support core processes in delivering value to customers.
Defining and visualizing processes is the critical first step to translating strategy into action. But it is through effective analysis and intelligent, data-based decisions that a business can understand the role which various processes play in achieving strategic goals. This then leads to an understanding of which process capabilities are necessary, where improvement and development resources can best be directed, and the appropriate tools and technologies to be applied.
Visibility and improvement of business performance requires the development of the measurement systems and data which illustrate the linkage between process behavior and the business and customer objectives for the business. Every strategic goal should be accompanied by the quantification of that goal, and no goal should be established without its associated measures. This includes outcome measures to see how well a business is performing against its strategic goals, and also the internal process measures that provide visibility to the causal factors that either enable or disable the business from achieving its goals. When these measures are lacking, it is impossible for a business to understand the cause-and-effect relationship between the actions it takes and the goals it hopes to achieve.
Reliable data is needed to align improvements with strategy and to understand precisely the processes which the business needs to develop. This involves collecting information on how processes are currently performing and then identifying the most significant gaps between “baseline” and “targeted” performance levels. To establish these targets – and determine what levels of performance the strategy calls for – requires a comprehensive measurement system which not only takes time and effort to validate and build, but needs to be frequently updated to reflect customer, market and technological changes.
Once a business has determined the appropriate performance levels for the process areas considered key to the strategy, it is then prepared to focus on developing the process capabilities that are critical to meeting the new targets. A process capability is any performance characteristic or attribute of a process which is required if the process goal is to be consistently achieved. Identifying, evaluating and collecting data on these “required process capabilities” help a business to concentrate on making changes that will have real strategic impact and to make smart investments of its limited improvement resources.
A number of tracking tools (such as process management charts and dashboards) can be used to monitor process capabilities and measure their impact on performance over time. These measures serve as “leading” indicators or predictors of process, and hence business, performance. They enable the business to make decisions and adjustments on a much shorter horizon, assess whether and how well process performance targets will be met, and determine the extent of the gains made as a result of improvement investments.
Agreeing on what the strategy of a business should be is the responsibility of senior management. But implementing the strategy requires a business to identify and engage the right people to make accountable for process performance and to equip them with the appropriate reporting tools and disciplines to responsibly evaluate and track the performance of processes.
To achieve its strategy, a business must create an organizational culture which fosters alignment between the strategy itself and the work performed within each department and function. This cannot be accomplished simply by communicating the strategy – no matter how well-chosen the words. A business must translate the strategy into process terms and into specific process goals and outcomes. This makes the strategic plan relevant to everyone in the business and gives each one a clear “line of sight” to the strategy. And it promotes ownership of new business goals by helping everyone understand how their work contributes to the overall objectives, and what skills, knowledge and abilities they must bring to bear to make the strategy succeed.
The three primary ways a business can promote feelings of accountability during strategy implementation are through:
1. The action of its leaders. Leaders serve as valuable role models when they make decisions based on data and processes (rather than gut feelings) and when they continually reinforce the strategic importance of process improvement.
2. Participation in developing the measures and reporting mechanisms that are needed to monitor critical process capabilities. When process owners and those who support them are required to measure, improve and monitor process outcomes on a regular basis, they tend to develop stronger feelings of accountability, as well as a greater commitment to continuous improvement. Of course, this only takes place when those with accountability for process performance are given both the skills and the authority to influence and manage those same processes.
3. Performance management. This is the most effective way to drive accountability. Individuals at all levels of the business should be evaluated based on how well they meet process performance goals. Recognition and rewards, both financial and non-financial, should be based on who contributes the most to making the strategy succeed. Generally, European businesses are organized in such a way that each business unit operating in a different country has is own P&L. This can facilitate the downward assignment of accountability for business performance. A challenge, however, is balancing the efforts to create common, global and best practice standards and disciplines for processes while still allowing country and regional versions to reflect local customer, channel and regulatory requirements.
Together with processes and measurements, accountability plays a key role in implementing business strategy. By linking individual performance to process improvements and outcomes, and by rigorously measuring outcomes against established targets, businesses will have a much higher likelihood of successfully translating strategy into action.