Execution: The Discipline of Getting Things Done

by Larry Bossidy

You don’t just put a plan together and then go back and see whether it can be of help to you. Decide on the objectives at the beginning: “What do we want to get done? What are the critical issues we need to understand better? Why at the end is it going to be helpful to us?”

A strong strategic plan must address the following questions: What is the assessment of the external environment? How well do you understand the existing customers and markets? What is the best way to grow the business profitably, and what are the obstacles to growth? Who is the competition? Can the business execute the strategy? Are the short term and long term balanced? What are the important milestones for executing the plan? What are the critical issues facing the business? How will the business make money on a sustainable basis?

Every business operates within a shifting political, social, and macroeconomic context, and the strategic plan must explicitly state the external assumptions that management is making.

People tend to look at their businesses from the inside out—that is, they get so focused on making and selling their products that they lose awareness of the needs and buying behaviors of their customers.

The issue is simply understanding the specific people who make the purchasing decisions and their buying behavior. At large industrial companies, for example, engineers and purchasing agents usually do the buying. But in small companies, the CFO or even the CEO will be involved, because they have to pay close attention to cash flow.

Does your business need to develop new products? Does it need to take existing ones into new channels and to new customers? Does it need to acquire other businesses? How are its costs compared with those of its competitors—and what productivity programs do you have in place to improve your cost position?

One tool that’s useful in defining growth opportunities is market segment mapping. The tool is simple enough; any business can be segmented.

To understand how it works, let’s look at A.T. Cross’s segmentation of the luxury pen market. A simple map of Cross’s market segments identifies three different consumers. The first is the individual who wants to buy such a pen for herself; the second is the person who buys one as a gift for another individual; and the third is the corporation that buys thousands, with its logo on them, and uses them as institutional gifts.

For each market segment the product is essentially the same, but demand is different and so is the strategy.

Each requires Cross to deal with different competitors, channels, ec...

Most often companies underestimate their competitors’ responses.

You measure your organizational capability by asking the right questions. If your strategy requires a worldwide manufacturing capacity, for example, you need to ask: “Do we have people with global experience? Do we have people who know how to source? Do we have people who can run a supply chain that extends worldwide?”

On a scale of one to ten, if your answers come up a six, you don’t have enough capability.

A good strategic plan is adaptable. Once-a-year planning can be dangerous, especially in short-cycle businesses where markets won’t wait on your planning schedule.

This is another reason your business leaders have been in on the plan from the beginning. Because they helped build it and they own it, they carry it around in their heads all the time—unlike a staff-driven planning book, which will spend a year on shelves before being discarded. So they can regularly test it against reality.

thinking about what will deliver results in the short and medium term will give you an anchor to build for the future.

Balancing the short run with the long run is thus a critical part of a strategic plan. Most plans don’t address what a company has to do between the time the plan is drawn up and the time it is supposed to yield peak results.

At Honeywell, in the phone calls I have with managers before a review, I’ll ask them what they think the critical issues are. I’ll then tell them what I think the issues are—not because my views are necessarily different, but because we have to be clear about what the strategic plan needs to address.

Many strategies fall apart because the right critical issues aren’t raised. AT&T’s critical issues included the decline in long-distance revenues and the organizational capability to execute a major shift in strategy.

Every strategy must lay out clearly the specifics of the anatomy of the business, how it will make money now and in the future.

That means understanding the following foundations, the mix of which is unique for every business: the drivers of cash, margin, velocity, revenue growth, market share, and competitive advantage.

for a new product would need to present the following information to answer the question about how his strategy for the product would make money and provide adequate return on investment: Pricing at different levels of demand. Will the customer pay a premium for what you claim is a differentiation? Cost and cost structure now and in the future. Cash required for working capital. Actions required to ramp up revenue growth. The investment required to market the product. Continued investments in technologies to prepare for the next generation of product. Competitors’ pricing reactions.

By now we hope you can see that a strategic plan contains ideas that are specific and clear. It is not a numbers exercise.

over five years offer little in the way of insight. The numbers you need are those that add to the robustness of the ideas in the strategic plan.

“Dad, what do you think they’re looking for?” I told him, “They’re looking for new ideas. Don’t go in there and just have a reprise of last year’s plan. Make your idea the best idea you can, and don’t worry if someone says it’s a bad idea. Make it into a creative process where some new thinking happens that wouldn’t otherwise have happened. That’s an element of a good planning process.”

As businesses pursue growth by expanding their offerings, they often end up trying to provide more goods and services than they can handle comfortably.

After two decades of unfocused growth, Unilever ended up with about 1,600 brands. In 2001 it confronted the problem head on, reducing its brands to some 400.

Many people strategize themselves into the wrong businesses. No matter how well you execute, the risk of failure increases markedly when the ideas you develop don’t fit with your existing capabilities, or force you to acquire those capabilities at too high a cost.

A good idea for a product or service may work at a company like the one that licensed the flat screen but not at a company like AlliedSignal or Honeywell. Good ideas aren’t the same for everybody.

But in company after company, the appetite is much bigger than the ability to digest, and wrong decisions get made. Too much is taken on that doesn’t come to fruition.

A good strategic plan has to be translatable into the operating plan. Not all in one year, but it has to have an action quotient to it.

I want the first three pages of the document to be a summary of the strategic plan. The agreed-upon components of the strategic plan must have a seamless transition into the operating plan.

At the end of the strategy review, write a letter to each of the leaders to solidify and confirm the agreements you made so that later you can use them as the basis for reviewing progress.

YOUR BOSS HAS asked you to drive from Chicago to Oskaloosa, Iowa, a journey of 317 miles. He’s prepared a budget for you with clear metrics. You can spend no more than $16 on gas, you must arrive in 5 hours and 37 minutes, and you can’t drive over 60 miles per hour. But no one has a map with a route to Oskaloosa, and you don’t know whether you’ll run into a snowstorm on the way. Ludicrous? No more so than the way many companies translate their strategic plans into operations.

What you need is what you find in companies that execute: a robust operating process, centered on an operating plan that links strategy and people to results.

The strategy process defines where a business wants to go, and the people process defines who’s going to get it there. The operating plan provides the path for those people. It

the more people who are aware of the expectations for them—the more you achieve.

We see three major flaws in the budgeting or operations process at most companies. First, the process doesn’t provide for robust dialogue on the plan’s assumptions. Second, the budget is built around the results that top management wants, but it doesn’t discuss or specify the action programs that will make those outcomes a reality. Third, the process doesn’t provide coaching opportunities for people to learn the totality of the business, or develop the social architecture of working together in common cause.

These operating plans are typically based on a budget that has been previously prepared. This is backward: the budget should be the financial expression of the operating plan and the underlying plans generated by the business’s components, rather than the other way around.

The financial targets are often no more than the increases from the previous year’s results that top management thinks security analysts expect.

Such a budget can also force people to make poor decisions when they’re desperate to reach their targets. One common practice, for example, is loading inventory into the pipeline just before the end of a quarter—often on overtime—to pump up the numbers. But the business will have to pay a price next quarter, when the managers will have to discount sharply or compromise manufacturing efficiency by cutting back production.

Most companies build their budgets or operating plans with a system designed by accounting people. The leaders set the goals using hortatory slogans like “fifteen-five”: 15 percent growth per annum over the next five years.

Then each business unit does its planning compared with last year and unconnected to the overall picture, with no common understanding or connection and no simultaneous dialogue. This kind of budget process defeats the very purpose of planning.

But would you believe you can prepare your budget in three days? We know a number of companies that do it. The starting point is a robust dialogue among all the relevant business leaders, who sit down together to understand the whole corporate picture, including all of the relationships among its parts. We call this the principle of simultaneity.

Synchronization is essential for excellence in execution and for energizing the corporation.

Debate on assumptions is one of the most critical parts of any operating review

You cannot set realistic goals until you’ve debated the assumptions behind them.

Debating the assumptions and making trade-offs openly in a group is an important part of the social software.

How will your competitors react to your moves? Will they change their pricing? What do you know about their coming product introductions? Will one of them launch a marketing campaign to muscle deeper into your territory?

Top down means that the targets are also set from the whole to the part—that is, for the business as a whole, with subsets for its various components. Too many companies do it the other way around, using the budgeting process to get plans from the various levels of each business and then assembling them into a whole. This creates a lot of wasted effort, since the numbers have to be redone again and again as people negotiate them. This one-page financial overview includes pieces of information not usually included in the operations review: productivity, a census of employees, the investments this year that will show up in future years.