Why do you think there are so few books on strategy execution/implementation?

To better understand why strategy execution was such an unknown topic, I looked into different areas and came to the conclusion that this is a very complex topic – a combination of sciences – because it touches upon all the fundamental elements of business management (such as marketing, finance, operations, HR and so on) and art. Even if you have all the elements in the right place there needs to be something more to make it happen.

In an attempt to get to the deeper reasons for this gap, I sought answers to the following questions:

1. Do the theories of the most highly regarded business management gurus – those who influence the way businesses are managed (e.g. Taylor, Drucker and Porter) – mention project management and/or the importance of its link with strategy execution?
2. Have the top business schools, those that train most senior executives and future leaders, been teaching the value of project management and its link with strategy execution?
3. Do the most prestigious strategic consulting firms advise chief executive officers (CEOs) and other senior executives on the advantages of linking strategy execution with project management?

Surprisingly, none of the most influential business management gurus referred to strategy implementation or the need for project management as a critical component for successful strategy execution.

When I looked at the top 100 business schools in the world, I was surprised to find that none of these schools teach a course in “strategy execution” or project management.

I also looked at the top strategic firms, such as McKinsey, BCG and Bain & Co, and found that none of them actually provide services on strategy execution as such.

When I looked into the number of articles published on the topic of strategy execution in Harvard Business Review (HBR), probably considered as the most prestigious and trendsetting management publication in the world, I made a very interesting and revealing finding. In their history HBR has published:

• 1,790 articles related to IT
• 1,527 articles related to strategy
• 946 on marketing
• 881 on leadership
• 862 on human resources
• 672 on operations
• 603 on innovation
• 569 on finance
• 325 on project management
• and only 87 on strategy execution!

I believe all the findings above are related, and are linked to the complexity of the topic of execution.

You suggest that companies are taking on too many projects, are managing them badly and rarely align them to an overall strategic framework. For these reasons they often fail. Could you explain the issues that need to be resolved?

Good question. During the past century, companies’ efforts to achieve their strategic initiatives have led to the relentless improvement, and thus constant reduction, of operational work (run-the-business activities) and to an unstoppable increase in projects (change-the-business activities). This slow but inevitable trend has had a significant impact on strategy execution. Unfortunately many companies remain ill-equipped to manage this shift.

In addition, if you look at any ranking or research on what are the most strategic decisions top management makes, you will see that most of the answers are along the lines of new market entry, new product development, acquisitions, business transformation, IPO, outsourcing and other similar responses. These are all initiatives that in the end, companies will need to execute via projects; there is no other way.

During my presentations, I often ask senior managers where they would use a suddenly-received one million euros – in operations or in projects. Ten out of ten say that they would invest the money in a project because the expected return value is always higher. Therefore, as the number of projects multiplied, the rate of strategic failures increased. My research shows that the traditional company’s poor project management skills – and the resulting difficulties in executing its strategy – can be linked to seven main obstacles:

1. omission of uniform methods and standard processes
2. misalignment of organisational structure with the company’s changing reality
3. absence of appropriate governing structure to support strategy execution
4. lack of project execution culture, skills and leadership attention
5. complexity of tracking and forecasting project costs, financials and benefits
6. inadequacy of systems and tools for monitoring strategy execution
7. a lack of focus

But companies’ failure in project execution is not only related to the number of projects they launch. To be honest, I think that this is partially due to the human nature. Many people I know have multiple private projects, frequently starting new ones but hardly ever finishing them. This happens in companies too. If we accept that it is with projects, like a successful new product or a strategic acquisition, that a company can make the big leap, we often see top management launch more projects than they can actually execute. Also, launching a project is always exciting, while executing requires discipline and follow-up which is significantly less so.

You say that traditional company structures, based on functional departments, need to change, as do processes, tools, skills, governance and performance metrics. What implications does this have for business, and what challenges does it pose for business schools?

One of the things that surprised me most was the lack of adaptation of many companies over the past few decades. The world, the markets, the consumers and the technology have constantly changed, and while many large organisations have evolved, some of their fundamental aspects have not changed that much. Many are still organised like they were in 1980 and are struggling to adapt to the new world. It is what I call a very strong dominance of the ‘run-the-business’ dimension legacy. This has massive implications for businesses.

As regards the elements you mention in your question, for example company structures, you can see that many companies are still organised in an old way, with functional, top-down departments based on the traditional value chain as we learned from Michael Porter. Yet, today the world is different; companies need to be more agile and react faster to changes in the market if they want to survive. The most important projects a company runs, which are often crucial for their future, are transversal across the entire company, meaning that they require resources and skills from every single department. And that is where the issue starts: who leads the project? Are the resources allocated full time to the project? To whom they report? How are they compensated? All these questions must be applied to each project – just imagine the chaos that it is created when companies run hundreds of projects.

The same strong run-the-business dominance and misalignment happens when you look at the processes and the tools of the organisations – these are very suitable for running day-to-day operations but much less so to manage the projects. And this also happens with skills, the performance metrics and other elements of the organisation.

The impact of this shift on business schools also has dramatic consequences. Business schools’ structure is strongly oriented towards operations (run-the-business) and that too has not changed much in decades. I also see that lots of money is spent in new improvement projects but very few are finished successfully. The lack of focus on key initiatives and follow through is something I often see missing.

The second big impact is on the content of the programmes, both at MBA and at the executive level. In my research I found out that only two of the 100 top MBAs in the world offer project management as part of their core courses curriculum. I didn’t see any that would offer lectures on strategy execution. The same applies to executive education – there are very few programmes on strategy execution. But this could be easily solved: the bigger problem is that many of the current core courses, such as marketing or finance, should be revised to incorporate the shift and the complexity between the run-the-business and the change-the-business dimensions.

You talk of the shift as being away from operational work (run-the-business) towards project work (change-the-business), but surely business has to do both – isn’t the issue about striking the right balance?

That is correct. In my book I describe a new paradigm, a totally different way of looking at a company’s activities: run-the-business (operations) versus change-the-business (projects) – the link between strategy planning, strategy execution and project management.

One important finding of my research is the silent but persistent trend toward more projects that has affected probably every business in the last century.

Since the 1920s (or even earlier) companies have been improving their run-the-business/operations activities as a means of increasing productivity by becoming more efficient and reducing costs. At that time, most companies were mainly producing goods – the service industry was not yet strong – and one of their main objectives was to grow. Growth by acquisition was not as popular as it is today, so the growth was mainly organic – by increasing production capacity and by entering new markets. Once the industries became more mature, growth was achieved by increasing efficiencies and reducing costs. The impact of these growth techniques was that the number of projects increased over time.

The fact that almost all the management gurus and their management theories focused on improvements for the run-the-business dimension significantly influenced this trend. Taylor, Ford, Ansoff, Drucker, Porter and other key influencers’ recommendations were focused on improving the operations of the business. On the other hand, all of these operational improvements were carried out as projects. These were often one-off projects, but changing a business involves carrying out a project; there is no other way.

Several other movements have helped accelerate this trend:

•        1970s – the universalisation of the PC at work;

•        1980s – the business process reengineering wave;

•        1990s – enterprise resource planning (ERP) to automate most operations;

•        2000s – the outsourcing of core and supporting operations, together with consolidation of the internet as a new channel for doing business.

The result of all of these changes is that companies have made their operations (run-the-business) extremely efficient, reaching levels where finding additional efficiency improvements is no longer possible. The problem is that this increase in projects has gone almost unnoticed because the focus has always been on running-the-business activities.

Dealing with the trend away from operations work (run-the-business) and toward project work (change-the-business) is not easy – and often is a zero-sum process: what you add to one dimension you have to subtract from the other. This calculation has an immediate impact on the side from which something is subtracted, and probably affects the entire business.

The book is about being a focused organisation, and the benefit of focusing on a few key initiatives. Does the number not depend on the size of the business and their capability to manage initiatives properly?

Good question. My research showed that although very few companies succeed in implementing their strategies, there are a few whose strategy execution is successful. What differentiated these successful companies was that they had a great leaders and high maturity levels in the key elements of their organisation.

To my surprise, some of these successful organisations were not just reaching but were also exceeding their strategic objectives. While their formula included great leadership and maturity, what made all the difference in their ability to exceed their expectations was the fact that they were highly focused.

In today’s world, most companies and many employees are highly unfocused. As a result, top management has difficulty setting a clear strategy and communicating a ranked list of priorities; most staff members end up deciding on their own where to concentrate their efforts, most likely on easy and irrelevant tasks. This lack of focus results in much wasted money and resources, the inability to execute the strategy, project failures, and unhappy and uncommitted employees. Successful individuals are highly focused, and the same applies to organisations. In fact, every business is focused when it is just starting up but only those companies that manage to stay focused will likely succeed and remain in business.

The example of a focused organisation is Apple under the leadership of Steve Jobs when he returned in 1997 to turn the company around. He stopped more than 90% of the running projects; he chose four products; he kept only the best people; he installed a sense of urgency and clearly communicated his ambitious vision. Basically, Steve Jobs converted Apple from a highly unfocused company in the verge of bankruptcy into a highly focused and one of the world’s most valuable organisations.

The number of initiatives is not related to the size of the company. I would even take it a step further: the larger the company is, the more difficult and the stronger leadership it takes to become focused. If you are a large company and you have too many initiatives at the top of the organisation, there is a good chance that people at the bottom will not know what the priorities are. I recommend starting with a reduced number of projects. Once you master the approach and see discipline throughout the company, you can start expanding the number of initiatives, but slowly and always making sure that projects are followed through until the end.

What do these changes mean to strategy consultants? Are they driving the changes, adapting to them, or having to re-think their approaches?

This is a very interesting question. My understanding is that only until very recently, strategy-consulting companies were not present in the area of execution. Five or ten years ago, consulting companies such as McKinsey or BCG were advising companies on the strategic planning side but once the direction was set, they were not involved in the execution. This can be clearly seen if you look at the services they provide: very few offer services on strategy implementation or project management. I believe this is linked to the facts noted above: very little literature, lack of gurus and poor business school teaching.

On the other hand, the big four and other consulting firms were focusing mainly on operational matters and on the implementation of specific projects, but never on the full implementation of a strategy. This created a gap in the market place: none of the top consulting firms was really offering services around strategy execution.

This space became a clear opportunity, and for a few years now you have seen the big four consulting firms moving upstream, while strategy consulting firms are moving downstream to fill in the gap and make serious money.

For these reasons I don’t believe strategic consulting firms are driving the changes. It is something they have noticed but, as it is a risky space because results are more tangible, they have not yet fully stepped in. I believe that the future of consulting will be much more focused on advising companies on strategy execution, meaning that they will need to rethink their approach.

The Awards are given to the FTSE 350 companies that can demonstrate they put their strategic thinking, planning and management into words, so directors and investors can make better assessments of future potential and worth. Past award winners have significantly outperformed the market and their industry peers, demonstrating the value in adopting best practice.

Ian McDonald Wood, Chairman of the SPS, stressed that, in the era of increasing transparency and tighter regulation, business would have to improve reporting standards. He noted that the evident value in doing so should make this a strategic imperative for better business performance, rather than just a compliance issue.

“Consistent strategic reporters that have made our short lists for at least three years over the four year of the SPS awards are 80% ahead of the FTSE350 index – 82.77% versus 2.68%,” McDonald Wood said. “These are truly remarkable results. Strategic reporting reveals the truly strategically-literate companies”.

At the event, Richard Whittington, Professor of Strategy at Saïd Business School, Oxford, and Consultant and Advisor to the Institute of Directors (IOD), gave a keynote speech emphasising the growing importance of strategic importance in the ‘Age of Transparency’, the new reality for business in the post-crisis economy.

Winners included: Rolls-Royce Holdings for Best Strategic Leadership; Lloyds Banking Group for Best Group Strategy; Man Group for Best Business Model; BAE Systems for Best Strategic Governance; ARM Holdings for Best Key Performance Indicators; Marks and Spencer Group for Best Strategic Risk; Serco Group for Best Strategic Capability; Telecity Group for Most Improved Report; and Anglo American for Best Shared Strategic Value. Four companies were shortlisted for each category. Full details can be found on the Awards website at www.svcr.squarespace.com.

Both courses aim to help people new to business strategy and planning: either young people starting on a management career and wanting to know what these topics are about, or managers getting involved in strategy and planning for the first time.

Each course is self-guided and consists of 14 classes. Each class has a short screencast video, explaining a main part of the subject, followed by a simple quiz. There is also optional guidance on applying the class materials to your own case.

The courses, written by Kim Warren, Teaching Fellow at London Business School, SPS Fellow and former Business Strategy Director, are designed for a 14-week programme, but you can work through the classes at any pace you wish. They are based on a business model most people will understand – a low-fare airline – and the quizzes are about another common business – a restaurant. Both are disguised versions of real businesses. Applying the class materials to your own situation will provide valuable practice (and real business value).

The courses offer a certificate of completion for those who score an acceptable level on the randomised quizzes.

The regular cost of each course is £80 + VAT, inclusive of all 14 classes, download materials and quizzes. SPS has negotiated a discount of 20% for Members (£64 + VAT).

An outline of the courses and a samples of each are available at:

Business Planning course www.strategydynamics.com/cbp59

Strategic Planning course www.strategydynamics.com/csp59

Confirmed speakers include: Colin Cram, Former Chief Executive, North West Centre of Excellence and Director; Professor Zoe Radnor, Cardiff Business School Associate Dean and Sarah Lethbridge, Cardiff Business School Senior Research Associate; Phil Swan, iNetwork Director; Paul Matthews, Monmouthshire County Council Chief Executive; David Shields,  Government Procurement Service Managing Director.

The topics to be discussed include:

• Creating a lean public sector
• A masterclass in lean
• Introducing lean into local government
• Systems thinking
• Lean case studies in the NHS
• Transforming the Government Procurement Service through the application of Lean

www.publicserviceevents.co.uk/223/lean-government

Interactive exercises showcase the many possible environments and situations in which scenario thinking can be used and implemented within your organisation, including for planning and risk management purposes. The SPMC will also delve deeper into a number of directly applicable ‘off-the-shelf’ scenarios, some of which are presented by guest lecturers from Rabobank and Royal Dutch Shell.

For more information on the SPMC please send an e-mail to jolanda@deruijter.net or visit the SPMC website. SPS members can get a €500 discount.

www.deruijter.net/uk/?page_id=1872

• Economic analysis of the current situation
• Potential scenarios and probabilities
• Implications of the Eurozone crisis for treasury management
• Re-denomination issues
• Contingency planning I – preparation and scope
• Contingency planning II – legal and commercial review
• Contingency planning III – risk mitigation
• The rating agency perspective

SPS members benefit from a 20% discount.

www.cityandfinancial.com/conference/the_eurozone_crisis_supporters

Greece, Ireland, Portugal and Spain are clearly struggling to implement the austerity measures needed to address their debt problems. The political consensus in these countries is fractured and public hostility to the austerity measures already in place is growing.

In Ireland 50% of the population have refused to pay a new €100 tax  and in Spain the newly elected government failed to win an important regional election. This political uncertainty, and the rejection of Brussels’ prescription, some argue, could ultimately lead to the complete collapse of the Euro project.

The recent collapse of the Dutch Government after it failed to reach agreement on a budget intended to reduce its deficit to 3% of GDP by 2013 is just one example of this instability. Long perceived as one of Europe’s stronger economies, the Netherlands actually ran a deficit of 4.7% of GDP, significantly higher than that of Portugal and Italy The leader of the country’s far right party has vowed to make the next election a vote on Europe and the Euro, a position no doubt influenced by the success of Le Pen in the first round of the French presidential elections.

The French elections have seen the Socialist candidate and frontrunner vow to renegotiate the Euro zone fiscal compact, Noakes says. Meanwhile, Spain’s central bank is struggling to deal with a budget deficit of 8.5% of GDP in 2011, and recent figures showing that the economy shrank by 0.4% in the first quarter of 2012.

Less than 48 hours after the IMF increased its global bailout fund, European problems and the difficulties member countries face in restoring financial discipline came to the fore once again. The markets are already reacting with share price falls in Europe and the US.

Against this background Danny Alexander, the UK’s Chief Secretary to the Treasury, has announced new rules to tighten the fiscal rules for government departments citing the ongoing Eurozone crisis and economic uncertainty as the reason for his action.

On the positive side, yields on government bonds in the Eurozone have moved away from previously unsustainable levels, but this has largely been due to the European Central Bank providing enormous amounts of liquidity to banks, which they have used – in part – to buy Eurozone sovereign debt. The ECB’s actions also eased investors’ concerns about the banks in these countries, which itself had a knock-on effect on government borrowing costs.

There is also a big question mark over the other positive aspect – the political will to secure the future of the Euro. Despite Angela Merkel’s statement in a BBC interview that “Germany would do everything it could to keep the Euro zone together”, it remains to be seen how long voters in Germany, and indeed in the other economically sound Eurozone countries, will be prepared to support governments that are committed to providing huge sums of money to bail out their neighbours in the Eurozone.

Whatever the future holds, Noakes stresses that strategists are realising that the Euro crisis is a chronic, long term problem and that firms have to get to grips with it and, like the government, need to be ready for any eventuality.

Jones outlined how after a decade of growth, defence contractors are again experiencing a challenging market environment with the outlook being characterised by significant downward budget pressures and high uncertainty with respect to the magnitude and timing of reductions.

He explained how against this backdrop the challenge is for defence firms to develop a long term strategy consistent with the new market realities to inform the priority allocation of resources and satisfy shareholder expectations.  Jones’ talk considered how could today’s strategy be informed by lessons from the past and how the strategy function can best position a company in responding to this changing landscape.

Why is strategy important?
Strategy is important – I believe the alternative is constant fire fighting and lagging behind the facts, which I see a lot.

Most managers are in ‘reactive mode’, avidly solving one problem after another: this tends to result in constant stress, and once problems are defined, there is no alternative, there is no freedom. I believe that strategy is there to be proactive. Shell was proactive regarding the 1973 oil crisis – through their scenarios, they were mentally (and as a team) prepared. The same is true for Rabobank regarding the credit crisis (already in their scenarios in 2003) and the subsequent Greek default. Strategy helps organisations to be future oriented – it is possible to be ahead of the curve.

What should be the role of the SPS?
The SPS is needed to recreate the ‘lost skill’ that strategy has become. Most companies tend to think that it is enough to react quickly, having agility through turbulence. But developing competencies takes time, building factories takes time, building trusted relations takes time, developing new breakthrough technology takes time – often years. So it is important that leaders look ahead, way past the next quarter or even fiscal year.

Prediction is impossible, but it is possible to take account of all relevant scenarios. It is possible to develop real call and put options to be prepared for most of them. However, somewhere in the 1980s and 1990s, we seem to have lost this skill. Short-termism is everywhere but today’s challenges – like deleveraging and regaining trust in the financial sector, balancing our countries’ budgets or delivering the transitions toward sustainability – all require a long view: these aren’t problems that can be fixed in one or two quarters, nor even in one or two years. We need strategic planners as a countervailing power against the also-needed short-term problem solvers.

The SPS can help to put these issues on the agenda, spread best practices, support practitioners with scientific ‘evidence’ and help strategic planners help themselves through communities of practice.

What do you think is the main issue with strategy as a profession?
As someone with ‘only’ 20 years of experience – I learned the trade in 1992-1993 during a seven-month project as research assistant at Shell Group Planning – I still value the knowledge and guidance of people with 30 or 40 years of experience. Many strategists see a ‘job’ as a strategist as something they do for a few years in the hope to become a manager of some sort afterwards. Indeed, it is very valuable to have line managers stepping into strategy, and moving back into the line afterwards.

But we also need professional strategists who can look back the full period of looking ahead. For me it is great to reflect on my work 10-20 years ago. What did we miss? What did we overestimate? For me strategy really is like playing the piano: one gets better through the years. I really appreciate the SPS putting this professionalism on the agenda.

My latest book, which unfortunately is only currently available in Dutch, offers a more long-term European view on strategy, as opposed to most short-term shareholder value-based text books from the USA. It offers an overview of 40 years of experience with scenario-based strategic planning, with many new cases all thanks to my co-author, former SPS Vice-Chairman Henk Alkema, who did the original analyses behind the famous Shell 1971 oil price scenarios.

We are working on a Dutch rewrite of the book, but for those who cannot wait, we welcome feedback on our draft paper about strategic planning to get through the current world crisis.

After recently finding out that one can become a Fellow of SPS, I have requested this honour. I look forward to seeing my years of strategy work, both in writing, teaching and above all, in practise, acknowledged. I see it as my professional obligation to continue to pass on the knowledge that others that went before me, passed on to me.

Let’s make sure that the next generations of strategists can continue to build on the generations that went before us. The future is too important to be ignored.

The relationship between business strategy and brand strategy

This month a member of the SPS LinkedIn group commented that brand seems to be a visualisation / articulation of the business strategy, and perhaps the best way of communicating the business strategy both inside the business and externally. But, they asked, which is or should be the driving force?

A concise response was offered in reply: “A ‘brand’ is part of a go to market value proposition. The brand strategy should therefore be aligned with the business strategy and reinforce the value offering.”

One member wrote that the brand is – or should be – a visualisation / articulation of specific aspects of the business strategy and to this end, strategy drives brand. “Strategy, however, is an umbrella organisational matter. Brand strategy, product strategy, people strategy, operational strategy, etc., all contribute to successful organisations, where the whole is greater than the sum of the parts.”

Another said that the business should own the brand, rather than the brand own the business. “We’ve also seen many brands that used to own the business come to grief over the years, for example Enron, Kodak, Arthur Andersen – the list goes on. Maybe if these businesses had owned and fed these brands, instead of being held captive to them, they might be still around.”

Why not join in the debate, with over 8,500 members of the SPS LinkedIn group.

The author introduces a new way of looking at a company through two very different and often conflicting dimensions: running-the-business and changing-the-business. What you add to one dimension you have to subtract from the other one. Finding the right balance between these two dimensions represents one of the major challenges to successful strategy execution.

Becoming a focused organisation, Nieto-Rodriguez argues, involves a radical change in the way companies are organised and the way they select and manage projects – the creation of a new culture.

SPS members can get a 25% discount on this and all other Gower management titles. Please visit our member discount page for the required discount code.