Emerald Group Publishing Limited
Copyright © 2003, MCB UP Limited
Making strategy happen
Malcolm Penningtonis a member of the Executive Committee and a Director of Kikkoman Foods, Inc. He heads The Marketing and Planning Group consultancy based in New York City and is a contributing editor of Strategy & Leadership (email@example.com).
Execution: The Art of Getting Things DoneLarry Bossidy and Ram CharanPublished by Crown Business, New York274 pp.,$27.50
Larry Bossidy is CEO of Honeywell. Before that he was CEO of Allied Signal. Earlier in his career he rose through the ranks of GE where he learned about execution from Jack Welch, GE's CEO for two decades. Bossidy's record shows that he learned well. Ram Charan, a consultant who has advised the CEOs of quite a few large firms, provides the theoretical framework and examples from his experience. Together, the authors have written a brilliant book about making strategy happen.
In the fast-changing, hotly competitive marketplace of today, a sound strategy is essential. An imaginative, creative strategy is better. But your strategy must be one that your organization is capable of executing. And it must be executed effectively. The authors cover both these issues.
The authors' thesis is, "Execution has to be part of a company's strategy and its goals. It is the missing link between aspirations and results". Some examples of execution success and failures from the book:
Pfeiffer at Compaq. "Compaq CEO Eckhard Pfeiffer had an ambitious strategy .... He broadened his base for more complete representation ... to serve all the computing needs of an enterprise on a global basis. He bought Tandem, the high-speed, fail-safe mainframe manufacturer, and Digital Equipment Company (DEC) to give Compaq serious entry into the services segment. His bold strategic vision transformed Compaq from a failing niche builder of high-priced office PCs to the second biggest computer company (after IBM) in just six years". But Pfeiffer and his successor were never able to execute this well-conceived strategy.
In comparison, rival Michael Dell's company adopted a build-to-order direct sales strategy that has been executed beautifully. Dell surpassed Compaq as the biggest maker of PCs in 2001.
Thoman at Xerox. In 1999 Richard C. Thoman became CEO of Xerox. His strategy was to transform Xerox from a products and services company into a solutions provider combining software, hardware and services to offer customers an integrated flow of paper and electronic information. He launched two mission-critical initiatives – one was to consolidate 90 administration centers into four. Another was to reorganize the 30,000-person sales force, shifting half of them from geographic to an industry focus to provide customers with solutions, not just hardware. The result was chaos. Xerox did not have the right people or the execution structure to handle both of these wrenching changes. In fairness, Thoman did not have authority to pick his own leadership team. But he should have factored this into selecting a strategy. Without the right people the reorganizations could not succeed. A strategy that appeared sound failed because the capability to execute was missing.
Brown at EDS. When Dick Brown became CEO of EDS at the end of 1998 this pioneer in computer service outsourcing was falling behind a rapidly changing information technology market. Revenues were flat, earnings declining, and competitors taking the market growth. The first thing Brown did was to devote three months to getting to know the company and its people. He told them his ideas and got theirs. He got managers to discuss opportunities, problems, and priorities. He encouraged them to develop plans in their areas of responsibility that were challenging, but doable, and for which they took accountability.
People selection got intense attention. He removed scores of under-performing executives and the bottom third of the sales force.
EDS moved from 40 strategic business units, each a private fiefdom, to four line-of-business groups designed to leverage the company's intellectual capital and cover main market groups effectively. The authors note, "The overhaul succeeded because Brown put its design in the hands of the people who would have to make it work". It certainly was not easy for them, but by the end of 2001 EDS was enjoying double-digit growth in revenues and margins.
The authors cover these stories in fascinating detail. They use many examples to support their contention that a leader must practice six essential principles of execution:
know your people and your business;
insist on realism;
set clear goals and priorities and follow through;
reward the doers;
expand people's capabilities through productive dialogue; and
That last principle could be the hardest to practice. All the CEOs who are cited as being great on execution are ruthless about removing executives who are not performing up to standard. Some of these CEOs will first spend time in trying to develop their executives through extended dialogue and coaching or will try other assignments. But most are impatient and will not tolerate much under-performance. After all, the CEO is responsible for the entire company and cannot afford to keep a poor performer.
This book will reward a careful read. You will learn precisely what it takes to successfully execute a strategy.
As to furthering the process of creating that wonderful strategy, the authors provide convincing evidence of several considerations that should be obvious, but are often ignored:
It is essential to be realistic about the environment you are in – the global environment, the markets you serve, the competitors (including the ones you do not know about yet), and your own internal capabilities.
You have to maintain a continuous dialogue with your employees and involve everybody in creating company strategy and the plans to execute it. If you do, the resulting strategy will be "theirs" and they will feel accountable for carrying out their part of it.
Your strategy determines who you need in your organization and where. You need to assess who you have, encourage those who are capable, coach those who can make the grade with some help, and get rid of those who cannot do what is required of them to make your strategy work.