Hirschhorn

www.cfar.com • Philadelphia 215.320.3200 • Boston 617.576.1166

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Strategy Execution

Larry Hirschhorn PhD

July 23, 2010

George Washington University2

©CFAR 2009 • 100717-G19-10698

Research shows that many strategic change efforts fail

• The authors of a survey of 898 manufacturing companies across four countries report that success rates in instituting new management practices on the factory floor, such as just-in-time manufacturing, were only moderate at best (1)

• A survey of change efforts found that only 38% demonstrated positive results (2)

• Paul Nutt found, through a careful study of decisions, from deciding to build the Millennium Dome in London to the Denver International Airport, that half of all decisions failed (3)

1. D. Holman et al, “Change and innovation in modern manufacturing practices: An expert panel survey,” Human Factors and Ergonomics in Engineering, Volume 10, pp. 121 – 137, 2000.

2. C. Glegg and S. Walsh, “Time for a Change! European Journal of Work and Organizational Psychology, 13(2), 217-239.3. P.C. Nutt, Why Decisions Fail: Avoiding the Blunders and Traps that Lead to Debacles. San Francisco Berret-Kohler publishers; 2002.

Much time and money is wasted; leadership credibility is damaged.

What’s missing?

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In CFAR’s experience, there are five reasons why strategy execution fails….

1. THE STRATEGY ITSELF Executives don’t take the time to identify and work through enough of the planning assumptions that underpin the strategy.

• Consensus, then, is not deep enough, and in the interests of minimizing conflicts, hot issues are suppressed.

2. THE DETAILS Going from the “big picture” to the critical details is not systemically tackled. It is here that unanticipated barriers and bottlenecks can be surfaced.

• Without seeing the interaction of the details, executives miss creative strategies for overcoming barriers.

3. THE POLITICS The leadership coalition sponsoring the change underestimates the need for credible connections to important opinion leaders or subgroups with power.

• There is no supportive political coalition which can provide the breathing room and “tolerance for error” leaders need to execute a strategy

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…., cont’d.

4. THE FUTURE ORGANIZATION & DECISION MAKING The organizational design associated with the strategy feels abstract.

• As a result, the legacy culture exercises a strong backward tug on efforts to create new decision protocols associated with achieving strategic goals.

5. RESISTANCE FROM THE FRONT LINE: In addition to leader’s “push” of their strategic message, they sometimes don’t know how to create “pull” so that people in the trenches are motivated to try out new behaviors and practices associated with the strategy.

• People resist, so execution comes to a halt.

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There are tools to help executives work through each of these challenges.

Presenting Issue Tool

The strategy itself . Planning assumptions: a look back

The details. Backcasting

The politics Organization network analysis.

The future organization Decision charting: is and ought, current and future

The front line History of the future

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Think of execution as walking up a staircase

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We asked you 16 questions on a survey to assess which steps on the staircase might be troubling you

1 Members of the executive team understand why we developed this strategy.2 This strategy will change the way we make decisions.

3The strategy we developed is an effective response to new client needs, to new mandates from government, or to competition from other organizations.

4 If we successfully implement our strategy some roles will gain influence and some will 5 People in the front line understand how our strategy should reshape the work they do.6 Implementing this strategy entails many moving parts.7 We will stumble on organizational politics as we try to implement this strategy.8 It is hard to anticipate the barriers and bottlenecks we are likely to face as we try to 9 Our strategy is the result of too many compromises.

10 The people who do the day-to-day work have the tools to implement the strategy.11 I understand my own role in implementing the strategy.12 It is hard to understand what will look different in the future as a result of 13 The people at the front-line have the incentive to implement the new strategy.14 We have a strategy execution plan in place which inspires confidence.

15The leaders of this strategy execution effort are weakly connected to other influential people within the organization.

16The executive team of our organization or agency will know quickly if we make some missteps or lag behind in implementing our strategy.

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We also asked you to specify how far along you were in your implementation effort

0

2

4

6

8

10

12

14

16

18

Less than amonth; we just

started

Between 3 and 6months

One year More than oneyear

No opinion, Notapplicable

Nu

mb

er

of

resp

on

den

ts

Most of you were either between 3 and 6 months or more than a year

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We calculated the change in agreement with each statement between these two time periods

• For some items more agreement between the two time periods indicated less anticipated difficulty. For example, “I understand my own role in implementing the strategy.”

• For other items more agreement indicated more anticipated difficulty. For example, “We will stumble on organizational politics as we implement this strategy.”

These comparisons provide some insight into how the implementation process is experienced as time passes.

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These items indicate that people anticipate less difficulty as time goes by

0 0.2 0.4 0.6 0.8 1 1.2 1.4

The people at the front-line have the incentive to implement the newstrategy.

Members of the executive team understand why we developed thisstrategy.

The executive team of our organization or agency will know quicklyif we make some missteps or lag behind in implementing our

strategy.

The people who do the day-to-day work have the tools to implementthe strategy.

The strategy we developed is an effective response to new clientneeds, to new mandates from government, or to competition from

other organizations, private or public.

The people who do the day-to-day work have the tools to implementthe strategy.

People in the frontline understand how our strategy should reshapethe work they do.

I understand my own role in implementing the strategy.

10

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These items indicate that people anticipate more difficulty as time goes by

-1.8 -1.6 -1.4 -1.2 -1 -0.8 -0.6 -0.4 -0.2 0

The leaders of this strategyexecution effort are weakly

connected to other influentialpeople within the organization.

Implementing this strategyentails many moving parts.

It is hard to anticipate thebarriers and bottlenecks we are

likely to face as we try toimplement our strategy.

It is hard to understand what willlook different in the future as a

result of implementing ourstrategy.

We will stumble on organizationalpolitics as we try to implement

this strategy.

This strategy will change the waywe make decisions.

Our strategy is the result of toomany compromises.

If we successfully implement ourstrategy some roles will gaininfluence and some will lose

influence.

11

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We can categorize the areas in which as a whole group you anticipate more difficulty

THE POLITICSThe leaders of this strategy execution effort are weakly connected to other influential people within the

THE DETAILS Implementing this strategy entails many moving parts.

THE DETAILSIt is hard to anticipate the barriers and bottlenecks we are likely to face as we try to implement our strategy.

THE DETAILSIt is hard to understand what will look different in the future as a result of implementing our strategy.

THE POLITICSWe will stumble on organizational politics as we try to implement this strategy.

DEICISION MAKING This strategy will change the way we make decisions.THE STRATEGY ITSELF Our strategy is the result of too many compromises.

THE POLITICS If we successfully implement our strategy some roles will gain influence and some will lose influence.

“Politics”and “details” stand out as important issues. These are areas that require closer attention.

15

6

8

12

7

2

9

4

Item no.

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In addition it is striking that many respondents believe that the strategy itself is the result of too many compromises

0

5

10

15

20

25

30

DisagreeStrongly

DisagreeSomewhat

Neither AgreeNor Disagree

AgreeSomewhat

Agree Strongly N/A or NoOpinion

Response

Nu

mb

er

of

Pa

rtic

ipa

nts

Our strategy is the result of too many compromises

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People who are more connected to the implementation effort believe more strongly that the strategy is the result of too many compromises

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

I am the leader, I am a memberof the team

I have changemanagement

responsibilities

I am periodicallyasked to voicemy opinions

I am in aninternal

consulting roleto

I am an outsidert but can

observe whatpeople are trying

to accomplish

None of thesecategories apply

to me

Response

Doesn'tapply/NoopinionStrongly agree

Agree somewhat

Niether agreenor disagree

Disagreesomewhat

Stronglydisagree

`

11 317 15 16 17 9 Number of people=

14

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

I am theleader,

I am a memberof the team

I have changemanagement

responsibilities

I amperiodically

asked to voicemy opinions

I am in aninternal

consulting role

I am anoutsider butcan observewhat peopleare trying toaccomplish

None of thesecategories

apply to me

Response

Doesn't apply/Noopinion

Strongly agree

Agree somewhat

Niether agree nordisagree

Disagree somewhat

Strongly disagree

The leaders of this strategy execution effort are weakly connected to other influential people within the organization.

People closer to the effort are more worried about the politics

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The average agreement across all groups is strongest for “many moving parts” and “making decisions”

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5

The leaders of this strategy execution effortare weakly connected to other influential

people within the organization.

Implementing this strategy entails manymoving parts.

It is hard to anticipate the barriers andbottlenecks we are likely to face as we try to

implement our strategy.

It is hard to understand what will lookdifferent in the future as a result of

implementing our strategy.

We will stumble on organizational politics aswe try to implement this strategy.

This strategy will change the way we makedecisions.

Our strategy is the result of too manycompromises.

If we successfully implement our strategysome roles will gain influence and some will

lose influence.

Average level of agreementwithin groups

Politics

Details

16

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Let’s examine one tool called “backcasting.” It is used for managing the “details” and overcoming “bottlenecks.” Consider this learning from Iraq

• In the war for Baghdad, the United States’ generals developed a doctrine or strategy called clear and hold.

• U.S. troops would clear a neighborhood of guerilla fighters and the Iraqi army would hold the area. But Iraqi troops were unprepared so that when U.S. troops retired to their bases, guerillas returned.

• Only when the army changed its doctrine from clearing an area to protecting its residents did they understand what holding required. It meant living close to the neighborhoods, rather than in large distant bases, taking a census of the population, providing services and talking with community leaders. The big stick took a back seat.

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To “hold” an implementation in place you have to attend to the details

• Consider the early failures of Euro-Disney. Attendance numbers were disappointingly low for the first several years, because the planners and executives missed some telling details.

• Disney did not serve liquor in its parks but the French gave their children diluted wine to drink

• Americans are ready to eat their lunch while walking, munching for example on a hot dog, but Europeans wanted to sit down for lunch. As a result dining facilities were far too overcrowded at lunch.

• In Europe many families associate parks with picnics on the grass, but Disney forbade customers from bringing in any food

• Sometimes we err by missing the trees for the forest!

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One reason that details are missed is because executives use “one step thinking.”

• Circuit City declared bankruptcy in November of 2008, but in the earlier stages of its cost cutting it reduced expenses by firing its most experienced salespeople, 3,400 of them, in March of 2008

• There was logic to this. They were the most expensive employees

• But the experienced salespeople gave customers the best service.

• When they were let go service levels fell and so did sales, particularly of big-ticket items (Joyce, 2007).

• Short term gains but longer-term losses!

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But there is a systematic way of using multi-step thinking: Look for problems and solutions

• Problem Our profits are low

• Step 1 : Fire expensive sales people

• Question How could this fail?

• Answer Our sales will drop, keeping our profits low

• Step 2: Retain some experienced sales people to train and supervise inexperienced sales people

• Question 2: How could this fail?

• Answer 2: Experienced sales people will worry that they will be replaced by the people they train: what is their incentive?

• Step 3: Let experienced sales people share in the upside as sales productivity improves.

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We can show this chain of reasoning visually

Accomplishment

Obstacle

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Now let’s look at a client’s problem. An company selling online education courses wants to develop “front-end” consulting services

Accomplishment

Obstacle

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Here is the Iteration 1

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Iteration 2

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Eliminate the obstacles and see the Accomplishments chart

10 conditions that must be true in the future if JG is to reach his goal

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This chart also shows that conditions 1-4 are necessary for all the other conditions. If you can’t accomplish them don’t get started!

• Look at 4: “JG runs a virtual coaching class in which sales people review their experiences”

• This actually will not happen until later. But if JG believes that he could never accomplish this, then he should not get started now.

• Put another way, the backcast predicts that JG’s effort will fail if salespeople do not retain the knowledge they acquired in the training program.That is why he will need the coaching program

• This is how backcasting helps you think “several moves ahead’ and leads you to “cross the bridge (virtually) before you come to it.”

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The backcast let’s you write a “history of the future”

• Major General David Fastaband, chief of military strategy for General David Petraeus, the architect of the surge strategy in Iraq, wrote an essay entitled, It’s Fourth and Long, Go Deep.

• The essay imagines Petraeus telling the story, two years into the future of the army’s success with its surge

• We call this a History of the future.

• Typically, while it is challenging to write a particular scenario—how we would like our part of the world to look five years from now—it is even harder to write the story of how we get from here to there. This is because the story has to highlight the sequence of changes that led to our goal, not just the features of the goal itself.

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A history of the future makes the change process real and visceral for people. It is a great communications and motivation tool

Interviewer: It appears that you were able to build a front-end consulting service within an environment that was cost-constrained. How did you this?

Len: I paid attention to two complementary tasks, assuring that the internal environment was hospitable and the salespeople could sell an intangible service

Interviewer. How were you able to get the sales people up to speed?

Len: Well, I developed a structural and behavioral solution. The consulting service was not nearly as tangible as courses from a catalogue. But I broke the services down into its componentsŃ performance consulting, competency profiling, giving feedback on performanceŃand I linked courses into the catalogue to these different consulting modules This made it easier for the salespeople to describe what the consulting services did and how it related to the courses they were also selling.

Interviewer. Does that mean that the salespeople had to understand the consulting process?

Len: VP for HR: Well, we did give them a chance to ride shotgun when one of our consultants went to a prospect to do a needs assessment, but more importantly we found that we had train them on how to qualify a prospect for purchasing our consulting service.

Interviewer: How did you do this?

Len: Well, É.

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Remember the old poem

“For want of a nail, the shoe was lost; For want of the shoe, the horse was lost; For want of the horse, the rider was lost; For want of the rider, the battle was lost; For want of the battle, the kingdom was lost; And all for the want of a nail.”

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CFAR can deliver a backcast over the course of 2-3 weeks

• Meet with the executive

• Conduct 3-5 groups interviews

• Present a draft backcast chart to the executive

• Revise the backast

• Present a completed backcast to a workshop of the executive and his or her direct reports.

• Work with two direct reports to write a history of the future

• Develop a communication strategy for using the history of the future with the troops