Sunday, December 15, 2013

The "Golden Ratio" of Strategy Creation vs. Execution

Take strategic continuity with continual improvement in realization over time.

The rapidly changing business dynamic makes strategy creation not less important, but more critical to compete and thrive for the business's long- term thriving. And one of the most crucial tasks for top executives is to spend a significant portion of time to 'Think Strategically.' However, what is the "right" percentage of time spent on creating a vision and strategy vs. execution and results, or what's the "golden ratio" of time-spending in strategy creation vs. execution? Does strategic planning follow the 80/20 principle to provide focus on the 20% of activities that will yield 80% future success?

Take strategic continuity with continual improvement in realization over time. Many organizations have the annual formal strategic plan including off-site meetings and in-depth analysis of the company’s visions, goals, and plans, In order to adapt to the accelerated changes, it is also important to take strong quarterly updates upon progress and sanity checks on the strategic plan. In successful companies, each year the strategy should be re-examined, and then throughout the year, you execute that strategy, being cognizant of changes in the landscape. There’s always a paradox: On one hand, it is very easy to continuously be caught up in execution with weekly, monthly and quarterly results. It is what keeps your customers satisfied and maintaining quality, delivery, and profitability on an immediate basis. However, if you never look up, you miss the large bus that is headed in the right direction. It now seems a long time ago that the five-year strategic plan with yearly updates/revisions was the accepted norm. But competition, market, and the economy make that too stale now. On the other hand, if you look up too often, you could over-react and prematurely change a good plan for a bus that won't even come close.

The strategy needs to be more inspired by looking 'outside': What passes for strategic planning, is often a prioritization of projects that have already been on the radar for a while. In most cases, these projects have an 'internal' focus aimed at cost reduction or optimizing various aspects of the business. Most often not enough time/energy/focus is spent on identifying what is happening in the market (what are the positive and negative trends/forces impacting the company) and what is happening in their competitive space, especially new entrants and innovative competitors. The risk of not focusing 'outside' is high, especially in the mid to long term. The strategy which is truly innovative is almost always inspired by looking 'outside.' Therefore, the wise business strategists seek out advice. This is the time to assemble their needs. Thereafter, they will be more proactive, listen to others and under most circumstances be more "successful."

Setting priorities right: A strategy needs to be dynamic; however, a rigorous process to make strategy can improve strategy effectiveness. The vision should change only when there is a fairly major shift in the direction of the business and be authored by the top executive teams. Make clear tradeoffs and choosing what not to do. If you choose what to do, you have to also choose what not to do because they are incompatible. It's very hard because tradeoffs limit opportunity. The 'execution challenge' is getting key staff to take concerted, ongoing effort on these 'internal' projects, which is hard because even these require doing the important things over the urgent stuff.
- the strategy should come out of a rigorous process of assessment examining where your value proposition resides with all the constituencies you currently serve. The process should include a full cross-functional leadership team.
- the assessment and strategy should be a leadership directive by the senior executives and should be conducted with a third-party source that can scientifically validate that research and help to form the indications and implications.
- the assessment and strategy phase should take no more than three to six months and include a top-line strategic roadmap that clearly defines metrics for success that can be shared with the entire organization.
- business planning to support the strategic roadmap should not take more than an additional thirty to sixty days.
- A robust process of daily, weekly and monthly review should be put into place to ensure real-time adjustments and continual improvements.

It truly depends on the industry. Certain industries have long lead times and are not in a continual air of opportunity. And it also depends on the size/age of the company, but typically in today's world, the top executives need to be spending a significant proportion of his/her time (30% to 50%) 'thinking strategically.' That includes making sure the right execution and decision frameworks are in place and working, which is part of the mission and strategy work. So many things are changing so quickly at the moment that attention needs to be paid almost continuously. It may not be practical to pick a magic number golden ratio for strategy vs. execution, as a strategy today is contextual and cascading, and action is part of the strategy. 


Great post! Everything should really be strategized to work out well. The 80/20 rule is one of the best math translation of that idea.

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