The Interdependence of Strategy and Execution in a Rapidly Changing World

By Rod Collins

 

While the digital revolution and its incredible pace of change are dramatically altering the work we do and the ways we work, the two fundamental accountabilities for business leaders remain constant: strategy and execution. What is changing is how companies approach and carry out these two timeless tasks.

In traditional businesses, planning and executing are usually considered distinct functions requiring different core competencies. Planners are seen as the “big sky, out-of-the-box” thinkers who move the business forward while the operators are valued as the “down-to-earth” pragmatists who get things done. Unfortunately, one of the consequences of this longstanding functional segregation is that middle managers and workers often have little understanding about the connections between these two essential dimensions of the business. While this is troublesome in normal circumstances, it can become deadly in times of great change.

In its surveys of some five million people over the last 25 years, FranklinCovey has uncovered alarming evidence of persistent managerial deficiencies in the performance of both strategy and execution. While workers give managers high marks for their work ethic, they rate their leaders poorly for their capacity to provide clear focus and direction. Thus,  the late Stephen Covey concluded, “people are neither clear about, nor accountable to, key priorities, and whole organizations fail to execute.”

Until recently, most organizations have been able to keep their heads above water, despite these deficiencies, because the relative stability and the slower pace of change before the advent of the Internet allowed enough time for their bureaucracies to make the necessary corrections and still keep pace with the market. Companies had time to learn from mistakes, to do rework, and still meet their market goals.

However, the sudden emergence of accelerating change over the past decade is challenging the wisdom of the functional segregation of management’s two core accountabilities. The most important thing to understand about the relationship of strategy and execution in fast changing times is that they are not separate activities; they are interrelated and interdependent responsibilities. Thus, any company today that organizes strategy and execution into different and distinct departments is making a serious error. In fast-paced markets, organizing effectively means a company’s organizational structure must foster and facilitate continual iteration between strategy and execution. Unlike in the Industrial Age, these accountabilities are not sequential events where strategy precedes execution. In the Digital Age, strategy shapes execution and execution, in turn, shapes strategy.

Strategy in a hyper-connected world begins and ends with customer value, which means the mission of a business has more to do with delighting customers than creating shareholder wealth.  This is the secret behind Apple’s remarkable success and the impetus that distinguishes Apple from its many competitors. While shareholder wealth continues to be important, it is no longer paramount as was true during the twentieth century. In a post-digital world, pleasing the customer is the prime concern for the simple reason that you can’t have shareholder wealth if you don’t have any customers. And perhaps no company understands this wisdom better than Apple.

When the core mission is creating customer value, strategy is the identification of the core business infrastructure necessary to continually fulfill a company’s promise to its customers, and execution is the design and management of business processes to meet or exceed customer expectations. Because we are now living and working in a time of great change, customer expectations evolve at a far more rapid pace than was true in the relatively slower Industrial Age. This means that strategic infrastructure needs to be continually updated to keep up with ever-changing consumer expectations. The recording industry failed to understand this when they persisted in pushing CD’s despite the customers’ preference for digital downloading. Apple, on the other hand, recognized and embraced changing customer expectations to become a major player in the music industry.

Throughout most of the twentieth century, strategy was product-centric and execution was transactional. The goal of strategy was to devise great business models and then to exploit the related products for decades, if possible. The job of execution was to efficiently transact the sale, delivery, and servicing of the goods and services. In a product-centric transactional world, business isn’t about customers; it’s about profits. From this vantage point, customers are often viewed as the intermediate variable between products and shareholder profits.

All that has changed in the wake of the digital revolution. In twenty-first century business, strategy is customer-centric and execution is all about creating a superior customer experience. In today’s business world, shareholder profits are the reward that companies receive when their products delight customers. Maintaining a product edge has become increasingly difficult because the life of business models has shrunk from decades to years. The best strategies today are adaptive not exploitive strategies.

Because those who execute are closest to the customers, their real-time knowledge is critical to informing strategy formation in a rapidly changing world. When the mission of business shifts from maximizing shareholder wealth to delighting customers, you can’t afford to leave those who know the customers best out of the room when charting the course of the company. That’s why strategy and execution are now permanently intertwined.

 

Rod Collins is Director of Innovation at Optimity Advisors and author of the upcoming book, Wiki Management: A Revolutionary New Model for a Rapidly Changing and Collaborative World (AMACOM Books, November 1, 2013)