STRATEGY EXECUTION AS COMPETITIVE ADVANTAGE

STRATEGY EXECUTION AS COMPETITIVE ADVANTAGE

Strategy execution is essential for the success of any organization. The successful implementation of a strong and robust strategy gives any organization a significant competitive advantage. Even the best-made strategies are worthless if they cannot be successfully implemented. Most organizations fail at strategy execution despite its strategic importance to any organization. Various studies have reported implementation failure rates between 60 to 90 percent. Strategy implementation is a multifaceted and highly complex organizational phenomenon. However, the strategic management literature has traditionally focused on strategy formulation when the real challenge lies in implementation.

STRATEGY EXECUTION AS COMPETITIVE ADVANTAGE

Strategy execution is essential for the success of any organization. The successful implementation of strong and robust strategies gives any organization a significant competitive edge. Strategy execution is even more important in current turbulent organizational environments. The environment of public and private organizations is increasingly dynamic. Developments such as the economic crisis, the globalization of markets, rapid and disruptive technological change, deregulation of industries, the shift of organizations from the public to the private sector and the increasing aggressiveness of competition have radically altered the environments in which organization operate. These environmental developments have resulted in strong pressures for frequent strategic change to maintain a ‘fit’ with the ever-changing environment. Short periods of stability, punctuated by frequent disruptions, have replaced the long and stable periods of the past in which organizations could achieve sustainable organizational performance for long periods of times. In turbulent environments, the ability to develop and implement new strategies quickly and effectively means the difference between success and failure for organizations. Even slight delays can be critical in highly competitive and dynamic environments. Strategic success requires an appropriate strategy but also that the strategy is implemented successfully and timely. Well-formulated strategies only produce superior performance for organizations when they are successfully implemented. Even the best-made strategies are worthless if they cannot be successfully implemented.

THE STRATEGY EXECUTION PROBLEM

Most organizations fail at strategy execution despite its strategic importance to any organization. A widely shared experience is that all too often plans do not work out as intended. Fewer than 15 percent of organizations around the world report that they are successful at strategy implementation (Harvard Business Review, 2006). Various studies have reported implementation failure rates at 60 to 90 percent (Kaplan & Norton, 2005). Implementation failure is commonplace within many organizations in both the private and public sector. My research found that the failure rate in public and third-sector organizations is much higher that private firms.

The majority of strategies fail in the strategy execution phase. After a comprehensive strategy or strategic decision has been formulated, significant difficulties are often encountered during the following implementation process. An important part of these failures can be traced to poor execution. Many organizations have a fundamental disconnect between the formulation of their strategy and the translation of that strategy into useful action and concrete results. This has been called the strategy execution problem: ‘the all too frequent failure to create change after seemingly viable strategic plans have been developed’ (Nutt, 1983). Implementation remains an enigma and a source of frustration in many companies. Achieving successful implementation is a continuing challenge for managers responsible for strategy execution. Survey after survey reveals that strategy implementation is a top priority for executives. There is a growing recognition that the most important challenges in strategic management are in strategy execution. Strategies that fail to be implemented can be very costly, both in formulation costs and foregone benefits.

STRATEGY EXECUTION IS COMPLEX AND HARD

Strategy implementation is a multifaceted and highly complex organizational phenomenon. The strategy execution process tends to be messy, ambiguous and often involves many people and crosses different departments in the organization. Part of the complexity arises from the social and political aspects of strategy implementation that need to be taken into account. Personality differences, politics, communication problems, and struggles over power and leadership are just a few obstacles that may undermine the execution of a new strategy. Strategy formulation and implementation inevitably raise questions of power within an organization. The very prospect of change confronts established positions and may result in conflicts and the use of individual and group power. Consequently, strategy execution often faces considerable resistance to change.

FOCUS ON STRATEGY INSTEAD OF EXECUTION

The strategic management literature has traditionally focused on strategy formulation when the real challenge lies in implementation. The majority of the literature so far has been focused on the strategic planning process or the actual content of the strategy being formulated. Hussey (1999) once stated that ‘much of the research into strategic management has been directed at the planning process or the strategic decisions, almost as if the desired end products were plans instead of actions’. Limited empirical research is reported about strategy execution. Many strategists treat strategy formulation as the only necessary element for strategic success. The common view on strategy implementation is that it is a relatively straightforward operationalization of a clearly articulated strategy or strategic plan (Noble, 1999). Once a strategy has been formulated, its implementation is often viewed as a matter of delegation, operational detail and tactical adjustment. Many managers and researchers treat strategy execution as a strategic afterthought. However, formulating a strategy is considerably easier than successfully executing a strategy. Organizations are much more difficult, expensive and slower to change than strategies are to develop. While strategy formulation is mostly an intellectual, highly analytical and sometimes, creative act, implementation is a hands-on and action oriented activity that requires considerable leadership and managerial skills. This is a task that leaders cannot delegate (Bossidy and Charan, 2009). Strategy execution is often perceived to be complex, hands-on, details, and mundane problems. Whereas strategic decision making is often viewed as important, exciting, and even prestigious, involving top management and other important persons. Strategic decision-making tends to be well bounded in time and space. It has an observable end, often ratified by a strategic plan, vote, handshake or organizational announcement. Implementation by contrast has no clear boundaries, is a highly complex phenomenon and often has no clear end.

ABOUT THE AUTHOR

Dr. Arnoud van der Maas (arnoud@strataegos.com) is an expert in Strategy Execution. Arnoud received his PhD in Strategy Execution from Rotterdam School of Management, Erasmus University – one of the top 5 business schools in Europe. This article is based on this PhD thesis on strategy implementation. He is owner of Strataegos Consulting – a strategy consultancy with special focus on strategy execution. Connect with him on LinkedIn or follow him on SlideShare for articles and presentation on strategy & execution.

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