Without excellent processes of executive and operational management, it is impossible to implement the strategy no matter how visionary the organization may be. On the other hand, without the vision and guidance of the strategy, operational excellence is not enough to achieve success.
Based on the Execution Premium methodology of Kaplan and Norton, a comprehensive and integrated management system is formulated that explicitly relates the formulation and planning of the strategy. We can refer to Form 1.
This six-stage management system, which incorporates the principles of the Facalized Organization into the Strategy, provides a comprehensive approach that includes all the processes and tools necessary to develop and put the strategy into operation, and to control and improve the effectiveness of the strategy. strategy and operations.
On the other hand, the constant revision and dynamic updating of information is incorporated into the system, generating a closed loop of feedback and learning, as well as the ability to update the strategy when the underlying hypotheses have lost their validity or are defective.
|Strategy Development||Through a deployment of strategic tools, such as mission statements, vision and values, external economic, environmental and market competition analysis. Other tools on which we can base ourselves for this stage are the five forces of Michael Porter and the competitive positioning framework, vision of the strategy based on resources and “blue ocean” strategies, scenario planning, dynamic simulations and games of war.|
|Strategy Planning||In this stage we support ourselves with tools such as strategic maps and BSC, together with strategic goals and initiatives.|
|Aligning the organization with the Strategy||In this stage, the strategic map and the BSC related to all the organizational units are unfolded, aligning the employees through a formal communication process and relating the personal objectives and the incentives of the employees with the strategic objectives.|
|Operations Planning||In this stage we rely on quality and process management, reengineering, process control boards, rolling forecasts, cost system based on activities, resource capacity planning and dynamic calculation of the Budget.|
|Control and Learning of Problems and Challenges||This process integrates information on operations and strategy into a management review meeting structure designed with extreme care.|
|Test and Adaptation||Through internal operational data and new external data of the environment and competition, generating in this way a new integrated cycle of strategy planning and operational execution.|
We can go into detail of the different activities that we must develop with each of the stages of this wonderful world of Strategy Management (Strategy Development and Strategy Planning).
The integrated management system begins with the development of the strategy by the executives. During this process, companies seek an answer to the following three questions:
#1. What business do we participate in and why? The executives begin the development of the strategy with an affirmation of the purpose of the organization (mission), the future results to which it aspires (vision) and the internal compass that guides its actions (values). The mission, vision and values statements define the guidelines to formulate and execute the strategy…
#2. What are the key points we face? The managers perform a strategic analysis of their competitive and operational environment, especially the important changes that occurred since the strategy was last designed.
We can support ourselves with three sources: Analysis of the external environment (PESTEL), Analysis of the internal environment (Identification of key processes, Human capital, operations, innovation and technological deployment) and analysis of the progress of the existing strategy (based on the BSC metrics).
The evaluation of the environment is summarized in a table Strengths, Opportunities, Weaknesses and Threats, which identifies a set of strategic points that must be very careful in the execution of the strategy for its resolution.
Based on the answers obtained from the two previous questions (1) and (2), the executive team should develop and communicate a strategic change agenda where we will detail the importance of the changes to incorporate in the strategy.
#3. How can we compete better? In the final stage, the executives create a strategy that includes the following points:
In what market niche will we compete?
What are the key processes that will create our differentiation?
What direction should the strategy adopt in terms of human capital?
What are the technological facilitators of the strategy?
Managers plan the strategy by developing strategic objectives, indicators, goals, projects and budgets that guide the action and allocation of resources. Companies consider five questions at this stage:
#1. How do we describe our strategy? A strategy includes several dimensions of organizational change, from improvements in short-term productivity to long-term innovation. Companies create a strategic map to represent all their strategic dimensions.
Companies find it difficult to manage the simultaneous performance of the 15 to 25 objectives of a typical strategic map, now grouping the related objectives into four to six strategic themes, each of which is a set of related strategic objectives that represent the main components of the strategy. (An example could be: “Improve quality and operational efficiency”).
By developing a strategic map around strategic issues, executives can plan and separately manage each of the key components of the strategy but still have to make them work in a coherent manner. As they transpose the functional lines and business units, the themes support the borderless approach necessary for the successful execution of the strategy.
#2. How do we measure our plan? In this stage, managers convert the objectives defined in the strategic maps into a BSC of indicators, goals and gaps.
The “value gap” is usually defined by the vision statement created during the development of the strategy, and this is divided in turn into gaps that each strategic issue must close in the course of three to five years.
#3. What action measures does our strategy need? Managers choose strategic initiatives, in other words finite-term action programs aimed at achieving the desired performance in the strategic map objectives. The initiatives should be considered as a portfolio of complementary actions and of cumulative effect, each of these must be implemented successfully so that the company achieves the goals of its themes and the objective of its vision.
#4. How do we finance our initiatives or projects? To execute the strategy, it is necessary to execute the project portfolio simultaneously and in a coordinated manner. This requires exclusive funds for these portfolios. The traditional budget system focuses on the resources provided to existing organizational functions and business units.
The strategic investments for the initiatives that transpose the functions and business units must be eliminated from the operational budgets and administered separately by the executive team. The creation of a special budget category called STRATEX (strategic expenses) facilitates the process.
#5. Who will lead the execution of the strategy? Some companies are incorporating a new responsibility structure for executing the strategy through strategic themes: the thematic teams. The companies appoint executives who will own the issues, provide them with funds for STRATEX, and support them with specialized teams in topics formed with the members of the entire organization. Owners and issue teams provide feedback on the execution of the strategy within each topic and are responsible for execution.