When Strategy Execution Marries Risk Management

A Practical Guide to Manage Strategy-to-Execution Risk

Executive Summary
Patrick Ow
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Table of %ontents
&reface
%hapter ' ( )ntroduction
%hapter * ( +ll in the strategy execution, risks, and controls
%hapter " ( +gile mindset and iterations re-uired in uncertainty
%hapter $ ( .oundations for strategy execution
%hapter / ( .ramework for strategy execution
%hapter 0 ( +n integrated management system for strategy execution
%hapter # ( &rocess for strategy execution
&ostscript
+bout the author
References
Strategies most often fail because they arent executed well. Things that are supposed to
happen dont happen. Either the organizations arent capable of making them happen, or
the leaders of the business misjudge the challenges their companies face in the business
enironment, or both. 0,ossidy and Charan* 20021
!"# of $E%s said they dont hae full control oer their companys direction. $E%s
want to be in control but know that organizations are complex entities with lots of
moing parts. &ost $E%s dont want a strict 'command and control( organization but
they do want to feel like they are steering the ship. 02apta* 20131
The media has been full of stories of organizations negatiely affected by catastrophic
failures ) not because they took on too much risk, but because the risks simply werent
put into perspectie and properly managed. 0Ernst 3 4o&ng* 20131
Strategic and business risks pose greater threats to shareholder alue than operational,
compliance, or financial risks *... + strategic and business issues are the most common
means by which alue is destroyed ) responsible for !,# of alue loss ) with
operational issues driing another -,# of the loss. 0Pricewaterho&seCoopers* 200-1
&reface
People and organisations manage risk each day as part o% how they make decisions. 5isk
management is already integrated nat&rally in what we all do $e%ore we decide to do
something. Some are $etter at this than others* $&t all can improve the 6&ality o% risk
management and decision(making* res&lting in improvement in achieving o$'ectives and
improved per%ormance and con%idence.
As an e7ample* a pilot knows the plane+s destination and planned flight path. 8hen the
plane is in %light* the pilot m&st constantly monitor the plane+s per%ormance and ad'&st
the heading 0or the direction that the plane+s nose is pointing1 to compensate %or the wind
0and other e7ternal %actors1 to %ollow the act&al path over gro&nd. )% the wind is di%%erent
%rom the planned %light path* the pilot must immediately ad1ust the plane+s heading
accordingly to $ring it sa%ely to its planned destination.
Pilots are clear a$o&t their destination and key o$'ective 0e.g.* to reach 9el$o&rne
sa%ely1. )n sharp contrast* organisations have so many :goals+ that it is di%%ic&lt to clearly
artic&late what the act&al destination is* let alone how and when to get there.
Pilots also know that their plane will $e o%%(co&rse -;< o% the time and are prepared to
respond constantly $y making the appropriate ad'&stments or agile course corrections to
get the plane $ack on the act&al path over gro&nd. #hey %&lly &nderstand that risk
management is intrinsically intertwined and constantly takes place. Pilots make '&st(in(
time decisions at partic&lar points in time d&ring %light time $y"
0a1 Systematically identi%ying ha=ards 0e.g.* changing winds or adverse weather1
that may impact the achievement o% their o$'ective 0e.g.* to reach 9el$o&rne
sa%ely1.
0$1 Constantly assessing the degree and pro$a$ility o% known &nknowns or risk
0e.g.* degrees o%%(co&rse* air tra%%ic conditions* weather conditions* etc.1.
0c1 Appropriately determining and e7ec&ting the $est co&rse o% action in real time
given the accepta$le level o% risk and $est availa$le in%ormation 0e.g.* re(pointing
the plane* landing on a wet r&nway1.
Pilots nat&rally integrate risk management into what they do. )t is an integral part o% their
real(time decision(making process that will ena$le them to reach their intended
destination sa%ely.
Organisations* on the other hand* get con%&sed or hyped(&p $y changes $eca&se plans*
systems* and processes have $een designed and implemented as i% they are permanent and
everything sho&ld go smoothly as planned or ass&med. 5ather than a$sor$ing the
sit&ation calmly* responding to changes systematically* and making appropriate co&rse
corrections to the way things are done* organisations over(react and introd&ce
nervo&sness and controls that are co&nter(prod&ctive and over(engineered.
Plans* systems* and processes are a means to an end. Organisational agility re6&ires
plans* systems* and processes to $e constantly adapted to changing circ&mstances and
conte7t %or organisations to achieve their o$'ectives.
>,&sinesses m&st $e e%%icient* %le7i$le* and driven $y c&stomer and economic realities.
8e $elieve that there are three $asic components o% strategic agility" process e%%iciency
within and across $&sinesses* improved insight and decision(making %or $etter
colla$oration* and %le7i$ility to respond 6&ickly to changing inp&ts and create new
$&siness processes that align with operations and strategy.? 0#apscott and ,arter* 200-1
#he easier part %or organisations is to decide where they want to go d&ring the strategy
%orm&lation or planning processes $y doc&menting their corporate strategy. #he harder
part is to get the whole organisation and everyone in the organisation to $e committed
and implement the doc&mented corporate strategy 0i.e.* strategy e7ec&tion1 where
organisations contin&o&sly act on new priorities 6&icker than their competitors witho&t
taking on too much risk and closely re(aligning employees+ economic interests to those o%
the organisation.
@ere is a per%ect ill&stration o% the pro$lem organisations constantly %ace in their p&rs&it
to deliver on their pro%it %orecast or improve on their per%ormance. >Strategies are
approved $&t poorly comm&nicated. #his* in t&rn* makes the translation o% strategy into
speci%ic actions and reso&rce plans all $&t impossi$le. ower levels don+t know what they
need to do* when they need to do it* or what reso&rces will $e re6&ired to deliver the
per%ormance senior management e7pects. Conse6&ently* the e7pected res&lts never
materialise. And $eca&se no one is held responsi$le %or the short%all* the cycle o%
&nderper%ormance gets repeated* o%ten %or many years.? 09ankins and Steele* 200;1
Organisations are &s&ally not s&ccess%&l in translating and implementing what looks good
on paper 0i.e.* doc&mented corporate strategy1 into speci%ic and meas&ra$le actions that
yield positive o&tcomes and s&perior per%ormance. 8inston Ch&rchill 01/.A to 1-B;1
once declared* >@owever $ea&ti%&l the strategy* yo& sho&ld occasionally look at the
res&lts.? #he written corporate strategy has the intrinsic val&e o% the paper it was written
on &nless there is e7ec&tion or implementation. This has resulted in a widening strategy
execution gap between documented corporate strategy and its execution!
As with pilots* formalised risk management within the conte7t o% strategy e7ec&tion is an
important management practice and discipline that will ena$le organisations to per%orm
reg&lar agile course corrections $y identi%ying potential $arriers or &ncertainties 0internal
and e7ternal1 that co&ld a%%ect them and the achievement o% their o$'ectives. Agile co&rse
corrections sho&ld never $e an area where organisations have the greatest di%%ic&lty.
Cn%ort&nately* many organisations have considered risk management as something that
slows them down rather than making them grow or move %aster and adding val&e to their
$&siness. #his sho&ld not $e so i% we take this e7ample" A car can accelerate i% it is sa%e
to do so and slows down when there are potential dangers that may stop the car %rom
arriving at its destination 0e.g.* $eing involved in an accident* skidding o%% the slippery
road* etc.1. Ask the 6&estion" .ow fast are you willing to drie a car to your intended
destination if you knew that the brakes in the car are not working/ :Dery slowly indeed+
wo&ld $e the right answer.
#he reason* o% co&rse* is that $rakes slow down 0or stop1 a car when it is re6&ired so that
the driver 0and the passengers1 can arrive sa%ely at their destination* within the planned
time and d&ration* and witho&t contravening any road r&les and losing demerit points.
ike risk management* $rakes are an integral and insepara$le part o% a car.
8hen organisations &nite strategy e7ec&tion and risk management as an integrated
management discipline* there is creation 0or preservation1 o% stakeholder val&e* e7ec&tion
o% doc&mented corporate strategy* and achievement o% organisational o$'ectives and
growth. #his discipline can assist organisations in managing the %ollowing risks"
0a1 poor &nderstanding o% strategic o$'ectives 0poor or non(e7istent o$'ectives1
0$1 adhering to the corporate strategy %or the long(term witho&t &nnecessary
changes mid(way 0knowing0doing gap1
0c1 poor strategy(to(e7ec&tion 0strategy execution gap1
0c1 not achieving their strategic o$'ectives* vision* and mission 0poor per%ormance1.
#he in%ormation contained in this e$ook is s&ited %or larger and comple7 organisations.
!evertheless* it does not stop smaller organisations %rom &sing the in%ormation contained
in this e$ook.
#he practical approach contained in this e$ook is no &niversal panacea. )% yo&r ind&stry
is sta$le and relatively predicta$le* yo& may $e $etter o%% sticking to the traditional
so&rces o% advantage and contin&e doing what yo& are c&rrently doing. @owever* i% yo&r
competitive reality is &ncertain and rapidly changing* as is tr&e %or an increasing n&m$er
o% ind&stries and organisations* yo& need an agile* dynamic* and s&staina$le integrated
management discipline and approach to stay ahead and per%orm well.
#his e$ook* which is a %ollow(&p %rom a&thor+s %irst e$ook 1eeping Scores2 &easuring
3erformance, 4ewarding 4esults 0p&$lished in 200;E now withdrawn1* re%lects the
importance o% risk management in strategy e7ec&tion. 9any ideas and approaches %rom
the %irst p&$lication have $een adopted and revised in this e$ook.
%hapter ' ( )ntroduction
8hen organisations %ail to deliver on their promises or pro%it %orecast* the most %re6&ent
reaction is that the chosen corporate strategy was wrong. >#oday* we %ace never(ending*
rapid(%ire change* incl&ding constantly shi%ting priorities* sweeping advance in
technology and comm&nication* %l&ct&ating markets* and heightened glo$al competition.
et+s %ace it. )t+s to&gh to stick with anything in this kind o% environment. 4et this is
precisely the reason why adhering to your strategy is so vitally important to long(term
s&ccess? 0emphasis added1 F call this the knowing-doing gap. 0Colan and Gavis(Colan*
20131
@aving a solid corporate strategy gets the organisation into the game. ong(term
adherence to the corporate strategy and the disciplined e7ec&tion o% the strategy are what
propels the organisation into the winner+s circle.
Cnnecessary changing* chopping* or tweaking a corporate strategy mid(way witho&t
giving a chance %or a proper e7ec&tion can $e disastro&s. #here is a common reaction to
shi%t strategic direction mid(way* regardless o% whether the previo&s corporate strategy
was working. E7ec&tives can $e too 6&ick to ass&me that the strategy is %a&lty rather than
the e7ec&tion. 8in the game* not $y constantly creating new strategies* $&t $y having the
discipline to adhere or remain with the c&rrent strategy and e7ec&ting it r&thlessly and
well.
#here is a gap $etween the $est(laid doc&mented corporate strategy and their act&al
realisation and implementation F call this the strategy execution gap. Organisations
m&st e%%ectively e7ec&te what looks good on paper.
#he reality is that organisations that stick with or adhere to their corporate strategy in the
long(term and e%%ectively e7ec&te this strategy have a s&staina$le competitive advantage
that is di%%ic&lt to imitate. #his is important %or today+s $&siness environment. Solid and
so&nd strategies %ail d&e to poor e7ec&tion.
2aplan and !orton %o&nd that over two(thirds o% %ail&res were not ca&sed $y poor
strategy* $&t poor e7ec&tion. 02aplan and !orton* 200A1
Strategy is a$o&t deciding what to do 0i.e.* choice* intended destination1. >5isk is created
or altered when decisions are made. ,eca&se there is almost always some &ncertainty
associated with decisions and decision(making* there is almost always risk. #hose
responsi$le %or achieving o$'ectives need to appreciate that risk is an &navoida$le part o%
the organi=ation+s activities that is typically created or altered when decisions are made.
5isks associated with a decision sho&ld $e &nderstood at the time the decision is made*
and risk(taking is there%ore intentional.? 0)SOH#5 3100A"20131
Strategy e7ec&tion is a$o&t getting the right things done thro&gh people or how well
strategic choices made are prioritised and e%%ectively carried o&t and implemented $y
employees within an organisation.
Strategy e7ec&tion represents a disciplined process or a logical set o% inter(connected
activities that ena$le an organisation to take a %orm&lated corporate strategy* stick to it*
and systematically create val&e %or its stakeholders within a given or accepta$le level o%
risk and risk appetite* which is per%ormance. )t is a >systematic process o% rigoro&sly
disc&ssing hows and whats* tenacio&sly %ollowing thro&gh* and ens&ring acco&nta$ility.?
0,ossidy and Charan* 20021
Cn%ort&nately* most management literat&re talks a$o&t the what and why 0i.e.* strategy
%orm&lation on paper1 and not the how and when 0i.e.* strategy e7ec&tion in conte7t1.
#here are always risks inherent in strategy e7ec&tion or in any $&siness. Iovern the
corporate strategy $y the organisation+s willingness to accept calc&lated risk in p&rs&it o%
val&e creation 0or preservation1 and per%ormance* as well as the organisation+s capacity to
$ear that risk given its risk appetite and accepta$le level o% risk.
A s&ccess%&l $&siness model e7ploits to a signi%icant e7tent areas in which the
organisation e7cels relative to its competitors* incl&ding &nderstanding and actively
managing risks inherent in e7ec&ting the strategy and r&nning the $&siness.
#his practical e$ook seeks to provide the how o% disciplined and systematic strategy
e7ec&tion %rom an integrated management perspective within a given level o% risk and
risk appetite. #his allows e7ec&tives to make $etter $&siness decisions $y systematically
identi%ying risks 0known &nknowns1* ena$ling the organisation to achieve their o$'ectives
within an accepta$le degree o% resid&al risk and avoid taking on e7cessive or &nnecessary
e7pos&res to risks in their 6&est to satis%y stakeholder e7pectations or to meet pro%it and
per%ormance %orecast at any cost. A stakeholder is a >person or organisation that can
a%%ect* $e a%%ected $y* or perceive themselves to $e a%%ected $y a decision or activity.?
0)SO I&ide .3"200-1
Taking a different but practical approach
Organisations today %ace a stark choice" change or %ail. Contin&o&s trans%ormation and
transition have $ecome the only constant in today+s $&siness landscape. 8hen e7ec&ting
their corporate strategy* those organisations that cannot adapt to their changing
circ&mstances and competitive environment are doomed to %ail.
Organisations m&st have the a$ility to e7ec&te in dynamic waysE acc&rately $&t
constantly perceive or sense changes to their operating conte7t and environmentE test
possi$le responsesE and implement changes and trans%ormations in prod&cts* technology*
operations* str&ct&res* systems* and capa$ilities as an integrated $&t whole system o%
ro&tines. Agile co&rse correction and constant adaptations are a given.
#he organisation+s p&rpose or mission 0o&tcomes other than pro%it or growth1 and
$&siness model 0how organisations make money1 sho&ld $e widely shared $y all
employees* where shared p&rpose and val&es drive positive $ehavio&rs that are
per%ormance($ased and risk($ased.
Organisational per%ormance is dependent on the s&ccess%&l cascading o% &nam$ig&o&s
corporate strategy to every individ&al in the organisation where there is"
0a1 strong employee involvement* $&y(in* and commitment
0$1 a disciplined %oc&s on only a hand(%&ll o% e7ec&ta$le o$'ectives
0c1 close alignment o% employees+ economic interests with those o% the
organisation.
E7ec&tives e%%ectively delegate and empower s&%%icient a&thority to employees so that
the organisation can e7ec&te strategies and respond to changes with s&ccess where there
is no second g&essing %rom the corporate o%%ice* only alignment with $asic* strategic
intent or o$'ectives.
Cond&ct reg&lar $&t di%%erent strategy and operational review meetings with employees
to disc&ss the impact o% key risks and controls on strategy* per%ormance* $&dgets* and
%orecast. Per%ormance management in the %orm o% clear* &nam$ig&o&s* accepted
per%ormance meas&res and targets reward positive and accepta$le risk(taking where
everyone* incl&ding the CEO* receives the same share o% the dividends and $on&ses.
#he management o% risk is an integral part o% each cascaded and conte7t&alised o$'ective
at all levels o% the organisation. 5isk management* $eing the %o&ndation o% the
organisation+s risk($ased control and per%ormance environment* develops cost(e%%ective
val&e(creating risk treatment plans that are at the same time key controls associated with
the achievement o% each o$'ective. An e%%ective system o% risk management that is
integrated with planning* $&dgeting* and reporting processes ena$les employees to make
$etter $&siness decisions. #his is done $y systematically identi%ying risks and e7isting
controls* and implementing risk treatments that sho&ld collectively ena$le the
organisation to achieve their o$'ectives within an accepta$le degree o% resid&al risk and
risk appetite.
inking conte7t&alised controls to the achievement o% o$'ectives ens&res that
organisational activities 0incl&ding decision(making processes1 are e%%icient and e%%ective*
where $est availa$le in%ormation is relia$le and timely* and the organisation is compliant
with applica$le laws and reg&lations.
,y actively involving employees in the activities that they are acco&nta$le %or d&ring the
strategy %orm&lation and cascading processes* the diversity o% vario&s organisational s&$(
c&lt&res* per%ormance management systems* and individ&al risk appetites can also $e
aligned and managed appropriately. #his avoids or limits &nnecessary risk(taking that has
ca&sed organisations to %all or %ail 0e.g.* ,arings* Enron1.
5eporting against conte7t&alised key per%ormance meas&res and targets %or each
o$'ective is also a report on the e%%ectiveness o% the corporate strategy* controls* and the
risk management process %or that o$'ective. )ntegrated reporting sho&ld drive e%%ective
val&e creation 0or preservation1 %or the organisation.
Contin&o&s learning* improvement* and employee coaching* teaching* and cons&ltation
are norms* where employees %reely contri$&te and share their knowledge and skills with
others. ,est availa$le in%ormation re6&ired %or e%%ective strategy e7ec&tion* decision(
making* and risk management %low vertically and hori=ontally across the organisation.
An e%%ective corporate governance %o&ndation can $e conte7t&alised* designed* and
implemented thro&gh the strategic &tilisation and com$ination o% %ive lines o% de%ence
that are provided $y line management* independent s&pport %&nctions 0i.e.* risk
management* %inance* h&man reso&rces 0@51* in%ormation technology1* independent
reviewers or ass&rance providers 0i.e.* e7ternalHinternal a&ditors1* e7ec&tive management*
and the $oard.
An enterprise(wide approach is re6&ired %or integrated strategy e7ec&tion and risk
management where the organisation"
0a1 responds dynamically and conte7t&ally to e7ternal and internal changes in a
timely manner $y relying on the work o% employees where they determine the how
0$1 operates e%%ectively and e%%iciently within the approved level o% risk and risk
appetite
0c1 maintains clear line(o%(sight $etween individ&al per%ormance and the
achievement o% corporate strategy and strategic o$'ectives thro&gh conte7t&alised
management0by0objecties where the organisation determine the what
0d1 prioritise and allocate limited reso&rces to strategic areas and initiatives that
matters most and adds tangi$le val&e %or stakeholders
0e1 identi%y and manage risks and controls at di%%erent levels o% the organisation and
within the conte7t they operate in* given the internal and e7ternal circ&mstances
and availa$le reso&rces
0%1 meas&re* eval&ate* and report on per%ormance to key stakeholders
0g1 comply with applica$le laws* reg&lations* and policies.
)mplementing the integrated approach sho&ld involve the %ollowing activities"
0a1 Getermine and conte7t&alise the organisation+s capacity* capa$ility* and appetite
%or the re6&ired per%ormance level and level o% risk needed to deliver on the
corporate strategy and strategic o$'ectives.
0$1 Conte7t&alise* &nderstand* and cascade the corporate strategy and strategic
o$'ectives into operational and individ&al scorecards and o$'ectives that are
speci%ic* meas&ra$le* achieva$le* reasona$le* and timed($o&nd 0S9A5#1.
0c1 )denti%y opport&nities and threats 0risks or known &nknowns1 that may threaten
the achievement o% organisational o$'ectives and growth.
0d1 )denti%y and eval&ate the design and e%%ectiveness o% key controls intended to
manage these risks and create a risk($ased control environment that drives the
achievement o% o$'ectives.
0e1 O$tain appropriate independent ass&rances on the e%%ectiveness o% key controls
across key areas o% risk.
0%1 Prioritise and allocate appropriate and s&%%icient reso&rces to activities and
pro'ects that add real val&e to the achievement o% corporate strategy and strategic
o$'ectives.
0g1 Eval&ate per%ormance and report against the achievement o% corporate strategy
and o$'ectives* $&dgets* risks* controls* and reg&latory compliance.
0h1 Contin&o&sly improve* adapt* and change $ased on %eed$ack and lessons
learned.
What about public sector organisations2
P&$lic sector organisations may %ind it di%%ic&lt to artic&late their o$'ectives clearly %or
vario&s reasons. One o% the reasons co&ld $e political.
O$'ective is >a thing aimed at or so&ghtE a goal.? 0o7%orddictionaries.com1 )t is a speci%ic
res&lt that a person* an organisation or system aims to achieve within a time %rame and
with availa$le reso&rces. )n general* o$'ectives are more speci%ic and easier to meas&re
than goals.
8hilst the concept o% an o$'ective is commonly known in the private sector* p&$lic sector
organisations can $ene%it enormo&sly $y having clear statements o% :5hy their
organisation exist/+ and :5hat the organisation is 6actually7 seeking to achiee/+.
Concept&ally* o$'ectives are applica$le to all organisations. )t is the level o% speci%icity in
artic&lating the o$'ectives or goals that will determine the level o% analysis that can $e
per%ormed on the organisation and to assess whether the organisation has o$'ectively
achieved what it said or promised it wo&ld do.
)n %act* o$'ectives are more relevant %or p&$lic sector organisations as they seek to show
higher acco&nta$ility and transparency %or spending or &tilising p&$lic %&nds. Arg&a$ly*
p&$licly listed companies 0PCs1 %all into the same category as p&$lic sector
organisations* where shareholders demand greater transparency and per%ormance.
%hapter * ( +ll in the strategy execution, risks, and controls
,ased on a sweeping 10(year st&dy o% more than 2*000 technology* service* and prod&ct
organisations in a variety o% ind&stries* >one simple %inding that s&rprise most e7ec&tives
was that only a$o&t one company in ten achieves even a modest level o% s&stained and
pro%ita$le growth on average over ten years 0de%ined as ;.; percent average ann&al
reven&e and pro%it growth* while earning the cost o% capital1. Over -0 percent o% $&siness
plans aspire to this per%ormance today* yet the tr&th is that %ew will achieve itE the
percentage is going down every decade and '&st took another nosedive.? 0Jook* 20011
#his is hardly s&rprising when nearly nine in 10 e7ec&tives s&rveyed $y #he Economist
)ntelligence Cnit in 2013 say e7ec&ting strategic initiatives s&ccess%&lly will $e
:essential+ or :very important+ %or their organisation+s competitiveness over the ne7t three
years. >4et B1< o% respondents acknowledge that their %irms o%ten str&ggle to $ridge the
gap $etween strategy %orm&lation and its day(to(day implementation. 9oreover* in the
last three years an average o% '&st ;B< o% strategic initiatives has $een s&ccess%&l. S&ch
poor implementation means that a company+s stated strategy %ails to shape what happens
in practice" only a small minority o% respondents say that their $&siness model is
e7tremely well aligned with strategy. !ot s&rprisingly* companies that are poorly aligned
with strategy also report weaker %inancial res&lts than their peers.? 0Economist
)ntelligence Cnit* 20131
)nterestingly* $ack in 1-/2* >%ewer than 10 percent o% e%%ectively %orm&lated strategies
were s&ccess%&lly implemented? 02iechel* 1-/21. !othing has changed since* really.
Other research >s&ggest that companies on average deliver only B3< o% the %inancial
per%ormance their strategies promise? 09ankins and Steele* 200;1 and organisations have
>made little attempt to identi%y areas o% non%inancial per%ormance that might advance
their chosen strategy? 0)ttner and arcker* 20031.
)t is hardly s&rprising then that the top two CEO challenges in 200/ and 2010 were
>e7cellence in e7ec&tion? and >consistent e7ec&tion o% strategy $y top management.?
0#he Con%erence ,oard* 20101
Some strategy e7ec&tion o$stacles incl&de" 0@re$iniak* 200;1
0a1 ina$ility to manage change e%%ectively or to overcome internal resistance to
change
0$1 trying to e7ec&te a strategy that con%licts with the e7isting power str&ct&re
0c1 poor or inade6&ate in%ormation sharing $etween individ&als or $&siness &nits
responsi$le %or strategy e7ec&tion
0d1 &nclear comm&nication o% responsi$ility and acco&nta$ility %or e7ec&tion
decisions or actions
0e1 poor or vag&e strategy
0%1 lack o% %eelings o% ownership o% a strategy or e7ec&tion plans among key
employees
0g1 not having g&idelines or a model to g&ide strategy e7ec&tion e%%orts
0h1 lack o% &nderstanding o% the role o% organisational str&ct&re and design in the
e7ec&tion process
0i1 ina$ility to generate $&y(in or agreement on critical e7ec&tion steps or actions
0'1 lack o% incentives or inappropriate incentives to s&pport e7ec&tion o$'ectives
0k1 ins&%%icient %inancial reso&rces to e7ec&te the strategy
0l1 lack o% &pper(management s&pport %or strategy e7ec&tion.
>!early all C(level e7ec&tives recogni=e risk management as an important ingredient in
their organi=ation+s overall $&siness s&ccess. An overwhelming ma'ority 0/B percent1 o%
s&rvey respondents said that risk management considerations are to some degree %actored
into strategic planning decisions. ,y the same token* companies will have di%%ic&lty
developing a strategic plan witho&t knowing their appetite %or risk* and whether they are
taking on too m&ch risk %or a given level o% ret&rn or too little.? 02P9I* 20131 )t is
there%ore di%%ic&lt to make strategic decisions witho&t developing a risk appetite
statement that will help e7ec&tives make decisions a$o&t how m&ch risk they are willing
to take on when e7ec&ting the corporate strategy.
Go not &ndermine the role o% $oards in strategy e7ec&tion and risk management. >8hile
respondents say their $oards are taking more responsi$ility %or strategy* risk management
is still a weak spot F perhaps $eca&se $oards 0and companies1 are increasingly
complacent a$o&t risks* as we move %&rther o&t %rom the 200/ %inancial crisis. #his is the
one iss&e where the share o% directors reporting s&%%icient knowledge has not increased"
2- percent now say their $oards have limited or no &nderstanding o% the risks their
companies %ace. 8hat+s more* they say their $oards spend '&st 12 percent o% their time on
risk management* an even smaller share o% time than two years ago.? 09c2insey and
Company* 20131
>Kaced with growing legal and $&siness responsi$ilities* ,oard mem$ers are $ecoming
%&lly engaged in &nderstanding the link $etween risk management and strategy. #hey
e7pect reg&lar &pdates %rom management and are engaging in a dialog&e with the
designated risk owners and not relying solely on disc&ssions with the Chie% E7ec&tive
and Chie% Kinancial O%%icers. #hey sho&ld not only eval&ate risks to the enterprise now
and ne7t year* $&t also the risks that may emerge several years+ o&t. )% there is open
comm&nication $etween the ,oard and senior management* companies will $e a$le to
&se risk management as a tool that ties long(term strategy with short(term
implementation.? 02P9I* 20131
*!' Strategic management and strategy execution
9anagement involves coordinated activities that direct and control an organisation in
p&rs&it o% its o$'ectives. )t is the >process o% coordinating work activities so that they are
completed e%%iciently and e%%ectively with and thro&gh other people.? 05o$$ins and
Co&lter* 200/1 E%%iciency is doing things right F that is* getting the most o&tp&t %rom
least amo&nt o% inp&t. E%%ectiveness is doing the right things F that is* prioritised work
activities that will help the organisation achieve its o$'ectives within a given level o% risk.
Strategic management is a$o&t"
0a1 Analysing the vision* mission* strategic o$'ectives* and environment. ,asic
6&estions incl&de"
0i1 .ow do we objectiely define success/
0ii1 5hat is our compelling customer8stakeholder alue proposition/
0iii1 5hat things are going well now/
0iv1 5here and how could things be better in the future/
0v1 9re there issues with performance, morale, and culture/
0$1 Gecisions a$o&t two other $asic 6&estions on competitive advantage"
0i1 5hat business should we compete in to differentiate ourseles, gien that the
essence of strategy is differentiation/
0ii1 .ow should we compete in those businesses to implement our corporate
strategy/
0c1 Prioritising actions to e7ec&te the corporate strategy that re6&ires the allocation
o% s&%%icient $&t necessary reso&rces to $ring intended val&es to reality 0that is
per%ormance1.
*!* 3isciplined and systematic strategy execution creates value
@igh per%ormance is possi$le i% management is serio&s and committed a$o&t val&e
creation 0or preservation1 thro&gh disciplined and systematic strategy cascading and
e7ec&tion* which is m&lti(dimensional. >.0< o% those organisations that had a %ormal
Strategy E7ec&tion process in place reported s&perior per%ormance. #hese organisations
are also eight times more likely to &se technology sol&tions that a&tomate process areas
s&ch as $&dgeting* per%ormance reporting* and operational %orecasting.? 0!orton* 200.1
Dal&e is >an attri$&te o% an entity determined $y the entity+s perceived &se%&lness*
$ene%its and importance? 0A&stralian Standard AS A1/3"200.1 Dal&e is created thro&gh
generating improved o&tcomes in a more cost(e%%ective manner.
4444444
-.-.: ;enefits of an effectie strategy execution
An e%%ective strategy e7ec&tion sho&ld res&lt in the %ollowing"
0a1 All employees sho&ld clearly see the alignment o% their 'o$* per%ormance* and
positive contri$&tion to the achievement o% corporate strategy and strategic
o$'ectives F where there is a clear line(o%(sight %or val&e creation 0or preservation1
and per%ormance.
0$1 Per%ormance reviews o% all employees who have personal per%ormance and
development o$'ectives and plans that are linked to the corporate strategy*
enhanced thro&gh the appropriate h&man reso&rce reward and per%ormance(
recognition systems.
0c1 S&pport %&nctions and core processes are tightly aligned with the corporate
strategy and %&lly s&pport the $&siness &nits.
0d1 K&nctional* operational* and $&siness &nit plans %&lly s&pport the corporate
strategy.
0e1 #hreats and opport&nities 0risks1 a%%ecting the achievement o% strategic
o$'ectives are managed %rom an enterprise(wide perspective* where risks are known
&nknowns 0e.g.* lack o% sta%% competency may in%l&ence the e%%ectiveness o%
strategy e7ec&tion1.
0%1 All employees know on a reg&lar $asis 0more than ann&ally1 the progress they
are individ&ally making in contri$&ting to the overall achievement and per%ormance
o% the corporate strategy.
0g1 Organisational policies* proced&res* systems* and processes are aligned with
and complement each other %rom an integrated management perspective and %&lly
s&pport the corporate strategy.
4444444
-.-.- <et the right people on the bus=
People drive real tangi$le val&e in strategy e7ec&tion. Strategy e7ec&tion re6&ires the
right people with the right skills* competencies* and knowledge. >Organisations don+t
e7ec&te &nless the right people* individ&ally and corporately* %oc&ses on the right details
at the right time.? 0,ossidy and Charan* 20021
Organisations can &nleash creativity and innovation $y recognising that individ&als are
the &ltimate so&rce o% val&e and $y creating an environment where they can make a
positive di%%erence and contri$&tion.
>Only A1< o% respondents say their companies provide s&%%iciently skilled personnel to
implement high priority strategic initiatives. 9oreover* '&st 1/< say that the hiring o%
people with the necessary $&siness skills or leadership talent to drive strategy
implementation is a very high priority at their %irms* and a mere 11< say the same o%
developing those skills among e7isting e7ec&tives. L...M #he s&rvey data also indicate a
correlation $etween companies that do $etter at implementation and those that %oc&s more
heavily on o$taining the re6&isite $&siness and leadership skills.? 0Economist )ntelligence
Cnit* 20131
*!" What is re-uired for an effective strategy execution2
An e%%ective strategy e7ec&tion re6&ires the %ollowing"
0a1 +gile mindset and iterations! 0Chapter 31.
0$1 !ecessary foundations %or strategy e7ec&tion. 0Chapter A1
0c1 A so&nd framework 0Chapter ;1 within which the integrated management
system %or strategy e7ec&tion 0Chapter B1 and strategy execution process 0Chapter
.1 occ&rs* where"
0i1 #he process consists o% actions taken to achieve an end.
0ii1 #he integrated management system $rings together* as common and
integrated to&ch(points* several disparate management practices 0or
components1 re6&ired %or strategy e7ec&tion.
Kig&re 2.1 $elow shows the relationship $etween agile mindset and iterations* and the
%o&ndations* %ramework* process* and integrated management system %or strategy
e7ec&tion.
4444444
-.>.: $ontextualised management0by0objecties
#he management approach taken to e7ec&te strategy is contextualised management0by0
objecties. E7ec&te the corporate strategy within the given conte7t and systems. @ave a
good &nderstanding o% the conte7t and systems when applying management($y(
o$'ectives.
9anagement($y(o$'ectives* also known as management($y(res&lts* is a process o%
de%ining o$'ectives within an organisation so that management and employees agree on
the S9A5# o$'ectives. 8hen employees themselves have $een involved with the
o$'ective setting process and choosing the agreed co&rse o% action* they are more likely to
commit and %&l%il their responsi$ilities.
#here are %ive mat&rity levels o% per%ormance"
0a1 evel 1 F K&nctional separation o% work%low is not present. Organisational
chart is not &p(to(date. 8orkers are individ&alised and do not interact
colla$oratively to achieve common goals. Personal o$'ectives are not aligned with
management o$'ectives.
0$1 evel 2 F Organisational chart is present and posted. K&nctional tasks are
clearly de%ined. 8ork%low interaction is clearly &nderstood $y all employees.
Per%ormance is meas&red as pass or %ail against deadlines.
0c1 evel 3 F #op(management o$'ectives are clearly de%ined and $roken down
0cascaded1 as individ&al o$'ectives %or all employees. Employee per%ormance is
reviewed $iann&ally.
0d1 evel A F Employees achieve personal and strategic o$'ectives thro&gh process
improvement* teamwork* and colla$oration.
0e1 evel ; F Employees create strategic o$'ectives that s&rpass corporate strategy
where meeting stretch per%ormance targets are the norm.
Strong leadership is re6&ired to lead people towards achieving their strategy(%oc&sed
o$'ectives. #he com$ination o% strong leadership and S9A5# o$'ectives drives strategy
e7ec&tion and per%ormance.
%hapter " ( +gile mindset and iterations re-uired in uncertainty
>/2< o% CEOs %eel like their team isn+t acting with eno&gh &rgency and this was
a%%ecting the company+s a$ility to get things done. !ot $eing nim$le and 6&ick can sink a
company. #he CEOs we talked to %eel like they are always h&stling* so why can+t the
others keep &pN? 02apta* 20131
>#he ma'ority o% s&dden negative val&e shi%ts were driven $y a %ail&re to adapt to
changes in the $&siness environment* c&stomer mismanagement and poor investor
relations.? 0O7%ord 9etrica and Ernst 3 4o&ng* 20021
9oreover* >in the world o% constant change* the spoils go to the nim$le.? 05eeves and
Geimler* 20111
Agile is $eing >6&ick and well(coordinated in movement? 0dictionary.com1 or
>characteri=ed $y 6&ickness* lightness* and ease o% movementE nim$le?
0the%reedictionary.com1. )n today+s competitive and &ncertain $&siness environment*
agility* or the state o% $eing agile* is re6&ired o% organisations to provide e7pected val&e
to their stakeholders $y s&ccess%&lly e7ec&ting their strategy. #he a$ility to respond
6&ickly and appropriately to change drives competitive advantage %or the organisation.
A mindset is a %ilter thro&gh which we e7perience and make sense o% the world. )t is a
vehicle %or control* coordination* and commitment to strategy e7ec&tion and
per%ormance.
+gility is about embracing constant change and making the appropriate decisions
by the right people at the right time in the right context based on the relevant
situation5dependent information becoming available at particular points in time! )t
is taking a just0in0time approach where right amo&nts o% relevant in%ormation are
processed when re6&ired* not in large or ins&%%icient amo&nts o% in%ormation that res&lts
in $iases 0i.e.* cognitive and gro&p(think1.
>A timely approach signi%ies that the risk management process is applied at the optim&m
point in the decision(making process. L...M )% the risk considerations are made too early or
too late* either opport&nities co&ld $e lost or there co&ld $e s&$stantial costs o% revising
the decision.? 0)SOH#5 3100A"20131
Organisations cannot predict the %&t&re with certainty d&e to lack o% relevant in%ormation
at the time o% planning and decision(making. #hey may not know what lies ahead.
@owever* they sho&ld $e prepared to actively cons&lt with key stakeholders 0e.g.*
c&stomers* reg&lators1 reg&larly and colla$oratively to make timely* necessary* and
participatory decisions when the relevant or $est in%ormation $ecomes availa$le. #his
re6&ires contin&o&s adaptation o% plans* processes* and policies to s&it the changing
conte7t or circ&mstance $&t %oc&sing on the organisation+s vision* mission* and corporate
strategy.
>CEOs %ace co&ntless decisions. #he $est e7ec&tives &nderstand which ones they need to
%oc&s on and which ones they can delegate. #hey also know when to make a decision.
And they+ve de$ated the risk o% not doing it. Any change in the landscape creates
opport&nities %or some$ody. #he decision to gra$ a $ig opport&nity can $e destiny(
changing. )% yo& don+t do it* someone else will. ook at how Ama=on* Apple* and Ioogle
move ahead o% everyone else.? 0Charan* 20131
Cn%ort&nately* >traditional approaches to strategy ass&me a relatively sta$le world. #hey
aim to $&ild an end&ring competitive advantage $y achieving dominant scale* occ&pying
an attractive niche* or e7ploiting certain capa$ilities and reso&rces. Ilo$ali=ation* new
technologies* and greater transparency have com$ined to &pend the $&siness
environment. S&staina$le competitive advantage no longer arises %rom positioning or
reso&rces.? 05eeves and Geimler* 20111
%hange is good
)n %act* change is very good. 8inston Ch&rchill 01/.A to 1-B;1 once declared* >#o
improve is to changeE #o $e per%ect is to change o%ten.? And Charles Garwin 01/0- to
1//21 once declared* >)t is not the strongest o% the species that s&rvives* nor the most
intelligent that s&rvives. )t is the one that is the most adapta$le to change.?
,y shi%ting the traditional mindset to managing* responding* and adapting to change and
$eing %le7i$le or nim$le* organisations are %ree to e7plore new possi$ilities* avoid $iases*
innovate* p&rs&e new reven&e streams* and take on immediate competitive advantage o%
any new opport&nities coming their way. ,y shi%ting attit&des and em$racing a mindset
o% change and accepting this as a given* this may mean %ewer &ne7pected twists and t&rns
along the planned path where organisations can ens&re that their prod&ct or service will
$e %it %or its intended p&rpose $y satis%ying the c&stomer or stakeholder.
Em$race change rather than opposing or avoiding it. Go not con%ine the organisation $y
its plans* especially when plans no longer deliver the re6&ired or e7pected val&e d&e to
changing circ&mstances* competition* or c&stomer pre%erences. 5emem$er that plans are
a means to an end* not an end in itsel%.
Agility is a$o&t contin&o&sly adapting the plans and activities to the conte7t and adapting
organisational policies* processes* and systems to create val&e* satis%y the c&stomer or
stakeholder* and s&pport the corporate strategy.
A good analogy is that o% sailing a $oat rather than driving a train to the destination. On a
train* passengers m&st go where the tracks take them. Changing a train ro&te is a ma'or
&ndertaking that will re6&ire re(planning and a lot o% work laying new tracks. @owever*
when sailing a $oat* the sailor can 6&ickly react to the conditions* take a slightly di%%erent
ro&te to avoid $ad weather* or take advantage o% a 6&ick stop in a di%%erent port F while
still steering towards the %inal destination. And the %inal destination is* o% co&rse* the
organisation+s vision and mission.
A s&ccess%&l corporate strategy does not add $&t reg&larly replaces and reprioritise
e7isting work and activities in a systematic and meaning%&l manner %or the main p&rpose
o% achieving the organisation+s strategic o$'ectives. Cn%ort&nately* >most e7ec&tives
0BA<1 report that they have too many con%licting priorities.? 0einwand and 9ainardi*
20111
9anagement sho&ld r&thlessly decide what initiatives to terminate and comm&nicate that
message or decision clearly and early. #erminate pet pro'ects that do not add any
strategic val&e and divert reso&rces to strategic val&e creating activities* pro'ects* and
programmes. ,y speci%ying e7actly and clearly what the :new+ strategy replaces* work
$ecomes a positive and power%&l %orce %or organisational change* transition* and
trans%ormation* there$y increasing individ&al prod&ctivity* and organisational
e%%ectiveness and per%ormance.
6avigating complex issues
)n an &nordered world* organisations m&st contin&o&sly navigate thro&gh comple7 iss&es
that lack visi$le ca&sality* where the relationship $etween ca&se and e%%ect can only $e
esta$lished in hindsight. Cond&ct sa%e(to(%ail e7perimentations to systematically &ncover
the ca&sality relationship.
!avigating comple7 iss&es makes the organisation %ar more agile and resilient to the
changing and &ncertain environment in which it operates.
)n contrast* i% the ca&se and e%%ect relationships are not visi$le $&t can $e discerned with
the appropriate analysis or e7pertise 0i.e.* with the help o% cons&ltants or e7perts1* then
the iss&e is knowa$le or complicatedE it is not complex.
7eing ob1ective5focused rather than plan5driven
#raditional managers operating in a sta$le world(view %oc&s on religiously following
plans with minimal or no change. #hey make and doc&ment advance decisions &p%ront*
ready %or e7ec&tion. #hey %eel good when they %ollow the plan to the detail* regardless o%
the act&al o&tcomes or changes to the conte7t.
On the other hand* agile leaders operating in an &ncertain world(view alue objecties
achieement 6strategic outcomes7 as the ultimate goal where plans are constantly adapted
and $ecome the means to achieving strategic and organisational o$'ectives* not the goal
itsel%. #hey %eel good when they achieved their o$'ectives and have created or preserved
val&e %or their stakeholders where it is s&$stance over %orm.
@owever* the constraints and ass&mptions em$edded in plans are still important to $oth
the traditional manager and agile leaderE plans g&ide the organisation and provide the
necessary planned path.
,oth traditional managers and agile leaders plan* and $oth spend a %air amo&nt o% time
planning* especially d&ring the corporate planning or strategy %orm&lation stage.
@owever* they view plans in radically di%%erent ways F $oth $elieve in plans as
$aselines. #raditional managers are constantly trying to :correct+ act&al res&lts to the
planned $aseline. Agile leaders* on the other hand* e7pect changes 0&ncertainties1 and
respond and adapt accordingly rather than %ollow o&tdated plans that no longer deliver
the intended val&e F they val&e responding to change over following a plan.
Iiven the constant changes to the competitive and $&siness environment organisations
operate in* variations to and adaptations o% plans will $e common occ&rrences where
plans are not sacrosanctE they sho&ld $e %le7i$leE they are g&ides* not strait'ackets. Agile
leaders there%ore emphasise what to do rather than what the plan says* and they totally
rely on people 0intangi$les1 rather than processes 0constraints1 to prod&ce the re6&ired
val&e and achieve their o$'ectives.
Point to note a$o&t traditional managers and agile leaders. 9anagers allocate people 0and
reso&rces1 to task within command(and(control str&ct&res and arrangements* whereas
leaders motivate and lead people to towards achieving goals thro&gh social in%l&ence*
relationships* and conte7t&alised management($y(o$'ectives. People :want to do the
work+ %or an agile leader rather than :haing to do the work+ %or a traditional manager.
%lear alignment and strong leadership re-uired
Agile leaders m&st provide the re6&ired clarity* alignment* and leadership a$o&t the
o&tcomes re6&ired and e7pected. #hey n&rt&re the vision and positively motivate people
towards achieving the o$'ectives. ,y clearly aligning the organisation towards the
r&thless and disciplined achievement o% strategic o$'ectives* val&e creation 0or
preservation1* and per%ormance* organisational priorities m&st $ecome clear so that
everyone can work e%%ectively towards the same organisational vision and mission. #his
sho&ld res&lt in more colla$orative or team($ased decision(making and n&rt&ring o%
shared val&es* especially within an &ncertain environment.
#here is total reliance on people to e7ec&te the strategy within the given conte7t. #here is
less reliance on processes and %ormalities to str&ct&re work. )n doing so* there is also total
reliance on competent leaders to lead people towards achieving the conte7t&alised
o$'ectives.
8ust5in5time learning and decision5making
As the literat&re will attest* traditional command(and(control management is derived
%rom the principles o% Krederick #aylor+s scientific management. )n today+s world*
however* there are tensions imposed $y command(and(control management on teams and
individ&als as knowledge workers are replacing the work%orce.
)n #aylor+s world* the traditional manager had specialised pro$lem(solving knowledge
and skills. )n today+s world* these key pro$lem(solving knowledge and skills reside with
knowledge workers 0e.g.* employees1 and not the manager.
Agility re6&ires a large degree o% preparedness and %le7i$ility* and the contin&o&s sensing
o% the environment and conte7t. )t re6&ires incremental decision0making $y empowered
individ&als and teams that colla$oratively considers the conte7t and $est availa$le
in%ormation at the time decisions are made thro&gho&t the corporate planning and
strategy e7ec&tion stages. Plans and processes are constantly adapted to the conte7t and
circ&mstancesE agility occ&rs when there are $arriers and o$stacles to overcome.
Adaptation is change with a purpose and working towards the achievement o% an
o$'ective 0e.g.* to create positive val&e %or stakeholders1. )n contrast* chaos is change
without purpose* which is not agility.
)n an &ncertain world* plans are imper%ect. !o amo&nt o% so&nd adance decision0
making can $e h&manly made &p%ront 0especially at planning stage1 with a$sol&te
certainty that will ca&se the plan to $e :per%ect+ prior to its e7ec&tion. Ass&mptions are
there%ore incl&ded into plans $eca&se the right in%ormation is not availa$le at planning
stage. )ne%%iciencies are incl&ded or $&ilt into plans to cater %or just0in0case s&rprises and
%or gaming the allocation o% &nnecessary reso&rces. #his res&lts in an ine%%icient reso&rce
allocation and :gaming the n&m$ers+ %or personal sel%(interest.
@owever* with technology and social media* knowledge workers have instantaneo&s real(
time access to large amo&nts o% relevant in%ormation that will drive just0in0time learning
and decision0making instead o% yesteryear+s '&st(in(case learning and decision(making.
#his is a nat&ral evol&tion on how the digital economy and knowledge worker makes
decisions.
As part o% the agile mindset* empowered $&t acco&nta$le team mem$ers e%%ectively solve
pro$lems 0rather than e7ec&tivesO1* e7ec&te the strategy* and make timely decisions on
the %ly when the re6&ired in%ormation $ecomes availa$le to decision(makers and
implementers. #his will lead to greater &nderstanding o% the conte7t. #his will also
red&ce just0in0case or opportunistic gaming behaiours where reso&rces can $e
o$'ectively and systematically allocated to val&e(creating activities.
+gile iterations: cascade5execute5adapt
Once the organisation+s vision* mission* and corporate strategy are approved and ready
%or e7ec&tion* an agile iteration as shown in Kig&re 3.1 is re6&ired to create val&e
incrementally %o&nded on contin&o&s adaptations and e7perimentations that are
attri$&ta$le to reg&lar %eed$ack and changes in conte7t and environment. #he cascade0
execute0adapt iterations are contin&o&s and will always $ene%it %rom reg&lar %eed$ack
received and e7perimentations. )ncrementally $&ild val&e to achieve the organisation+s
vision and mission.
#he agile iteration consists o% the %ollowing"
0a1 %ascade the corporate strategy* o$'ectives* and key per%ormance indicators* and
check %or alignment. Ask the 6&estions" 5hat will we do/ 5hat are our measures
of success/
0$1 Execute the strategy $y systematically creating 0or preserving1 val&e %or the
organisation+s stakeholders and cond&cting sa%e(to(%ail e7perimentations to
systematically navigate comple7 iss&es and &ncover the relationship $etween ca&se
and e%%ect. #he %oc&s" ?ust do it=
0c1 +dapt 0and improve1 the organisation+s per%ormance and plans to the
environment and conte7t. #hese are agile co&rse corrections $ased on reg&lar
%eed$ack* improvement* and e7perimentation. Ask the 6&estions" 5hat did we do/
5hat changes should we make to perform better or execute the strategy/
#his approach emphasises the %ollowing"
0a1 %oc&s towards the achievement o% organisational vision* mission* and corporate
strategy
0$1 %le7i$ility and resilience 0the a$ility to recover positively %rom constant
conte7t&al and environmental changes1
0c1 $eing 6&ick and well(coordinated in movement and decision(making
0d1 reg&lar* timely* and appropriate %eed$ack %rom c&stomers and stakeholders
0e1 contin&o&s adaptations* e7perimentations* and transitions d&e to constant
conte7t&al and environmental changes
0%1 contin&o&s improvements and val&e creation 0or preservation1
0g1 elimination o% non(val&e adding and non(strategic activities* pro'ects* and
programmes
0h1 reg&lar and timely %eed$ack on the organisation+s and employees+ per%ormance.
%hapter $ ( .oundations for strategy execution
Kor strategy e7ec&tion to $e e%%ective* an organisation sho&ld have the %ollowing
%o&ndational elements or conditions in place* given its internal and e7ternal
circ&mstances"
0A.11 comm&nicate and %eed$ack reg&larly and openly
0A.21 great e7ec&tion re6&ires great e7ec&ta$le strategy
0A.31 what gets meas&red* gets e7ec&ted
0A.A1 know yo&r $&siness* yo&r people* and yo&rsel%
0A.;1 adapt and change or perish
0A.B1 strategies and plans are $&ilt to $e e7ec&ted
0A..1 e7ec&tion re6&ires vertical alignment and hori=ontal integration
0A./1 strategy e7ec&tion is everyone+s 'o$
0A.-1 &nderstand what yo& are acco&nta$le %or
0A.101 dynamic governance drives strategy e7ec&tion
0A.111 make h&man capital the creative core o% strategy e7ec&tion
0A.121 simplicity and $revity are keys to e%%ective e7ec&tion.
%hapter / ( .ramework for strategy execution
Strategy e7ec&tion will depend on the e%%ectiveness o% a %ramework that comprises o% the
%ollowing components and arrangements* centred on an agile mindset 0Chapter 31 and
%o&ndations %or strategy e7ec&tion 0Chapter A1"
0;.11 management mandate* commitment* and leadership
0;.21 &nderstanding the organisation and its conte7t
0;.31 esta$lishing comm&nication* %eed$ack* and reporting mechanisms
0;.A1 implementing"
0i1 an integrated management system %or strategy e7ec&tion 0Chapter B1
0ii1 the strategy e7ec&tion process 0Chapter .1
0;.;1 monitoring and review o% the %ramework
0;.B1 contin&al improvement o% the %ramework.
Artic&late the %ramework in a dedicated strategy execution plan that sets o&t how to"
0a1 manage the strategy e7ec&tion process within speci%ic conte7t* $ased on speci%ic
governance* 6&ality* and compliance re6&irements and e7pectations
0$1 integrate the strategy e7ec&tion process into the %a$ric and discipline o% the
organisation
0c1 ens&re that the strategy e7ec&tion process and integrated management system
%or strategy e7ec&tion is s&staina$le* e%%ective* and e%%icient.
#ailor or c&stomise the %ramework and strategy execution plan to organisational conte7t*
c&lt&re* and mat&rity.
%hapter 0 ( +n integrated management system for strategy execution
Organisations &se some kind o% management system that provides a %ramework in which
the organisation can esta$lish management practices and proced&res to direct and control
its activities to achieve its o$'ectives. A management system is a set o% interrelated or
interacting elements o% an organisation to esta$lish policies and o$'ectives* as well as
processes to achieve those o$'ectives. Krom a $&siness management perspective*
e%%iciency is gained $y having one* integrated system o% management.
8hen the organisational str&ct&re is comple7* it is essential %or the organisation to
develop a ro$&st* practical* yet simpli%ied* integrated management system that will %&lly
integrate the relevant management practices and common to&ch(points o% the $&siness
into one coherent and synchronised management system that ena$les and drives the
achievement o% its corporate strategy. )nstead o% :silos+ o% disparate systems and
practices* this is a gen&inely co(ordinated and synchronised system" one that is greater
than the s&m o% individ&al parts* collectively achieving more than ever $e%ore in terms o%
its overall per%ormance and e%%ectiveness.
)ntegrating is a$o&t &nderstanding the common $&t essential elements or to&ch(points o%
each management practice* its conte7t* p&rposes* and o$'ectives* and com$ining or
integrating them into a single coherent* integrated management system that %&lly s&pports
and complements each other %or the sole p&rpose o% achieving the organisation+s
o$'ectives and key per%ormance indicators.
)ntegration does not simply involve introd&cing esta$lished and standardised
management tools and processes into e7isting management systems. )t re6&ires the
adaptation and alteration o% those tools and processes to s&it the needs o% decision(makers
and their e7isting processes %or decision(making.
#he integrated management system creates common tools* synta7* data str&ct&res*
processes* and meas&res %or e%%ective strategy e7ec&tion. #hese management practices are
a means to an end that sho&ld $e &tilised and ma7imised strategically %or $oth
organisational and individ&al per%ormance.
Some $ene%its o% implementing an integrated management system incl&de"
0a1 a$ility to create &ni%ied o$'ectives and to %oc&s on achieving them
0$1 red&ced cost thro&gh red&ced d&plication and ma7imisation o% e%%ort and
reso&rces
0c1 greater &nderstanding o% common control and reg&latory re6&irements
0d1 de%ined $o&ndaries and acco&nta$ilities aro&nd &ni6&e roles* responsi$ilities*
and acco&nta$ilities
0e1 increased e%%ectiveness o% timely decision(making
0%1 enhanced levels o% organisational harmonisation* alignment* and
synchronisation* leading to increased prod&ctivity* 6&ality o&tcomes* and improved
per%ormance
0g1 enhanced stakeholder satis%action thro&gh more e%%ective comm&nication*
interaction* and con%idence in the strategy e7ec&tion process and organisational
per%ormance.
#he integrated management system %or e%%ective strategy e7ec&tion may comprise the
%ollowing management practices"
0B.11 governance
0B.21 planning and stakeholder management
0B.31 o$'ective and 2P) setting
0B.A1 port%olio* programme* and pro'ect management
0B.;1 reso&rce management and $&dgeting
0B.B1 enterprise risk management
0B..1 h&man capital management
0B./1 knowledge management
0B.-1 ass&rance* a&dits* and independent eval&ations
0B.101 per%ormance monitoring* review* and reporting
0B.111 per%ormance management
0B.121 compensation* $ene%its* and rewards
0B.131 change management
0B.1A1 compliance management
0B.1;1 6&ality management and contin&o&s improvement.
#ailor or c&stomise these management practices to the organisational conte7t and
mat&rity. Organisational governance* str&ct&res* and arrangements sho&ld %&lly s&pport
and enhance the implementation o% the integrated management system.
Kig&re B.1 $elow shows the relationship and interdependencies $etween vario&s
management practices within the integrated management system %or strategy e7ec&tion.
An integrated management system re6&ired %or strategy e7ec&tion sho&ld allow %or more
e%%ective and e%%icient comm&nication o% in%ormation in the %ollowing directions"
0a1 vertically* either top(down or $ottom(&p* thro&gho&t organisational levels or
layers
0$1 hori=ontally with other $&siness &nits* departments* sections* pro'ects* and
across val&e(chains and organisational $o&ndaries
0c1 holistically* %rom an enterprise(wide or port%olio perspective 0across the
organisation1.
#he strategy execution plan sho&ld speci%ically address the incorporation o% relevant
management practices into an integrated management system that will ena$le and %&lly
s&pport the strategy e7ec&tion %ramework and process.
%hapter # ( &rocess for strategy execution
#he strategy e7ec&tion process is a key component o% the %ramework %or strategy
e7ec&tion and comprises the %ollowing activities that operationalise the integrated
management system"
0..11 esta$lish governance over the process
0..21 comm&nication* cons&ltation* and colla$oration
0..31 esta$lish the conte7t 0incl&ding developing the strategy execution plan1
0..A1 stakeholder engagement and management
0..;1 translate and cascade the corporate strategy and o$'ectives
0..B1 determine capacity and appetite %or risk
0...1 identi%y and assess risks
0../1 meas&re pro'ect and port%olio per%ormance
0..-1 develop an enterprise(wide view o% per%ormance* risk* and control
e%%ectiveness
0..101 improve governance* risk management* and controls
0..111 contin&o&sly monitor and review per%ormance and strategic ass&mptions
0..121 reward per%ormers and deal positively with &nderper%ormers.
#ailor or c&stomise these activities to the organisational conte7t and mat&rity. #hese
activities are not se6&ential. #he process %or strategy e7ec&tion sho&ld $e %it %or its
p&rpose and relevant to the achievement o% the corporate strategy and strategic
o$'ectives.
&ostscript
#he title o% this e$ook 9When strategy execution marries risk management: descri$es
how risk management is an insepara$le g&idance and control system that will ena$le and
drive organisations to artic&late and achieve their strategic o$'ectives and e%%ectively
e7ec&te their chosen corporate strategy within accepta$le levels o% risk. ,oth strategy
e7ec&tion and risk management are intrinsically intertwined. ,y doing so* it minimises
risky decisions. #he degree o% achieving organisational per%ormance targets is the key
meas&re o% the e%%ectiveness o% the organisation+s risk management practices.
,ased on the concept o% marriage* the ,i$le tells &s in 9atthew 1-";(B that Pes&s said*
>#his e7plains why a man leaves his %ather and mother and is 'oined to his wi%e* and the
two are &nited into one. Since they are no longer two $&t one* let no one split apart what
Iod has 'oined together.? 0!ew iving #ranslation1
8hen risk management :marries+ 0or is 'oined to1 strategy execution* $oth management
practices are &nited into one seamless or integrated management activity. #his oneness or
integration with a common purpose of achieing strategic objecties is vital %or
organisations to s&ccess%&lly e7ec&te their corporate strategy* per%orm well $eyond
e7pectations* and contin&o&sly meet their pro%ita$ility %orecast and organisational
growth.
+bout the author
Patrick Ow* an e7perienced risk management pro%essional* has a keen interest in strategy
e7ec&tion and per%ormance management. @aving e7tensively worked in A&stralia*
9alaysia* and Singapore* his specialisations incl&de"
0a1 corporate planning* and strategy development and e7ec&tion
0$1 per%ormance management* $alanced scorecard implementation* and key
per%ormance indicator development
0c1 integrating risk management with internal a&dit* planning* $&dgeting* and
per%ormance management and reporting.
@e is a mem$er o% CPA A&stralia* a 6&ali%ied lawyer* and a certi%ied trainer. Connect
with him online" patrickowQgmail.com or https"HHwww.linkedin.comHinHpatrickow.
Patrick has a&thored a n&m$er o% management articles that appeared in 9ccountants
Today* a pro%essional maga=ine p&$lished $y the 9alaysian )nstit&te o% Acco&ntants" 0in
alpha$etical order1
011 Aligning #raining to Strategy 09arch 200.1
021 ,eyond 9eas&rement Alone" Optimising Corporate Per%ormance 0!ovem$er
200;1
031 ,&siness Process 9anagement" Connecting People* Process and #echnology
0A&g&st 200B1
0A1 Corporate governance is o&r response to risk 09arch 20101
0;1 Griving Per%ormance with ,&siness 5&les 0Gecem$er 200B1
0B1 Em$edding 5isk 9anagement Practices %or )mproved Organisational
Per%ormance 0April 200/1
0.1 Enterprise(8ide ,&siness Process 9anagement Grives Per%ormance 0P&ne
200B1
0/1 E7pect the Cne7pected" 9anaging 4o&r Contin&ity 5isk 0Septem$er 200-1
0-1 Krom Strategy to Pro%it 0A&g&st 20121
0101 )ncrease Pro%ita$ility thro&gh Employee Engagement 09arch 200B1
0111 )SO 31000 and the Principles %or 9anaging 5isk 09ay 200-1
0121 2P) ,ased Compensation Kramework 0Ke$r&ary 200.1
0131 2P) Kramework %or S&perior Services 0P&ly 200B1
01A1 9anage 5isk 3 Enhance Per%ormance in the 3rd Sector 0Septem$er 200/1
01;1 9anaging Climate Change 5isk 0Pan&ary 200-1
01B1 9anaging )nter(Organisational 5isks 0Ke$r&ary 20101
01.1 9anaging Per%ormance with 2P)s 0P&ne 200B1
01/1 O&tper%orm $y inking Per%ormance and 5isk 9anagement 0Ke$r&ary 200/1
01-1 Per%ormance is the 2ey 0Septem$er 200.1
0201 #&rning 5isk into Opport&nities 0April 20101
0211 Dal&e Grivers" 8hat 9akes One Company 9ore Dal&a$le than AnotherN
0!ovem$er 200.1
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