Let’s talk some more about strategic planning.
More specifically, the detailed steps comprising the end-to-end process
of developing and executing a compelling and cohesive corporate strategy.
In Part 1 of this two-part series, I introduced The Strategy Checklist framework (see
Figure 1). And in this article, I delve into each step of the process to
demonstrate how it can be used by strategy executives and business leaders to orchestrate
an end-to-end strategy process that connects a company’s values and vision with
its strategic plan, and drives results that advance its long-term objectives.
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| Figure 1. The Strategy Checklist - an end-to-end process for developing and executing a compelling corporate strategy |
Purpose
Most companies that have systematic strategy processes, usually jump –
and really only do – phase 2 of The Strategy Checklist: planning. That’s why
the corporate strategy process is most commonly called “strategic planning.”
It’s kind of like the annual budget, but a little less frequent, and often a
lot less consequential.
But planning, near or long-term, can be a rudderless exercise, if phase
1, purpose, is left unclear or completely undefined. Deciding what a company
stands for, what it believes in, what it values, what it strives for in the
long run, and making that clear to everyone – these are critical steps to
having a strong culture, a differentiated strategic position, and a successful
business. It defines the north star for the company and all its internal
and external stakeholders.
There are three basic steps in the purpose phase of The Strategy
Checklist:
Values
If you keep asking “why”
long enough, you eventually get to values. Values are the most deeply ingrained, beliefs and motivators. They are what define people and companies.
They are usually passed down by family, guardians and role models. They are
deeply personal and rooted in emotions and principles.
Values are not about
‘what’ we do – they are about ‘how’ we do things, and ‘why’
we do them. They are the ultimate compass that steers our decisions and
choices. The U.S.
Marine Corps and The
New York Times provide good examples of clearly defined, simply articulated
values that don’t even mention what these organizations do – they motivate their
people and guide their mission.
Values are usually
established by the founders of an organization and are meant to be there
‘forever.’ As times or leaders change, values can be revisited or refreshed,
but these tend to be rare, seminal occasions.
Vision
This step is about
envisioning the future we want to create and live in, the dreams we want to fulfill, the things we want to build and experience. The vision is an
inspiration for all stakeholders, a beacon to keep referencing when formulating
plans or facing challenges.
A clear and powerful
example is Oxfam’s vision: “A world without poverty.” In 1980, Bill
Gates formulated a simple, prophetic vision for Microsoft: “A computer on
every desk and in every home.” His vision was realized probably a lot
faster than even he ever imagined.
Defining the vision
for the company is probably the most important thing a CEO must do. And because
of that, it should happen as soon as new leaders take the reins of an
organization. A vision should ideally be defined in ‘timeless’ terms to
ensure its longevity and continued relevance. But even the most ‘evergreen’
of visions should probably be updated every 3-5 years, given how fast the world
is changing.
Mission
This step starts to
talk about what the company does day-to-day, whom it serves, how it creates
value, how it competes. It is more concrete and action-oriented than the vision
– it describes the core activities the company performs in service of its vision.
It also can refer to how a company defines and measures success, thus starting
to make a connection with the eventual objectives and KPIs that will be
established in the planning phase.
For example, The New York Times’s
mission is “We seek the truth and help people understand the world.” And
TED, the nonprofit that gave its name to short, poignant talks, synthesized its
mission in true TED fashion: “Spread ideas.”
Planning
This is the most familiar and commonly practiced phase of the strategy
process. Most companies have recognized that just budget planning for one
quarter or one year ahead, while absolutely necessary in order to achieve their
financial objectives, is not sufficient to ensure success in the longer run.
In this phase, the leadership team looks out at the appropriate
strategic horizon – could be 1-2 years, could be 3-5 – and defines the top
objectives for the organization and the major steps it needs to take to achieve
them. All that planning, when phase 1 has been properly completed, should be
done in service of the company’s stated vision and mission, and in keeping with
its values and purpose.
Goals
The first step of
any planning process is to set objectives. At the outset of any strategic
planning exercise, CEOs must decide on and communicate the goals the
organization will need to attain to advance its mission and make meaningful progress
toward achieving its vision.
Goals provide the
bridge between the more abstract corporate vision and the concrete initiatives the
company will have to execute as it moves forward. They have to be rooted in the
‘why’ spelled out in the purpose phase, and progress against them has to be
observable and measurable to allow the organization to gauge its advancement
and success.
Capabilities
The next step, after
goals have been set, is to conduct what strategists call a ‘gap analysis’ –
what capabilities does the company need, that it currently lacks, or what does
it need to do, incrementally or differently, in order to be able to achieve its
goals.
Capabilities are
usually described in ‘people, process, technology’ terms. And they can
either be cultivated internally or acquired externally. To achieve its goals, a
company may need new talent or expertise; it may require technology, tools or intellectual
capital; or it may need new procedures, governance and management disciplines.
Defining the ‘gaps’
of strategic capability for the company lays the foundation for the actual
initiatives and projects that the company will have to include in its strategic
plan.
Priorities
Once the required
capabilities and actions to achieve the strategic goals have been identified,
the most important step the leadership team must take is to assign priorities.
Few organizations have the resources or capacity to do everything they plan, so
setting priorities is key to success.
Most organizations
are surprisingly deficient at this task. Competing agendas, pet projects,
desire to please everyone all get in the way of effective prioritization. Which
is why it is critical that priorities get decided at the top and clearly
communicated down.
There are a number
of frameworks that are used to assign different priority to initiatives,
projects and tasks. The most common ones involve mapping initiatives on a 2-D
matrix – either based on ‘importance vs. urgency’ or ‘effort vs.
value’ – and prioritizing the most feasible and impactful activities. Taking
sequencing into consideration is also part of this process, as certain
activities may be dependent on others being executed first.
Execution
In many companies, the strategy group is not even tasked with
overseeing and orchestrating this phase of the strategy continuum, which is a major
miss. And often, no one is – execution is left to individual groups and
managers, without any central process to track, coordinate and report progress against
the strategic objectives.
Organizations that do this phase well have a Corporate PMO
(Program Management Office) embedded in their strategy function and providing centralized
administration, coordination and systematic tools for tracking and reporting on
all strategic initiatives that have been prioritized as part of the strategic
plan. It doesn’t have to be the rigid and bureaucratic structure many imagine
when they hear ‘PMO.’ On the contrary – the best PMO units are intimately
familiar with and invested in the business; they are flexible and
client-service oriented; and they help business teams execute and meet their
objectives as much as they track and administer the process.
Initiatives
The first-order-of-business
responsibility for a Corporate PMO is to help the team construct and formalize
the Corporate Portfolio of Strategic Initiatives. This takes all the necessary
activities that were identified during the capabilities step, overlays the
agreed-upon priorities, and creates a project portfolio that becomes the embodiment
of the strategic plan, and its day-to-day manifestation to the entire
organization.
A well-constructed corporate
portfolio of initiatives should rely on a collection of PMO tools and processes
that ensure consistency and discipline of execution. Each initiative should
have a formal charter stating its purpose and objectives, its main planned activities,
milestones and success KPIs, its executive sponsors, steering committee, and
team members. A RACI
matrix as this one provided by Smartsheet (short for Responsible,
Accountable, Consulted, Informed), is a critical tool to clarify who’s in charge,
who needs to answer for what, and who is doing what.
In addition to
formalizing the governance charters for each initiative, the Corporate PMO also
should deliver an ongoing process for reviewing the portfolio as a whole,
finding common threads and efficiencies among initiatives, and making sure
teams in different silos running different initiatives learn from each other,
make the necessary connections, and operate from the same set of priorities and
strategic narratives.
Tasks
This is the realm of
day-to-day project management, utilizing detailed project plans, task lists,
issue logs and risk matrices. Ideally, all initiatives that comprise the
corporate portfolio should utilize the same discipline of PMO processes and tools,
and be on one project management platform, such as Smartsheet.
At the very least,
each project should have an assigned project manager who administers and
populates a detailed project plan and issue log, conducts weekly (or whatever
the right frequency is) calls, assigns tasks for execution or issues for resolution
based on the RACI matrix, and produces all reporting, data and documentation required
by the project sponsor and the steering committee.
Often the quality of
execution of key initiatives is left to individual teams or business units who
may or may not have the ability and discipline to deliver professional project
management at the task level. That is a mistake. The investment in professional
project management resources, who can be leveraged across multiple initiatives,
is negligible compared to the cost of failing to execute as planned.
Metrics
Defining and
tracking success metrics is the final step of the strategy process. It is unfortunately
often overlooked or reduced to just tracking obvious KPIs, such as revenue or
cost, which are among the ultimate outputs of executing the strategy, but may
not reveal whether the strategy is being executed in line with all the
strategic objectives and values the company established in the earlier stages of
the process.
Throughout the execution
phase of the strategy process, the leadership team should be focused and
constantly tracking their progress against the right KPIs. But what are
those? The right KPIs close the loop between the highest aspirations and goals
the team set in the early phases of the strategy process and the actual
outcomes that the company is producing as a result of executing the strategic
initiatives. If the results are achieving the company’s goals, fulfilling its mission,
and advancing its vision, while living the corporate values, then the strategy
is working. If all the initiatives are being executed, and yet the KPIs are not
in line with the goals, mission, and vision, then something is broken.
For example, increasing
‘diversity’ or ‘learning’ may have been set as key goals that
advance the company’s mission and vision. Then appropriate KPIs needs to be
identified that properly measure the progress against these objectives. Just tracking
revenues or earnings or market share will not shed light on the company’s
success toward its diversity or learning objectives.
The best practical
tool strategists use to manage this final stage of The Strategy Checklist is the
balanced
scorecard, first developed by US management thinkers Robert S. Kaplan and
David P. Norton. It was initially introduced as an alternative to unidimensional
performance systems that focused excessively on one metric, such as earnings
per share or return on investment. It proposed a multidimensional view of a
company’s performance, introducing a construct that involved a number of
metrics along four key perspectives of the business: financial, operational,
customer, and innovation and learning.
Since then, balanced
scorecards have taken many forms, and leadership teams have been adapting and customizing
them to their particular strategies and needs. The idea is not necessarily to
follow the exact framework developed by Messrs. Kaplan and Norton, but rather
to create a multidimensional performance measurement tool and populate it with
the right metrics – the ones that clearly indicate whether the company
is indeed achieving its strategic goals and realizing its vision.
The other critical
tool to apply in this stage is OKRs
(Objectives and Key Results). OKRs are that final step in the strategy
continuum that aligns the compensation and incentives of individual company
leaders and employees to the strategic goals and KPIs that were defined in the
earlier stages. First introduced by Andy Grove when he was CEO at Intel, and
later popularized by Google, OKRs are a simple, practical and powerful tool to
standardize employee performance measurement, while connecting it with the
company’s strategy.
Strategy is a journey that starts at a higher place with fuzzy concepts
and emotionally charged beliefs. But ultimately it needs to get translated into
specific, even mundane, tasks and actions that collectively, over time, result
in the realization of the original vision.
It is much like the process by which the artistic vision and divine
inspiration of an architect, such as renowned 19th-century Catalan
modernist Antoni GaudÃ, is eventually (after 144 years) realized by the daily
toil of masons, bricklayers and stone carvers to produce the magnificent La Sagrada Familia cathedral.
The Strategy Checklist is a practical recipe to plan, organize and
execute a cohesive and orderly strategy process that starts with the highest values
and aspirations, translates them into specific objectives and plans, and employs
disciplined execution tools to ensure the full realization of the strategic
vision.
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