Strategy and Innovation - A Straight Answer to Strategy Implementation Problems

White Paper Strategy and Innovation Execution Excellence A Straight Answer to Strategy Implementation Problems Dr. Oliver Greiner Susanne Gábris www.horvath-partners.com Publication Date: January 2010 White Paper: Execution Excellence – A Straight Answer to Strategy Implementation Problems 1.2 The Myopia of Project Management 1. Rethinking Strategy Execution regarding Strategy Execution 1.1 Initiatives – The Heart of Strategy We found that managers tend to underestimate the success Execution factors of project execution which are not exclusively based on hard facts like budget or timeline adherence – which typically It is a common belief that strategies fail because they were not are the cornerstones of project management. Clear directions, elaborated properly. But in reality, strategy development is less right accountabilities and visible leadership, for example, play than half the battle. In the majority of cases – we estimate 70% a greater role in project success nowadays than traditional – the real problem is not bad strategy. It is bad execution project management tools for financial monitoring. [Charan/Colvin: Why CEOs Fail]. A recent representative inter-sector study of 82 different When we talk about strategy execution we think of hundreds companies reveals that projects are often bound to failure of different initiatives defined to transfer abstract strategy into because essential internal success factors (shown below) are tangible business reality. In turn, every single initiative missing. contributes to strategy execution. Hence the equation is simple: if a set of initiatives fails, strategy fails. Lack of communication 62% Within strategy execution we distinguish between smaller No clear objectives and demands 57% initiatives constantly developed and executed in daily Politics, egoism and disputes 54% concerning competencies business, and major strategic initiatives executed in a project Lack of resources at project start 54% setting. Companies with poor results in strategy execution Lack of qualified staff 42% might have trouble with the implementation of one or both Lack of project experience at 37% management level kind of initiatives. No commitmente of the management 32% To make the myriad of smaller initiatives support a strategy Insufficient project planning 29% we need to be ensured that individuals within the company Lack of stakeholder management 26% Lack of project management are clearly committed to the strategy. Thus, employees have to methods (e.g., risk management) 23% n=82, all industries know the company’s strategic directions and must be willing to Technical requirements too high 8% Multiple entries possible accept them. It is also important to give individuals proper and strategically aligned incentives to foster their willingness to Figure 1: Internal reasons for project failure according to implement strategy. Management tools like the Balanced Engel, Quadejacob: Results of a project management study (2007) Scorecard can significantly help to improve strategy execution in this field. To be good at executing major strategic initiatives many The survey implies that by overcoming these weaknesses a managers pursue the plan that with “strong (multi-)project major boost in strategy execution is possible. However, we also management” and “appropriate management attention” the need to consider the fact that external reasons could also successful execution of core projects must be a matter of affect the success of core projects. course. Imagine your project target is to launch a new professional Quite the opposite is the case! hair care product at a lower price than your competitors. The business idea is to sell a professional hair care product in retail We found that although top-performing companies realize 85% instead of in hairdressing salons or wholesale. Imagine you of their core projects successfully, low performers achieve had a great resource plan, total management commitment, success in only about 40%. On average, almost every second clear communication, the very best staff and brilliant project strategic project does not achieve the originally intended organization. Your project seems to be on track. objectives. Unfortunately, the environment has changed since you started. Since strategy execution is fundamental to competitive advan- A new competitor you did not see coming has already tage, we think companies should strive to do their utmost in launched a comparable product at a more favorable price. project execution and should question harder why their Additionally, retail stores intend to stop selling hair care projects fail. products to reduce complexity and to improve their margins. In this new environment, how successful do you think this project might be? It is a safe bet it will land on the list of strategic project failures. © Horváth & Partners 2010 1 White Paper: Execution Excellence – A Straight Answer to Strategy Implementation Problems 1.3 Horváth & Partners Execution Excellence People! Model The success of a project is often due to its brilliant project Companies which want to improve their success rate regarding team. Suitable competencies and unequivocal accountabilities major strategic projects should not look at single reasons for are mandatory to accomplish the desired project results in the project failures. They should try to manage the different cru- end. cial factors of successful execution in a comprehensive way. Setting! In order to support managers to do this, we have developed the Without an organizational and process framework a project “Execution Excellence Model” based on our experiences with cannot exist. Projects must be positioned clearly in an overall top-performing companies. The model combines traditional vision in order to ensure that they are not regarded as project management techniques with internal and external “disturbing”, “distracting” or even “counterproductive” to daily project success factors that can help to increase project business. success rate.