CEB Strategy Leadership Council

Five Pillars of Strategy

Execution
A Compendium of CEB Best Practices and
Resources for Translating Strategy to Action
A FRAMEWORK FOR MEMBER CONVERSATIONS
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 Closing the gap
between strategy and
STRATEGY EXECUTION REMAINS A TOP CHALLENGE
execution for new growth
initiatives, remains a top 2014 Top Priorities of Chief Strategy Officers
concern among CEB Gap Between Importance (Scale: 1–7) and Current Effectiveness (Scale: 1–7)
Strategy members.
Execution is harder
today because…
■■ Strategists indicate that
■■ Distraction of Quick
2.00 Wins

Gap: Importance–Effectiveness
execution is an area of high 2.00 1.72 1.72 As GDP is projected
importance but report it is 1.60
to grow 3X in 2014,
an area of low effectiveness market improvements
Attaining
in their organizations. Market distract managers
Leadership from long-term bets
0.50 Via Fast given the ease of
■■ Sixty-one percent of 0.06 Followership “quick wins.”
strategists cite the inability
Improving Defending Preventing Leveraging Managing
■■ Low Discretionary
to bridge the strategy- Effort
Execution New Growth Growth “Big Data” the Changing
execution gap as the primary (0.41) Following the
of New Bets Platform to Enhance Role of
reason for failure of new (1.00) Growth Stalls Decision Strategy recession, 88% of
growth initiatives. Initiatives Making employees report a
significant increase
n = 18. in workload, reducing
■■ Two trends are causing Source: CEB 2013 Agenda Poll. efforts dedicated to
execution to be harder new growth.
today:
1. the distraction of quick
wins in an easier market Drivers of New Growth Initiative Failure
and Percentage of Senior Executives Rating Poor Company Performance

2. less employee bandwidth

in the wake of the Bridging Gap Between 61%
recession. Strategy and Execution

Adequately Funding/
43%
Prioritizing Projects

Strategy Formulation 34%

0% 35% 70%
n = 587.
Source: Bloomberg; “Why Good Strategies Fail: Lessons for the C-Suite,” The Economist Intelligence Unit, 2013; CEB 2013 Aggregate Analyst Projections Report; CEB analysis.

© 2014 CEB. All rights reserved. CSB8530414SYN

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THE FIVE PILLARS OF STRATEGY EXECUTION

Strategy Execution

Strategy Formulation Planning Performance Management Strategy Communication Organizational Capacity

Test assumptions Clarify strategic objectives Ensure accountability for Foster a two-way dialogue Provide managers with
about the executability to set expectations actions critical to strategy about the strategy to ensure the capacity they need
of the strategy during for those tasked with execution and monitor organizational buy-in. to execute both new
formulation. executing the strategy. performance. and existing strategies.

NEW
CEB Strategy Leadership Council

Closing the Strategy-

To-Execution Gap:
Unlocking Organizational
Capacity to Execute New
Growth

CEB Strategy Leadership Council CEB Strategy Leadership Council CEB Strategy Leadership Council CEB Strategy Leadership Council

Redefining Business Aligning Goals Strategy Execution Building Support

Boundaries to Resources in Volatile Markets for Change

Source: CEB analysis.

© 2014 CEB. All rights reserved. CSB8530414SYN

 4
 Test assumptions about
the executability of
PILLAR 1: STRATEGY FORMULATION
the strategy during
formulation.

83% of strategies can fail due to faulty assumptions

■■ The strategy formulation
process reveals underlying
critical assumptions How strategy formulation impacts execution:
necessary for successful
■■ Lack of clarity about strategic assumptions causes unanticipated “surprises” during execution
strategy execution.
■■ Poor assumptions surfacing reduces the ability to monitor uncertainties and course correct

■■ Inflated understanding of company and functional capabilities

CEB Strategy Resources

FEATURED

Kimberly-Clark—Capability-Based Market Maps break down strategy into manageable

stages (step-outs) to facilitate execution.

Ericsson—Strategic Assumption Stress Tests prevent decision-making biases from creeping

into the strategy formulation process.

Volksbank—Bottom-Up Assumption Calibration surface an acceptable range of assumptions

against which all plans must be resilient.

Eli Lilly—Assumptions Cascade broadcast strategic assumptions to invite contrarian

feedback about potential execution roadblocks.

Source: CEB analysis.

© 2014 CEB. All rights reserved. CSB8530414SYN

 5
 Major transformations
can seem overwhelming
EXPANDING TO FAR ADJACENCIES
at first.
Three-Phase Growth Strategy, Revenues (US Dollars)
Kimberly-Clark, Health Care, 1996–2003

Far Adjacency
New Customers
Near Adjacency
Product Breadth
3 Clinician-Preferred
Strategy
Non-Health Care 2
Product Extension Acquisition of
Head-to-Toe
New Products Strategy medical device
Acquisition of company enables

1 Non-Woven
disposable mask and
glove companies
access to higher-
margin, physician
Strategy Medical
creates complete customer segments
Polymer technology Devices
line of surgical
used to make $1.4 B
protection products
diapers breathable
enables first-ever
breathable surgical
gown
Health Care
Products

$345 M

1996 2010

Step-Out Strategy Challenges

■■ Evaluating unfamiliar businesses
■■ Establishing strategic screens to ensure acquisition alignment
■■ Remaining focused while increasing the range of new market opportunities
■■ Convincing senior management of new business boundaries
Source: Kimberly-Clark; CEB analysis.

© 2014 CEB. All rights reserved. CSB8530414SYN

 6
 Communicating the
plan as a one-page
ACCUMULATING PRIVILEGED INSIGHT
picture helps employees
understand where the US Medical Device Industry Market Map
organization is, where it’s Hypothetical, 1996
going, and how it will get
there. Market
Expansion Surgical Gloves Medical Devices, Disposable
Non-Woven Products
Moves and Masks Tubes, and Materials

Differentiated
Specialty
Specialty Spe LL
cialt
Y y
Product relatedness and Specialty X CC
competencies in existing
Specialty
markets provide privileged Specialty Specialty Z Specialty KK
Specialty
insight into customer needs… U
W D

Specialty y Specialty
Sp Specialty V cialt
ec
ial BB Spe JJ

E
ty MM

ty
S Specialty Specialty

ial
Specialty
H

ec
C AA Specialty II

EE
Specialty

Sp
Specialty y FF
cialt

ty
T
DD Specialty Spe

ial
Product F

ec
Specialty P
Specialty

Sp
Type Specialty Specialty GG
ty Specialty Q
B ial R
p ec
S G ty
cial Specialty Specialty
Specialty Spe N
HH O
A
O.R. Nursing
Specialty I
Specialty M
Lab
Blood
Bank Specialty Specialty L
General Nursing J
Central …creating possible “stepping
Specialty
Supply K
stones” toward higher-margin
new business opportunities.
Undifferentiated
Procurement Nurse Technician Surgeon
Decision Maker

Markets with No Kimberly-Clark Presence

Markets with High Kimberly-Clark Presence

Product Relatedness and Proprietary Information

Circle size equals market size

Source: Kimberly-Clark; CEB analysis.

© 2014 CEB. All rights reserved. CSB8530414SYN

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 Align actions to
strategy by clarifying
PILLAR 2: PLANNING
the objectives for those
tasked with execution.

67% of key functions are not aligned with business unit and corporate strategies
■■ Specifically, the planning
process should focus on
vertical alignment between How planning impacts execution:
Corporate and BUs, and
■■ Lack of goal clarity creates conflicts among functions seeking to execute the strategy
horizontal alignment across
BUs and functions. ■■ Poor goal alignment causes critical goals to be under- or over-supported

■■ Unclear priorities create timing and resourcing misalignments that limit execution success

CEB Strategy Resources

FEATURED

Seagate—Goal Alignment Cascade make goal interdependencies explicit and clarify how
each employee’s role is critical in the execution of corporate-level strategies

FirstRand—Strategy-Driven Budgeting align BU operating expenditures to corporate

strategic objectives, instead of cost items.

Becton-Dickinson—Span of Control Maps scale individual incentives of BU executives with

the total share of corporate performance that he/she can legitimately influence by sharing
resources within his/her control.

Cross-Verify—Functional Readiness Roadmaps provide corporate functions early visibility

into the support expected from them for new growth initiatives, enabling them to align their
efforts and identify any constraints.

Source: “Creating the Office of Strategy Management,” Harvard Business School Press, 2005; CEB analysis.

© 2014 CEB. All rights reserved. CSB8530414SYN

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 Senior executives
convene for the Goal
Alignment Workshop
to assess goal quality
and ensure all corporate
goals are fully supported
by aligned individual
executive goals.
■■ The first part of the Goal
Alignment Workshop
requires senior executives
to collectively challenge
each other’s individual goals.
■■ Voting mechanisms force
individuals to discuss
trade-offs and collectively
prioritize one another’s
performance goals to
enhance alignment of
actions
ACHIEVING CLARITY AND CONSENSUS
Goal Alignment Workshop
1 Goal Posting and Voting (2.5 hours) 2 Goal Evaluation (1.5 hours)
Objective
Support
Goal Goal Move
Clarify
Goal Goal
Goal Goal
■■ Each executive posts individual goals beneath the relevant
corporate objectives. ■■ Teams of executives review each corporate objective to
■■ Small groups evaluate the posted goals using color-coded
assure clear and comprehensive goal alignment.
Post-It™ notes: ■■ Each team first responds to green notes on goal impact,
–– 10 green notes—Goals with greatest impact that must be then answers yellow questions on goal clarity, and finally
fully supported responds to red suggestions to move goals to another
corporate objective.
–– Five red notes—Goals that should be moved to a different
objective
–– Five yellow notes—Goals that are unclear
Goal conflict prioritization identifies under-supported strategic
Voting uncovers differences of opinion.
objectives and misalignment.

■■ The Goal Alignment 3 Goal Refinement and Finalization (1.5 hours) 4 Goal Presentation (2.5 hours)
Workshop enables senior Corporate Goal
managers to end the day-
long session with clearly Additional
Goal Goal
articulated goals that are Goal Needed

aligned with corporate Goal (Revision

Goal
objectives. Suggested)

■■ Team finalizes wording on the corporate objective it owns. ■■ Each team presents final wording of its corporate
■■ Team determines if further goals are needed to fully support objective and corresponding goals and metrics
the objective or if existing goals need to be revised. ■■ Group discusses failure risks and identifies next steps
■■ If revision is necessary, new goals are reviewed by the
“The most important original owner.
thing in a goal alignment
process is the quality Group agreement on specific goals improves commitment Group presentation and discussion identifies failure risks
to strategy. and defines next steps.
that goes into it at the beginning.”
SVP HR Source: Seagate; CEB analysis.
Seagate Technology
© 2014 CEB. All rights reserved. CSB8530414SYN

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 Ensure accountability
for actions critical to
PILLAR 3: PERFORMANCE MANAGEMENT
strategy execution and
monitor performance.
of organizations believe their performance management systems are insufficient for
58% monitoring the performance of strategy
■■ Performance management
systems enable timely
course-correction through How performance management impacts execution:
monitoring metrics of
■■ Lack of personal accountability undermines action against goals
project and business
performance. ■■ Poorly designed metrics prevent identification of course-corrections

■■ Absence of effective performance dashboards undermines resource reallocation

CEB Strategy Resources

FEATURED

Eli Lilly—Assumptions Cascade conduct performance reviews to diagnose whether

performance gaps are the result of invalid assumptions, inappropriate strategy, or poor
execution

Intuit—Engagement-Based Execution Tests use employee engagement data to assess

whether employees have the skill and will to implement the strategy.

ADP—Strategic Initiative Audit Framework force investment/divestment decisions by

requiring executives to categorize each project as a candidate for either acceleration or
closure assessment.

Air Products—Critical Uncertainty Prioritization scale investments to match reductions

in the uncertainty of the project’s financial value.

Merrill Lynch—Project Derailment Indicators track leading indicators of project derailment

to fix or terminate failing initiatives and redirect resources.

Avery Dennison—Rolling Investment Prioritization ensure timely resource reallocation

across growth projects by diagnosing execution roadblocks faster.

Source: “Three Reasons Performance Management will Change in 2013,” Forbes, 2012; CEB analysis.
© 2014 CEB. All rights reserved. CSB8530414SYN

 10
 During monthly business
reviews, Eli Lilly addresses
DIAGNOSE ROOT CAUSES
three reasons why
performance failure occurs. Methodology for Diagnosing the Root Cause of a Performance Breakdown

■■ Formal conversations about

strategy assumptions occur 1 2 3
every six months as a stand- Invalid Assumptions Inappropriate Strategy Inadequate Execution
alone event and when a
performance failure calls Failure to identify true Failure to pick the right Failure to implement the
for a review. market conditions strategic alternative right strategy

Case in Point: Industry Case in Point: Investment Case in Point: Selected

■■ When a business misses R&D productivity remains in unrewarding therapy wrong alliance partner
a target or milestone, the stagnant. area (mismatched capabilities)
leadership team begins the Expected Actual
review by examining its
assumptions.
? ?
■■ If the market conditions are
different than they expected, Missing a Safeguard Issue to Resolve Issue to Resolve
the course of action is a financial target Assess environmental Clarify market beliefs If assumptions are
strategy revision because or a plan risks and monitor underlying strategy and still valid and strategy
prevailing assumptions no milestone calls reports to identify if criteria for selecting still correct, review
longer reflect market reality. for a strategy new market trends or from alternatives. implementation plan
review uncertainties now exist. to identify failure point.
CFO GM
CEO R&D

Strategist Marketing

Accurate diagnosis
enables a fix to the real
issue.

Source: Lilly; CEB analysis.

© 2014 CEB. All rights reserved. CSB8530414SYN

 11
 Foster a two-way
dialogue about the
PILLAR 4: STRATEGY COMMUNICATION
strategy to ensure
organizational buy-in.

67% of employees do not understand their role when new growth initiatives are launched
■■ A robust strategy
communication process is
crucial to ensure that key How strategy communication impacts execution:
employees are fully engaged
■■ Lack of buy-in reduces employee commitment and motivation for action
with and “bought into” the
strategic plan. ■■ Messages that lack credibility increases organizational resistance to change

■■ Poor knowledge sharing across silos increases inefficiencies and the cost of execution

CEB Strategy Resources

FEATURED

Rolls-Royce—Corporate Storyboards generate buy-in from middle-managers who don’t

have a say in strategy formulation but are indispensable in strategy execution.

RBC—Cross-Unit Leadership Dialogues conduct issue-resolution forums early enough

to uncover cross-silo barriers before they derail the strategy.

Infosys—Strategic and Action Planning Meets demonstrate to employees how their

perspectives are incorporated into strategic debates, and facilitate ongoing information
exchange.

RadioShack—Internal Message Narrowcasting apply best practices from marketing and

public relations to build understanding of and support for strategy execution.

Source: CEB analysis.

© 2014 CEB. All rights reserved. CSB8530414SYN

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 Target key people with
a personalized message.
PULLING BACK THE CURTAIN
CEO Room with Corporate Storyboard
■■ Rolls-Royce’s strategy Rolls-Royce Plc
communication documents
inform each listener
exactly what they must do
to support the strategy
implementation.
Chapter: The
Chapter: The Story to Date
Revealing
Alternatives
Unveiling the “paths
not taken” provides
insight into the executive
decision-making process.
Traditional Strategy Communication
■■ Large groups (100+)
■■ Five to six presentations
■■ One-hour sessions
■■ 15 minutes of Q&A
■■ Linear sequence
© 2014 CEB. All rights reserved. CSB8530414SYN Source: Rolls-Royce; CEB analysis.
The story is divided into five
to six “walk-away” themes.
Chapter: Creating— Chapter: Service— Going?
Chapter: Creating
What Could We Do?
Growth— Chapter: Service—Where
What Could We Do? Have We Got to, and Where
Are We Going?
Strategist guides conversation to
Supply the most relevant parts of the story
Chain
Impact on for each group, drawing on unit-
Solutions level anecdotes to personalize the
storyboard.
Facilitating Showing
Debate Where You Fit
Strategists and Putting individual’s
participants challenge activity in the context of
each other to think what others are doing
differently about company illustrates non-obvious
strategy, provoking impact on strategy.
unscripted discussion;
unresolved issues are
catalogued on Post-It
notes.
Rolls-Royce Strategy Communication
■■ Small groups (6–10)
■■ 50–60 presentations
■■ Three-hour sessions
■■ Structured conversation
■■ Non-linear format
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 In the current environment,
strategists must now focus
on unlocking capacity to
ensure strategy execution
success.
Strategist Roundtables:
22 May 2014
16 September 2014
2 October 2014
14 October 2014
23 October 2014
3 December 2014
Need More than Communication
“You can communicate
all you want. But if you
don’t give them the tools
or capacity, you don’t bring any
credibility to what you’re
communicating.”
VP, Strategic Planning
Transportation Company
© 2014 CEB. All rights reserved. CSB8530414SYN
PILLAR 5: ORGANIZATIONAL CAPACITY
While strategy formulation, planning, performance metrics, and communication are all critical
pillars for strategy execution, many organizations overemphasize the use of these levers,
particularly communicating the importance of change, to drive execution. They fail to recognize
the importance of unlocking capacity in the organization to allow for and accelerate the
execution of new growth strategies.
86% of CEOs place new growth as a top priority in 2014
of employees report they lack the necessary tools and capabilities for executing
76% growth initiatives
Communicating Urgency Unlocking Capacity
Most companies rely on better The best companies focus on
communication to overcome unlocking organizational capacity
Chicago
organizational resistance to change to enable line managers to execute
New York
Johannesburg Practices for Unlocking Organizational Capacity
Chicago
London
New York ■■ Deploy diagnostics to test organizational capacity before launching growth efforts
■■ Use new tools for clarifying mid-manager trade-offs about resourcing growth bets
■■ Construct new frameworks for freeing trapped resources
■■ Create support structures for integrating growth projects into existing businesses
Those able to successfully unlock capacity to execute new growth strategies increase profitability by 77%
Source: “Good to Grow: 2014 US CEO Survey,” PWC, 2014; CEB analysis; “Why Good Strategies Fail: Lessons for the C-Suite,” The Economist Intelligence Unit, 2013.
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