Strategy Execution: How Top Companies Increase Profits – Part 1

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Part I: Why Strategy Execution is the Solution

Even the highest performing companies miss opportunities to increase profit. As the economy improves and business picks up, you need to make sure you capture as much of the upswing as possible. Maybe you need to take advantage of the potential in the market. Perhaps you need to manage the rapid growth you’re already realizing. Either way, strategy execution is the key to both revenue and profit growth.

But strategy itself is the first major obstacle. Successful companies focus their attention and effort on activities which further increase profit. Strategy too often is an academic exercise which seems far removed from financial results.

Accordingly, most high performing companies are reluctant, to put it mildly, to slow down at all and spend valuable time on the development of their strategy. Much better, so the reasoning goes, to put all efforts into revenue and profit growth and forgo strategy development as an inefficient use of valuable time and energy.

Here are the top five most common reasons to “delay” strategy development:

We’re so busy serving our clients, we don’t need to worry about “big picture” issues right now. We’re moving ahead and just trying to keep up.
Strategy is a complex process designed for Fortune 500 companies. We know what we do, so why should we spend time writing a plan we won’t need?
The economy and our market is so volatile and unreliable, any strategy we develop could very well be invalid or useless in six months. We need to be flexible, agile and adaptable.
Our strategy is simple: sell as much as possible. This is all the focus we need.
Working on strategy is a long, slow and painful process. But we create a strategic plan every year or two because it’s what we’re supposed to do.
How many of these statements about strategy ring true and apply to your company? Chances are good at least one.

And why should you invest scarce resources in strategy when hard won experience indicates it won’t even produce a minimal return on the investment? You’re in business to make money. You take action instead of sitting around and thinking about what you’d like to do.

But what if strategy could be directly linked to dramatic increases in revenue and profit?

Strategy execution creates that link.

Consider a strategy designed specifically for execution, a strategy created in such a way that it guides, informs and enhances the daily activities and decisions of everyone in your company. A strategy so intimately connected to daily operations it is anything but academic.

Strangely enough, strategy and execution are two terms and two concepts infrequently linked together. Yet the whole point of strategy is for it to be executed. Without strategy execution, a company’s strategy amounts to no more than an itemized wish list. Granted, it may be a detailed wish list with top line or bottom line results you really, really want to achieve. But desire, alas, doesn’t deliver results. After all, “A plan without action is a daydream”.

Of course, the flip side of the adage is equally true, “Action without a plan is a nightmare”. There’s no way to get around the need to set out a coherent plan.

Sell more, spend less. It’s simple. As complex as some experts want to make strategy, it is really as simple as those four words. A company’s strategy must detail how it expects to sell more, either to new or existing customers, and how it expects to spend less, meaning improve efficiency and reduce costs.

My series Does Strategy Enhance Business Performance addresses various aspects of strategy development. Part II examines Strategic Destinations, the Value Gap and Generic Strategies, Part III deals with the Four Perspectives of the Balanced Scorecard and the translation of the strategy in a Strategy Map is discussed in Parts III, IV, and V.

In order to be executable, a company’s strategy must be:

Clear, easy to understand and expressed in terms of achievable objectives
Structured to permit a high-level overview, with the capability to drill down to lower levels of detail, to avoid presenting an intimidating level of complexity
Quantifiable and measurable through a balanced mixture of lagging and leading indicators
Not only does strategy execution deliver improved bottom line results, but it also addresses several major concerns which typically plague high performing companies and prevent the realization of their true financial potential.

Talented leaders often see the short, mid and long-term of a company and what must happen to achieve their strategic destination. But very few individuals in any organization have such a multi-level perspective. A strategy focused on execution provides a clear view of the road forward.
High performing companies always reach for stretch targets not easily achieved. Often, a stretch target, such as tripling net profits, can seem intimidatingly big as well as disconnected from day-to-day activities. A strategy focused on execution makes targets more realistic and achievable.
Employee engagement and company culture are buzz words for today’s motivated companies. The best way to have engaged employees who operate in a high performance culture is for everyone in the organization to understand what they’re trying to achieve and why in a way only an execution focused strategy can deliver.
Even with an awareness of big-picture goals, the rush of daily activities can be overwhelming. Only by integrating strategy into the execution of daily operations can companies engage all resources, especially personnel, in the achievement of increased profits.
Operations are the activities which maintain the company ship and keep it afloat, which patch inevitable holes and pump out water before it becomes a problem. An exclusive focus on operations is much like keeping a ship safe in the harbor; it’s not why ships are built.

Strategy encompasses all the activities which steer a company through the high seas and uncharted territory toward a difficult, distant destination. If it were easy, everyone would do it. High performing companies execute strategy to reap the highest possible financial rewards.

You’re already well underway; now move full steam ahead. Stay tuned for future installments of this series which will address, in detail, practical steps to execute strategy and capture all of your company’s profit potential.

Ed Breman is the founder of Accelerate Exceed and a strategic partner of Daszkal Bolton. Ed oversees Performance Management consulting services for businesses and is certified in the Balanced Scorecard methodology, a proprietary approach to management recognized as one of the most important and influential management ideas of the 20th century by the Harvard Business Review. Ed may be reached at [email protected]

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