Strategy Execution Statistics: 6 Steps to Successful Strategy Execution
Most companies that successfully execute their strategy achieve outstanding results. These 6 proven practices and statistics make it easy to see why companies that apply the best practices when executing their strategy, in average, see their stakeholder value triple in just 3 years.
Correctly executing a strategy is the most effective way for a company to create value for its clients and shareholders. However, studies show that only 10% of organizations are successful in doing so, primarily due to a lack of alignment between their structure and strategy.
Consider the following strategy execution facts and figures:
- 60% of organizations don’t link their budgets to their corporate strategy.
- 67% of HR and IT departments don’t link their priorities to the corporate strategy.
- 75% of middle managers don’t have incentives linked to the organization’s strategy.
- 95% of the typical workforce doesn’t understand what their company's strategy is.
Benefits of Strategy Execution
Even though between 85% and 90% of companies fail to execute their strategies, those that succeed achieve outstanding results (they generally increase their revenue by 80%-120% in a three year period), that subsequently translate into billions of dollars.
Likewise, a recent study demonstrated that 70% of companies that have a formal and established process to execute their strategies outperform their competitors. These organizations are also eight times more likely to rely on technological solutions to automate processes such as budget preparation, financial reports and forecasts. This, in turn, allows them a greater adaptation capacity of their internal processes.
This same study identified six best practices that directly contribute to these companies’ successes. (We will henceforth refer to these organizations as “successful companies”).
1. Define and measure the strategy.
77% of successful companies have an established mechanism to translate their strategy into operative terms and evaluate it on a day to day basis.
One of the biggest barriers to strategy execution is not being able to describe it, as you cannot manage what you cannot measure. The Balanced Scorecard and Strategy Maps, methodologies employed by these successful companies, help fill this gap. The first step for their implementation is assembling the executive team to develop a common standpoint of the organization’s strategy. Frequently, this is the first time the team reaches a consensus on the matter.
Once a general strategy is defined and agreed on, it must be translated into operational terms through a Strategy Map. The Strategy Map is composed of strategic objectives that are later reflected on a Balanced Scoreboard, along with metrics that can be easily communicated and acted upon.
2. Focus on strategic initiatives
76% of successful companies focus on a limited number of strategic initiatives to reach their objectives.
A normal organization executes hundreds of processes and dozens of initiatives on a regular basis. However, the majority of said processes are operational, rather than strategic. In other words, even though their execution is vital for the company’s operation, they do not necessarily contribute to the strategy’s development or grant the organization a competitive advantage.
By identifying which projects are truly strategic and devoting more attention to them, companies can greatly improve their overall strategy execution capacity. Some examples of key initiatives may be R&D, asset retention and operational excellence.
3. Establish regular meetings to monitor strategy
75% of successful companies have a formal and pre-established system to inform on and manage their strategy.
Regardless of how good it may be, a strategy remains a hypothesis; it’s the company’s best guess of how to guide the organization toward its goals.
Certainly, having a clearly defined strategy is an importing starting point, but for it to be successful, a strategy must be assessed and adapted continuously.
Regular strategy review meetings allow for the company to continuously monitor the strategy’s performance as it develops. They serve as a forum where the strategy’s progress may be discussed and the team can decide upon the necessary actions to tackle their areas of opportunity.
4. Communicate the strategy to all levels
73% of successful companies have a formal mechanism to communicate their strategy.
The strategy is designed by the top management, but executed at the bottom. Front-line employees (like customer service agents, sales attendants and drivers) are the closets to the clients and to the company’s core business. Therefore, it is fundamental that the decisions they take on a regular basis reflect the strategy’s priorities; a task that would result impossible unless they know the strategy and understand the way their job contributes to its success.
Marketing and communication literature state that, for a message to be successfully adopted by the target audience, it must be delivered numerous times and in numerous ways. Some of the ways that the strategy may be communicated is through newsletters, brochures or as a part of the personnel’s regular training. However, the most communication is the one that leaders send by walking the talk and embedding the strategy in their own day-to-day actions.
5. Aligning business units and support areas to the strategy.
63% of successful companies have all their business units aligned to their overall corporate strategy.
The implementation of the strategy requires all parts of the organization to be coordinated and integrated. The company’s HR programs, staff incentives and IT priorities should integrally reflect the company’s overall strategic priorities.
Unfortunately, most organizations are unable to effectively manage their interdepartmental processes in a holistic and unified way. The problem lies in that these different areas frequently do not know the overall strategy and, therefore, do not align their priorities to corporate needs.
Developing strategic maps for different areas of the company helps eliminate this barrier. This way, leaders help create a shared vision of the strategy that, in turn, helps support areas focus their efforts on the organization’s strategic priorities.
6. Link budget initiatives.
64% of successful companies build their budget based on their strategy, rather than on past behaviors.
Most successful companies efficiently coordinate their planning and budgetary processes. Unfortunately, however, up to 60% of organizations fail to do so due to a structural inconsistency between these two processes.
Strategic planning deals with long-term aspirations while budgets deal with short term operational issues. Moreover, strategic planning calls for interdepartmental initiatives, while budgets are usually restrained to specific functions or areas. However, linking the two is fundamental to integrate each area’s short and medium projects, and thus successfully execute the strategy.
A key factor in this step creating a separate budget for operating expenses and another designated for strategy expenses (also called STRATEX).
This article provides an overview of the six best practices in strategy execution and Balanced Scorecard management. However, these techniques are not isolated from one other; only implementing some will not yield the desired results as they are all part of a comprehensive process.
These best practices provide a framework for your company to successfully convert its strategy execution into a competitive advantage, and consequently achieve extraordinary results. At TRISSA we can help you develop the skills you need to successfully implement and execute your strategy. We provide our clients the tools and expertise needed to help them clarify their strategy, translate it into operative terms, align their organization and establish an effective follow-up mechanism to guarantee its successful execution.
Author: Trissa Strategy Consulting
Source: Norton, David P. "Strategy Execution, A Competency that Creates Competitive Advantage." Palladium Group Whitepaper (2007): 1-7.