Trends in Strategy-Execution for Responsive Organizations
Towards an iterative strategy definition and execution process
The last decade, organizations are more and more confronted with different competitive pressures. Emerging technologies, rising consumer expectations, complex value chains and changes to the way people live and work are just a few factors that trigger organizations to rethink their strategy. Combined with a relatively poor track record on large scale change execution, this has created a need for organizations to reinvent their strategy definition and execution processes.
Both above-mentioned reasons were echoed in the conversations we had with managers in the field of strategy and transformation, working in Europe. We asked these transformation leaders: why have their organizations looked for radical new ways of structuring their business governance? This article is a result of these discussions held in the latter half of 2022. They reveal a swing towards adopting an iterative strategy definition and execution process within their organizations. Strategy-definition and -execution (from here on strategy-execution), or better yet: the ability to change strategies quickly in response to unexpected events, is firmly on the agenda of many strategy executives. But what are the trends in strategy-execution? We’ve discovered at least 5 of them and will argue that this is just the beginning.
A connected view of 3 business governance routines
The COVID crisis may have opened the eyes to the C-suite that inherently, their company does have the ability to decide and respond quickly to heavy turbulence. Responsive organizations can compete and thrive in this age of change by continuously sensing for, and quickly responding to, market changes and emerging opportunities. To achieve such situational awareness, companies must connect three routines inherent in all companies
- the strategy routine: the vision and strategy design, including the performance review process
- the portfolio routine: the process of planning and prioritization of initiatives to achieve the target state, including the financial forecasting and planning process
- the delivery routine: the process of innovation, solution design, - implementation and - maintenance in line with the desired business outcomes
The above borrows substantially from a belief in a more fluent notion of strategy itself: balancing between deliberate (planned, envisioned) and emergent (context- and learning-driven) strategy. As the father of Management by Objective (MBO) thinking on which most modern management methodologies are based, it seems only fitting to quote Peter Drucker: “the greatest danger in times of turbulence is not the turbulence: it is to act with yesterday’s logic.”
Figure 1: 3 strategy-execution routines
In our conversations with representatives from 9 companies, we focused on the strategy-execution side of governance. This is more than mere product- or solution development as it includes the commercialization as well as the resource strategy. It does not address the financial strategy of a company or its efforts in M&A. And we acknowledge there is likely a grey zone when it comes to the applicability of below-listed trends.
As a definition for governance, we settled to describe it as the set of principles, structures, and processes to direct an organization and positively influence its business outcomes. It leans on sense-making and problem-solving to make decisions that are subsequently communicated to the organization. Therefore, to achieve responsiveness, effective governance aims to optimize the combination of speed and quality of decision making within boundaries of costs to the organization to reach these.
Figure 2: elements of effective governance
Trend 1: a tight-loose-tight leadership style
The principles of effective governance have not changed much from what was already known. Transparency, alignment, accountability have been important before and will remain so in a VUCA (Volatile, Uncertain, Complex, Ambiguous) world. However, frontrunners in business agility now place even greater emphasis on transparency and alignment, combining these with a ‘keeping options open’ type of strategy. This reinforces the notion of a fast feedback loop that needs to be intentionally designed.
The Transformation Director in charge of the redesign of the strategy-execution loop for a leading Dutch telco phrased it as a “heavy reliance on a tight-loose-tight type of leadership style”. At this telco, the CEO of a 7,5 thousand employee strong organization takes extra care ensuring few filters exist between strategic discussions within the executive team and the translation to the wider management community (more on this with trend 3). Any outcomes or qualitative insights resulting from the implementation are discussed at least quarterly. It reflects the ‘mission command’ leadership style of modern militaries and should be seen as opposite to either ‘micromanagement’ or ‘command and control’ styles (see Figure 3).
Management by Objective is often associated with the translation of this tight-loose-tight philosophy to the business world with Objectives Key Results, its most popular offspring today. In fact, OKR formed the starting point for all the organizations interviewed. Famed for its use by tech giants as LinkedIn, Google and Facebook, there is sufficient variation in implementation here. For one it is providing the background for a performance discussion and goals alignment. For another it is a very structured process to look back, spread lessons learned quickly, and look forward to new performance goals followed with strong discipline.
Figure 3: leadership styles based on the level of alignment, balancing between ‘tight’ (emphasized in business governance) and a more ‘loose’ way (left to team or unit autonomy and local governance)
Trend 2: speed of decision making through a single company heartbeat
The intentional redesign of the governance is something companies in strategy-execution transformations share. All but 1 manager we talked to spoke of a single heartbeat designed to run through the organization. The aim of this process is to align top management to shared goals. Next, it aims to challenge the feasibility of these by taking a holistic perspective as opposed to the often rigid and single-view approach of program governance. As capacity to deliver on strategic initiatives is often a bottleneck, prioritization of strategic plans is a logical and continuous part of it. This also requires a different mindset of the leadership involved; arguing priority relative to other initiatives evokes more scrutiny from colleagues than a regular defense of the business case against measured financial performance alone. Back to the Telco: “Not everyone liked [relative] value-based decision-making but supporting it [in the QBR] allowed people to see the total picture [of the strategy-execution process intent].”
Figure 4: Comparing three example heart beats we see similarities and differences. All examples companies aim to connect the three routines and work in a syncronized quarterly rythm. Company B took a different approach and separated the planning from the feedback events. Company T and R have a similar setup, both have strategy routine preparing for the company quarterly business review (QBR). However, company R uses a 6-month strategic cycle. Within this 6-month strategic cycle company R organizes, like company T , quarterly planning events (QPE) on Domain level.
Though many names for top-level decision-making platforms have been mentioned, Quarterly Business Review (QBR) with the process labeled QBR-flow is most commonly used among the companies we interviewed. As the name suggests, this heartbeat typically assumes a quarterly rhythm. However, as one online retailer mentioned, it is not always easy to maintain this frequency with the executive level. “The preparations just took too much effort, so [following a quarterly rhythm at first] we moved to half-yearly instead.” When automation efforts pay off, it is expected they return to the quarterly schedule.
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