Louis Carstens, Chief Strategy Officer, Capricorn Group
Michael Porter, arguably the leading strategy expert globally, said the following: “Strategy is about making choices and trade-off's and deliberately choosing to be different."
Most will agree on the generics of strategy – that it sets the direction of the organisation, consists of specific goals and objectives to create value for customers and for shareholders, and that it determines how capabilities and resources should be utilised to deliver the desired value. However, by far, the most critical part of a strategy is making choices about what to do and what not to do. You cannot straddle, nor have multiple options to cover all bases, or think that strategy is about predictability and straight-line performance – it is considered lazy thinking not worthy of competent executives. Strategy does require a commitment to figure out the right choices to win, compete better in the market, serve customers better than competitors and do what no other competitor is doing.
A good choice is considered to be crystal clear about what the do's and the don't's are and the necessary test for good strategy choices is their ability to drive differentiation. There is a possibility that two companies can have the same strategy statement and that their choices can be indistinguishable. To mitigate this dilemma, ask the questions: What ultimately drives differentiation and distinguishes two competing organisations? What is the one thing that ultimately defines sustained success? What finally determines survival and success in turbulent times, and what is the foundation of competitiveness?
The answer is found within execution and implementation. Strategy formulation and crystal-clear strategy choices can be copied by competitors. However, execution and implementation can never be replicated, making it the domain where winners are differentiated from losers and leaders from followers. The first step to great execution is to directly link strategy and company performance.
Why is it important to measure the performance of a company?
To drive strategy execution and performance improvement, it is crucial to define strategic execution metrics and quantifiable, measurable KPI's (Key Performance Indicators) which is data-driven. Strategy Performance Scorecards are essential, whereas emotion and qualitative uninformed opinions are redundant. Data is superior to opinions which are not based on fact or knowledge, reducing it to invalidity and naivety. A critical question that all executives should be asking all the time is, “How are we doing in implementing our strategy?" Without data, KPI's, and data-driven strategy scorecards that reflect on past performance trends and current strategy performance, this question cannot be answered.
Data, quantitative performance measurement and unemotional strategy scorecards make the organisation's strategic goals more transparent to management, and it provides an ongoing mechanism to monitor progress toward these goals. Executives need to look at the performance metrics and ensure they are anchored in good, crystal-clear strategy choices while also catering for unique competitive environments. The Balanced Scorecard is a powerful strategy execution tool as it clearly and succinctly provides a simple logical measuring strategy execution.
A good test for a comprehensive set of strategy execution metrics is that they should tie back to the customer and organisational performance requirements while also providing a pure basis for aligning the strategy process to the organisation's goals. The Balanced Scorecard passes this test. Yet, many criticise the Balanced Scorecard as outdated, too complicated, irrelevant or not unique enough, given current competitiveness challenges. Yes, the Balanced Scorecard is not new – but for those executives who are willing to look at the Balanced Scorecard with fresh eyes, an open mind and new lenses, it can and will open up new avenues of strategy implementation excellence and thought that drive execution differently.
There are more elements to consider in strategy deliverance which include relevant key factors in determining whether or not the strategy of the company is being met, whether organisational success depends on monetary measures and when to measure performance against objectives. For now, we should first consider if we do support Michael Porter's statement about making choices and whether we are deliberately choosing to be different. Do we have a solid strategy, and most importantly, do we measure it according to data or are we just playing in the field of the uninformed?
