There are three critical components of any successful business: Strategy, Structure and Execution. No company can achieve and maintain success without appropriate attention to each component and a solid understanding of their interdependencies.
strategy
The first step in positioning for long term value creation is to craft the Strategy. The Strategy determines how the company creates value for customers over the long term, and as a result, forms the foundation for employee and investor value. Everything a business does – all decisions and actions – should be based on the Strategy. Strategy development starts by defining where the company aspires to fit in the grand scheme of its industry and customer base and gets more concrete as the company zeroes in on how it will create value for target customers and achieve sustainable competitive advantage.
Think of Strategy as the "what" and the "why" of a business.
- What will the business be when it grows up?
- Why will customers care?
As a general rule, the more effort invested in crafting the Strategy, the more likely the business will succeed. At the same time, a sound, well planned Strategy is a necessary, but not sufficient, ingredient for success. Sustained value creation results from the combination of a sound Strategy with an optimized Structure and disciplined Execution.
Key Elements of A Good Strategy
Long-term Vision.
- Unbiased, focused definition of how the company will create value in the future
- Shared across entire leadership team and communicated to all employees
Target Customers & Channels.
- Description of ideal customers & how they will access the company’s offerings
- Focuses sales and marketing on attracting and retaining the most attractive customers & partners
Value Proposition.
- Fact-driven definition of how the company creates value for target customers
- Creates the platform for sustainable, defendable competitive advantage
Business Model.
- Plan for HOW the company will generate revenue, manage costs and earn attractive returns
- Includes such decisions as make v. buy v. license and innovator v. follower v. commodity
Product & Brand Portfolio.
- Definition of products or services offered & how they will be positioned to attract customers
- May include multiple brands with distinct identities as well as related products within a brand
Financial Projections & Metrics.
- Model of expected financial results & outline of how and when success will be measured
- Provides clarity about priorities and expectations & ensures transparency of performance
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Top 5 Factors That Embody the Letter & Spirit of A Good Strategy
1. Objectivity
Encourage unbiased evaluation at all times; entertain a range of possible long-term scenarios and be open to creative or unexpected outcomes
2. Rigor
Require fact-driven analysis of data, assumptions and hypotheses, combined with input from a variety of perspectives
3. Culture
Tap into the company’s inherent culture, identity and skills, leveraging them as the foundation for inspiring employees, investors and customers with a sense of value
4. Focus
Embrace targeting customer segments, focusing all of the company’s efforts and investments on those customers who are most likely to value (ie purchase) the products or services
5. Leadership
Continuously communicate priorities and expectations to align employees; set reasonable expectations for path & pace; designate an executive to steward Execution
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structure
Perhaps the most underappreciated aspect of value creation is optimizing the Structure. The importance of Structure is often overlooked, either due to insufficient knowledge about the fundamentals of organizational development or a mistaken belief that the Structure is set in stone. A company’s Structure is the critical link between Strategy and Execution. The Structure forms the infrastructure that supports the organization in its quest to Execute the Strategy. An optimized Structure improves operating efficiencies and creates value for employees.
Think of Structure as the "how" and "where" of the business.
- How do we align the organization to achieve the Strategy?
- Where are the people with capabilities critical to the Strategy?
As with Strategy, it is important to understand both the ideal state and the current state of the Structure so that executives can map the path of least resistance. An appropriate Structure is a necessary, but not sufficient, ingredient for success. Sustained business success results from the combination of an optimized Structure with a sound Strategy and disciplined Execution.
Key Elements of a Good Structure
Organizational Design.
- The actual Structure of the organization, or what it looks like on an org chart
- Considers the importance of specific functions relative to the company’s Strategy
Training & Development.
- Curriculum to develop key functional, managerial and leadership skills in employees
- Equips employees to improve performance in current roles and prepares them for future roles
Recruiting & Retention.
- Attraction of new employees with desired skills & retention of top performers
- Includes targeting the search, managing career paths, mentoring and rewards & recognition
Performance Management.
- Timely, constructive and actionable feedback about performance v. expectations
- Begins with clarity about expectations and metrics, includes formal and informal assessments
Succession Planning.
- Managing talent across the entire organization to ensure a robust talent pool for critical positions
- Ensures continuity of operations and simplifies the overall talent management process
Process Design.
- Development of key processes in light of the Strategy
- Ensures clarity about roles and responsibilities; liberates employees
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Top 5 Factors That Embody the Letter & Spirit of A Good Structure
1. Clarity
Ensure roles, responsibilities and expectations are clearly and frequently communicated throughout the organization, each employee should know how she contributes to company success
2. Efficiency
Reward continuous improvement and efficient operations in all facets of the company; avoid bureaucracy and carefully manage matrix organizations
3. Empowerment
Give employees authority consistent with their responsibility and allow them to exercise that authority freely; ensure employees know when they are expected to seek input or elevate decisions
4. Results-oriented
Focus all efforts on achieving the desired results – financial or otherwise – and eliminate any activities that are not tied to delivering results or maintaining legal compliance & integrity
5. Respect
Demonstrate respect for all customers and employees – regardless of role, background or skills – to instill confidence and establish a culture of respect
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execution
Execution is where it all comes together – the day to day management of the Structure to achieve the Strategy. Managing Execution requires relentless attention to detail, combined with the ability to focus employees on the activities that are most important to the achieving the Strategy. Success is defined as delivering superior financial results, which provides investors with superior value.
Think of Execution as the "who" and the "when" of the business:
- Who is responsible for achieving each objective?
- When do we expect results?
As a general rule, clearly defined accountabilities and relevant metrics that are frequently and fairly evaluated ensure successful Execution of the Strategy. Rigorous Execution is a necessary, but not sufficient, ingredient for success. Sustained business success results from the combination of disciplined Execution with a sound Strategy and optimized Structure.
Key Elements of Good Execution
People Management.
- Effectively leading subordinates, peers and superiors to achieve objectives and create value
- Requires proactive interaction to focus efforts, remove obstacles, communicate priorities and provide feedback
Path Management.
- Disciplined progression from current state to endgame, with key milestones clearly charted
- Requires an objective understanding of current capabilities, required capabilities and gaps
Pace Management.
- Determination of the optimal speed at which the organization can accomplish the objectives
- Must be balanced – not so fast as to overwhelm, but fast enough to instill a sense of urgency
Metrics Management.
- Dissection of expectations into manageable portions that employees can embrace and Execute against
- Iteratively measuring performance v. metrics, adjusting actions and evaluating performance
Process Management.
- Optimization and stabilization of processes, creating a culture of continuous improvement
- Maintains the appropriate balance between structured processes and unstructured work
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Top 5 Factors That Embody the Letter & Spirit of Good Execution
1. Integrity
Require honesty and objectivity in everything from customer & employee interactions to metrics management
2. Discipline
Instill a disciplined approach to evaluating performance and adapting processes to improve performance over the long term
3. Fortitude
Once a Strategy is set, maintain relentless focus on key initiatives despite distractions, unless there is a shift in the underlying fundamentals
4. Transparency
Communicate expectations and rewards or consequences via clearly defined metrics that are evaluated periodically
5. Charted
Define the appropriate path and pace to maximize the likelihood of success, expectations should be aggressive, yet realistic
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