How Effective is Your Implementation of Your Strategy?
recently discovered one of those book gems. Small and
concise, with wonderful simple, crisp, informative writing.
The book is called “Seven Strategy Questions” by Robert
Simons, published by Harvard Business Press, 2010. Just
asking seven questions of your strategy can help you quickly
identify whether you are on the right track, or where there
questions with their follow-up questions are:
is your primary customer?
Does everyone know what your primary customer values
How have you organised to deliver maximum value to
Have you minimised resources spent on shared
services and other functions not directly associated
with delivering to a customer?
your core values prioritise shareholders, employees and
What tough decisions have been guided by your core
your core values recognise your business’s
responsibility to others?
everyone committed to your core values?
critical performance variables are you tracking?
What is the theory of value creation?
What could cause your strategy to fail?
How do you create accountability for performance?
strategic boundaries have you set?
What are your major reputation risks?
Does everyone know what actions are off-limits?
What strategic initiatives will you not support?
are you generating creative tension?
How are you motivating everyone to think like
How do you encourage innovation across units?
Have committees and dual reporting made your
organisation too complex?
committed are your employees to helping each other?
What is your theory of motivation?
How are you creating shared responsibility for
How do your compensation policies affect commitment
to help others?
strategic uncertainties keep you awake at night?
How do you focus everyone’s attention on these
What systems do you use interactively to stimulate
How do you encourage bottom-up information sharing?
world where there are so many options and choices, companies
(here we include large, medium and small businesses)
sometimes take what they think is the easiest route and try
to be everything to everyone. No-one can achieve this.
However, deciding what to offer and to whom, involves tough
uncomfortable choices. We also often get caught up in jargon
and the latest buzzwords and forget to go back to basic
principles when reviewing the effectiveness of our
list on one hand:
Your core values? – (not your desired behaviours)
Your measures of success?
Or do you
have a plethora of measurements, scorecards and spread
sheets that make it easy for you to postpone having to make
tough choices because you need to measure more?
critical element of implementing your strategy effectively
is to engage with your organisation. No-one can ever have
all the answers all of the time. Your service technician is
sometimes the first person aware of changes in your
customer’s business; your employees can tell you how your
company is perceived in the market – are there compliments
passed around the braai or dinner table or are they too
embarrassed to say where they work? So what are effective
ways of engaging your organisation:
pose the questions face-to-face. Face-to-face communication
is the most effective and powerful channel. It is also the
one that is often neglected. How easy is it to just churn
out e-mails and think you have done your job? Wrong. These
e-mails are glanced at, ignored or just deleted. Face to
face, people can see your eyes, your intent and passion.
That’s also how trust is built.
Discussions must cascade downwards throughout the
organisation. If your managers do not see
communication/debate as part of their day-to-day job, then
there will be a gap in understanding between management and
process must truly “engage” operating managers. This ensures
that the people who actually run the business are involved,
not high level theorising in an ivory tower.
must be about what is right, not who is right. How often is
the person with the loudest mouth, exuberant personality or
a smart political player, the one that is listened to? When
in fact, there are others who have greater insight, but are
ignored. Rank, titles, office politics must be left outside.
It is also important to ensure that people who speak
uncomfortable truths are not punished. This shuts up
everyone very quickly.
root every discussion in: “What are you going to do about
it?” If action does not follow a discussion, then your
company will end up wheel-spinning endlessly and people will
just talk for the sake of talking.
Below is a
more detailed explanation of each of the Seven Questions:
your primary customer?
Up to 2003, McDonald’s clearly defined its primary customer
as multisite real estate developers and franchise owners.
The same menu was offered around the world and there were
large centralised functions. However, in 2003, the
same-store sales declined and growth was zero. The new CEO –
Jim Cantalupo – made the call that the new primary customer
was now the consumer. Regional managers were introduced to
ensure that the tastes of specific areas were addressed. You
can now get porridge for breakfast in a UK McDonald’s, or
soup in a Portuguese one. As of January 2010, McDonald’s has
delivered 81 consecutive months of increasing same-store
When you are asked who your primary customer is, do you
answer: “We have multiple customers?” If so, then you are
spreading your resources across too many functions and units
in an attempt to meet different customer needs. This doesn’t
mean that your primary customer is only Company A – this is
dangerous as you are putting all your eggs in one basket. It
is rather a specific targeted market. Mary Kay Cosmetics
defines its primary customer as the independent beauty
consultants who contract with Mary Kay as sales agents.
Trying to please other parties can also dilute your focus.
Amazon has two sources of income – direct-to-consumer sales
and fees from independent retailers. These retailers now
provide more than a third of Amazon’s revenue. Yet, Amazon
has defined its primary customer as the consumer. This has
created unhappiness with the retailers, some have even filed
lawsuits to force Amazon to devote more resources to them,
but Amazon has held firm. As a result, it has the highest
customer-loyalty rating for any retailer in America.
Once you have defined who your primary customer is, you need
to ensure that you and everyone in your company understands
what that customer values – low price, customised service,
world-class technology, etc. Of Proctor and Gamble’s
executives, 70% spend several days at their primary customer
– the consumer – eating meals and accompanying them on
shopping trips in order to understand their needs and how
they use P&G’s products.
Then you need to ask whether you have organised to deliver
maximum value to your clients. Different customers require
different organisation design. MasterCard has defined its
primary customer as large global banks who value low prices.
Hence, it has centralised its resources to maximise global
efficiency and drive down costs. Visa on the other hand, has
chosen regional banks with local preferences, hence it has
organised its resources by region.
The final action is to ensure that you minimise resources on
non-customer functions, i.e. staff functions. This is tricky
– if you cut too much, it can be very detrimental, but if
you spend too much, you are wasting money that you could be
spending on your primary customer. You need to ensure that
you measure the effectiveness and value produced by each
How do your core values prioritise shareholders, employees
Defining core values is not a “feel-good’ thing to do. It’s
a critical business decision. When faced with critical
decisions, which way do you turn? Which come first
-shareholders, customers or employees? Your business needs
to select one and this has to be consistent in every tough
decision that you need to make. Each choice is based on a
different value creation. The more decentralised you become,
the greater the need to ensure that every employee
understands the core values of the company. Core values are
not integrity, teamwork etc. These are just behaviours.
When you are a pharmaceutical company that gets slightly bad
results for a new drug, do you pull it or do you carry on
measuring - hoping more stats will change the results? Are
your core values to put customers first, and hence, at any
sign of possible danger, you pull the drug, or do you put
shareholders and profits first and continue with the drug?
Interestingly, Jack Welch used to profess shareholders as
the primary value. He now says that it is the dumbest one to
follow. Shareholder value is a result of putting employees,
customers or products first.
What critical performance variables are you tracking?
If you are currently tracking a bunch of performance
indicators that are not explicitly linked to your strategy,
you will present people with a random list of measures that
may, or may not make sense to them.
Scorecards with 30 to 60 measures can be created under the
false assumption that more measures result in a more
complete, i.e. better, scorecard. The more measures, the
more attention managers have to spend on each measure and
eventually there is a great opportunity cost that is lost.
Rather focus your attention on seven things that result in
far more effective implementation and action, than on 40
things with far less attention paid to each measure.
A question to ask instead of implementing “more measures”,
are: “Where could our strategy fail?” List the top three. If
these are not in your top 7 list, then you are not focusing
on the right things. At Amazon, convenience for buyers tops
its list of things that could cause strategy to fail. Hence,
executive focus is on making it as easy as possible to
What strategic boundaries have you set?
This is all about controlling strategic risk. Pressures
caused by performance measures can result in people doing
things that could compromise your business strategy, e.g.
reducing quality to meet delivery targets. You must also
ensure that people are not wasting time and resources on
things that are not in line with your strategy.
There are two ways to control risk. You can tell people what
they must do, or tell people what they cannot do. Think of
the Ten Commandments. It’s all about setting boundaries and
telling people what they cannot do. Telling people the
limits of the boundaries of what they cannot do, frees them
up to be creative and innovative within these boundaries.
Companies also need to learn to say no. Steve Jobs said that
if Apple did not have the strength to say no to developing
PDAs, which all of its competitors were doing, it would not
have had the resources to create the iPad and look where
that is today!
When boundaries are set, it is very important that they must
be powered by punishment, rather than reward. If someone
goes beyond the boundary they must be disciplined and fired
How are you creating creative tension?
On November 5 1990, George Bush signed into law a new Tax
Bill that put a 10% luxury tax levy on boats that sold for
more than $100 000. As a result, boating company J Boats,
who in 1990 sold more than 30 boats costing in excess of
$100 000, sold only two in 1991. The company executive knew
if they didn’t do something drastic, they would go under.
They designed a new type of boat with a price tag of below
$100 000. It was only when they were cornered that
creativity flourished with the subsequent new design and
If you shield your company and staff from the ever-prevalent
competitive pressures, there will be very little innovation.
Plus, the larger a company becomes, the more isolated people
become from understanding their competitors. What is the
race about in your company? Getting to the next level in the
organisational structure or beating the competition in the
marketplace? To spur innovation, we need to break
comfortable habits, which we all fall into easily.
Stretch targets must also be set and realistic performance
measurement scores must be provided. This does result in
challenging conversations at times. But how many times have
you heard of huge executive bonuses when the company has not
been doing well? This is a company where this is very little
respect for the leadership. Do you think people bring their
creativity with them to work in such a company? No way, they
leave it at the door. People like to know where they stand
Set the span of accountability for managers greater than
their span of control. This is contrary to management
theory, but does result in greater collaboration to find
solutions to clients’ needs. For example, make the finance
director accountable for customer satisfaction. They will be
forced to have a broader picture of the company rather than
just the Rands and cents! John Chambers, CEO of CISCO,
requires the top 750 executives to spend 30% of their time
on initiatives that are outside their primary job
How committed are your employees to helping each other?
Southwest Airlines has the fastest turnaround of any
airline. This has resulted in it being one of the few
companies that have grown consistently each year. One of the
ways it achieves this quick turnaround time is that the
pilots are responsible for helping the baggage handlers
unload the mail and freight. Think of it, a pilot being a
postman as well! This allows them to achieve a turnaround
time of 15 minutes. Wouldn’t it be great if airlines in this
country could achieve this?
Whereas, at Enron, traders had to lock their computer
screens when they went to the bathroom so that others
wouldn’t steal their trades! And where is Enron today?
Most companies are not built on self-interest, and hence
people should only be rewarded for that in few unique
instances, such as boutique investment houses. What is your
theory of motivation? Is it that people are just driven
solely by money (Theory X of Douglas McGregor – no relation
I’m afraid) - or are they driven by more than money? Do they
want meaning in what they do and a feeling of self worth?
If people are proud of the vision of the company and its
broader purpose, they will take shared responsibility for
ensuring its goals are achieved. This includes helping
others to succeed in their jobs, not the cutthroat world of
The one thing that causes any collaboration effort to fail
is unfairness in reward. If there is not a fair and
transparent reward system in place that rewards everyone in
a high performing team, then there will not be a culture of
What strategic uncertainties keep you awake at night?
One thing is a given. Today’s strategy won’t work tomorrow.
Products become obsolete, new competitors appear on the
market, customers’ needs change. The only unknown is how
soon it will happen!
Any company must be able to adapt to change quickly and
sustainably. To adapt successfully, companies must
continually focus on the strategic uncertainties, i.e. what
could change that would result in changing the original
decisions used when designing your strategy.
These can be built into an interactive control system that
is visible and watched constantly. The system needs four
Capture simple and “easy to understand” information
Conduct face-to-face discussions between leaders,
operating managers and employees
Focus debate and discussions on strategic uncertainties
Generate new action plans
The Company should ask:
“What has changed, why, and what are we going to do about