Achieving execution excellence

Source :  Prof Krishna Palepu, Harvard Business School, 2003

What is value proposition ?
-  Identifying a non-trivial customer problem
- Crafting a solution to create value for the customer
- Articulating why your solution is superior to the alternatives
- Assuring that you retain some of the value created for your investors

But … value proposition is not enough :
Strategic thinking has never been more important – “Business strategy is the single most important issue ….”  (Business Week)
… but successful strategy implementation is rare (“Less than 10% of the strategies are effectively implemented” – Fortune)
(Source : Kaplan and Norton, Balanced Score Card).

Barriers to execution excellence :

-  Communication barrier : Strategy not understood by those who implement it, and/or dynamic market realities not known by those who set the strategy

-  Systems barrier :  Management systems focus on operational control, not strategic learning and feedback

-  Incentive barrier :  Incentives are not aligned with strategy

(Source : Kaplan and Norton, Balanced Score Card)

Driving corporate performance managing the barriers :

-  Communication barrier :  Communicate the operational implications of strategy internally and externally, ensuring effectiveness of the communication

-  Systems barrier :  Translate the strategy to operational terms, understandable by the target group

-  Incentive barrier :  Link strategy to performance monitoring and compensation

Metrics for execution success :
Capability metrics :  What are the key capabilities that are essential to our strategy? What are the associated risks?
Process metrics : What are the key activities that are essential to delivering our value proposition? What are the associated risks ?
Customer metrics :  How well are we meeting the key customer expectations that our strategy promises?
Financial metrics:  Are we earning our cost of capital? If not now, will we in the future? What are the key financial metrics we should be tracking along the way?

Strategic metrics  -  how will they help ?
- Allow you to communicate and guide strategy implementation
- Allow you to test cause and effect hypotheses behind your value proposition
- Allow you to fine tune your strategy continually
- Allow you balance and short-term financial perspective with long-term strategic perspective.

Using strategic metrics :
- Linking strategy to initiatives, resource allocation, budgeting
- Linking strategy to performance evaluation and compensation
- Linking strategy to Board information
- Linking strategy to capital market communication

Summary :
Achieving execution excellence requires
-  A mapping of your strategy to capabilities, processes and outcomes (strategic metrics)
- Communicating them to employees, to the Board, and to the capital markets
- Linking them to initiatives and budgets, performance evaluation and compensation, and to levers of control