Strategy alignment triangle

3  propositions are essential to the success of strategy

1. Customer Value proposition (why should buyers come to you?)
2. Profit proposition (Cost-Price-Value Model )
3. People proposition (why should people work for you and execute the strategy

This is true for ANY strategy - blue ocean or red ocean or whatever.

Under red ocean strategy, these 3 need to be aligned within the existing industry (existing customers, existing competitors, existing collaborators) conditions for either differentiation or cost leadership. 

Under the blue ocean strategy, these need to work for new customers / applications, new competitors and new collaborators. Again two options of differentiation or cost leadership are possible.

3 myths that kill strategic planning

Strategy is about Tradeoffs

Strategic thinking is about deciding on which opportunities to focus your resources (time, people, and money) on and in the process which opportunities to let starve. Michael Porter says, “The essence of strategy is choosing what not to do or which initiatives to put on back burner so that you can concentrate your resources in a single key area. Sounds simple but actually it is not - due to 3 myths :

Myth 1: 
Let Productivity take front seat.

Strategic thinking means deliberately leaving some things undone. It means having to tell your people that the idea /project they were working on has been demoted in favor of something else which is more valuable. 

In such circumstances it is tempting to continue striving for productivity. After all, what’s wrong with being productive? The problem is that productivity is efficiency : doing things better irrespective of what strategy you follow. One must remember that without a strategy, productivity is meaningless. As Peter Drucker famously said: “There is nothing quite so useless as doing efficiently that which should not be done at all.”

Myth 2: 
Identify what’s “important" and drop the rest.

If you try and make a list of every project and cross out those that are not important - you will find that no project is less important because every project is “important” to someone somewhere somehow.  That’s why don't debate what’s important.  Strategic thinkers must decide where to focus, not merely what’s “important. He should decide which projects will contribute most to the declared strategy of the organization, and put the rest of the “important” projects on hold.

Myth 3: 
Strategy is only about thinking.

Ultimately, strategic thoughts must yield strategic action. The strategy leader must take a call about what the team will - and will NOT - focus on. Napoleon once said, “Nothing is more difficult, and therefore more precious, than to be able to decide.” Perhaps that’s also why this precious ability to decide is the defining feature of those deemed worthy to hold the highest leadership positions.

Important about learning strategy

Most smart people are used to seeking and finding the right answer.

Unfortunately, in strategy there is no single right answer to find. Strategy requires making choices about an uncertain future. It is not possible to discover the one right answer. There isn’t one. 

In fact, even after the fact, there is no way to determine that one’s strategy choice was “right,” because there is no way to judge the relative quality of any path against all the paths not actually chosen. There are no double-blind experiments in strategy.

To be a great strategist, we have to step back from the need to find a right answer and not intimidated or paralyzed by uncertainty and not get intimidated by the ambiguity; and are creative enough to imagine possibilities that may or may not actually exist and are willing to try a course of action knowing full well that it will have to be tweaked or even overhauled entirely as events unfold.

The essential qualities for this type of person are flexibility, imagination, and resilience. But there is no evidence that these qualities are correlated with pure intelligence. In fact, the late organizational learning scholar Chris Argyris argued the opposite in his classic HBR article Teaching Smart People How to Learn. In his study of strategy consultants, Argyris found that smart people tend to be more brittle. They need both to feel right and to have that correctness be validated by others. When either or both fail to occur, smart people become defensive and rigidly so.

This does not imply that smart people should be kept away from strategy. It does imply however that strategy should not be a mono culture — as it can become in strategy consulting firms — of high-IQ analytical wizards. Great strategy is aided by diversity of thought and attitude. It needs people who have experienced failure as well as success. It needs people who have a great imagination. It needs people who have built their resilience in the past. And most importantly, it needs people who respect one another for their range of qualities, something that is often going to be most difficult for the proverbial smartest person in the room.

Hoshin system of strategy implementation

The challenge faced by many people in the organizations of today is that there is a strategic destination they're all supposed to reach but they don't always have a convenient device to help them reach their objective. Sometimes individuals, teams, and even whole departments can get so far off course that they seem not even to remember what the final destination was supposed to be! This is where it's useful to have a system to co-ordinate different parts of your organization and keep them on course. The proposed system aligns all parts of an organization to accomplish an important objective.

The Process

1. Select a key objective.
2. Aligns implementation plans at all levels.
3. Implements, reviews, and improves the plan on an ongoing basis.

The process follows Deming's "Plan-Do-Check-Act" cycle which is well known as a method of continuous improvement.

Step 1: 
(Plan) Define What You Want to Improve

This is most often a key strategic objective that needs a significant change in how things are done. 

Step 2: 
(Plan) Establish Sub-Goals to Achieve Your Objective

• What organizational (or team/functional/departmental) goals for the year are need to achieve this objective?
• What checkpoints are necessary to keep the goals on track?
• What controls can you put in place to ensure that the goals are successfully reached?
• How will you measure progress and evaluate success?

Record these, and use them as the basis for your review process.

Step 3: 
(Do) Communicate the Plan

• Communicate your plan throughout the organization.
• Ensure that all levels of the company understand your vision and goals.
• Have each department and team set its own goals to link directly to the objective and the sub-goals you've established.
• Make sure that managers in these departments and teams "ripple goals down" so that everybody knows their part in the plan, and is using the Hoshin process to manage the people who report to them.
• Assign clear responsibility for each item in the implementation plan.
• Make sure that you have agreement on all items within the plan with all of your reports, and make sure that this agreement has rippled down as well.

Step 4: 
(Check) Develop a System to Collect Information on Your Control Parameters, and Then use it to Manage Change

Are your key metrics being met? If not, why?

Create a review table that shows the:

• Goal.
• Goal owner(s).
• Time frame.
• Performance metrics.
• Targets.
• Actual results.

Then use this table to manage movement towards these goals on an ongoing basis.

This "check" step ensures that your plan is a living document. It doesn't just sit on a shelf to collect dust once it's finished. Hoshin planning is based on the idea that to reach your strategic goals, the company needs to be in a constant state of reflection and evaluation.

On your review table, note any differences between the target and actual performance. This information will be used for subsequent plans, because Hoshin planning builds in levels over time. The plan you create this year will be used as the basis for next year's plan.

Step 5: 
(Act) Analyze Results, and Take Corrective Action Where Needed

If there are any differences between expected and actual results, identify the sources of those differences. Discuss these, organize corrective action, and implement this action.

• What is going right?
• What is going wrong?
• Do the plans meet the realities of your business and the problems you face?
• Are measures appropriate?
• What can be done better, or differently, to reach your destination?

This stage of the process ensures a system of continuous improvement. To keep moving the company toward its vision, review the plans not just once a year, but on an ongoing basis to determine how daily work should be done. With this review (or act) step, you can ensure that plans continually evolve to take into account a changing environment.

Step 6: 
Repeat the Process as Needed

This process can be cycled over and over to maximize the quality of your efforts. It can also be used within your various business units, functions, and teams to ensure that their specific strategies have the same goal alignment and commitment to continuous improvement.

Tip 1:

A tightly controlled approach like this only suits certain situations and certain industries. Use your best judgment when applying this tool to your own situation.

Tip 2:

Peter Drucker's Management by Objectives (MBO) was very influential in developing this method. The idea of various levels of organizational objectives, from management down to the workers, is a fundamental part of such planning.

The "8" : Strategy Implementation System

The organizational perspective and the individual perspective must meet in order to realize your strategy It is easy to believe the statement but difficult to make it happen. The main reasons for this are (1) Different views of finance, HR and strategy formulators at the top level (2) Lack of ownership by the middle management (3) Absence of a simple methodology.

You need to use top-down as well as  bottom-up processes so that everyone  is involved in executing the strategy; although from different roles.  The execution is a cyclical process and not a one-off exercise. With each cycle, you improve your execution capability and get a better performance  from your strategy.  The main concern is how to link internal individual behavior to changing external circumstances ( customers, competitors, company, collaborators, context). 

For this the senior managers must present the strategy in a focused, easy-to-remember manner and ideally in a story form (hero, villain, circumstances requiring strategy and courage) in order to change the behavior. A manager is a key in this process because he is the one who participates in all the activities like strategy communication, translating the strategy to department, division or team, setting his/her own objectives, defining objectives for the team, coaching for performance, and evaluating performance. The quality of your Strategy Execution is strongly linked to the effectiveness of your managers. The better your managers carry out their Strategy Execution role, the better the results you will achieve. 

SPECIFIC STEPS 

Update your Strategy 
at least annually  based on changes in its competitive environment and on the Strategy Execution feedback from the previous cycle.

Communicate 

when finalized and approved by all stakeholders communicate it in a transparent and easy-to-understand fashion and create engagement for the new/adapted strategy.  One big event and a single strategy e-mail are not enough. Use other meeting platforms, discussion groups, informal and formal encounters, performance management sessions, intranets, websites, screensavers, coffee corners, billboards. You cannot over-communicate your vision and strategy! Senior managers are strategy ambassadors and in addition to the content, tone of voice and presentation skills are essential for an inspiring communication.

Cascade

You break down objectives into smaller chunks for the next organisational level. The process stops at the smallest unit level − these are often teams. In the end, the size of your organization will define the size of the cascade. You should aim for alignment horizontally and vertically and you also need to balance your objectives across perspectives. These 4 perspectives are: financial, customer, internal processes, and people. You can add other dimensions, as appropriate.  In addition to the balancing act on the macro and micro levels, you need to select the right indicators – often called Key Performance Indicators or KPI's −  to track the objectives and define appropriate targets.

Compare & Learn

Your strategy is a hypothesis. It’s your best estimate of the route to success … but it’s still an estimation. It’s crucial to take some time at the end of a cycle to go back and check your hypothesis, to compare your initial strategic assumptions with what you have learned from the reality of the Strategy Execution cycle that is being completed. By doing this, you will put yourself in the forefront − research shows that only 15% of companies take this step.

But at the same time, make sure you don’t just look back at your strategy: take a look at your Strategy Execution capability as well. All too often, we see companies jumping automatically to change their strategy, because they did not reach their projected performance. But, upon examination, there is nothing wrong with their strategy. The problem is in executing it. So, make sure you evaluate your execution capabilities as well!

This ‘compare & learn’ step will help you verify your hypothesis, update your strategy, and fine-tune your execution capabilities accordingly.

Manage initiatives

Initiative management is the activity in which your dreams run up against reality, your strategy meets operations, and resources are added to the strategy formula. This is one of the most difficult steps in Strategy Execution − and so it’s also where execution quite often goes wrong. Initiative management is about selecting, prioritising and executing the right initiatives: those actions that will lead to the realisation of your objectives. Initiative management can be broken down into 3 main activities. See the answer to question 7 for more details.

Set Objectives

Setting individual objectives is one of the best things you can do to improve performance − your own performance, and (if you have them) your team members’ performance. The positive impact of goal-setting is one of the most widely researched and scientifically validated aspects of today’s organisational science. Make sure you link all individual objectives with the strategy at the organisational level. If you don’t, you might have a great objective … but it’s of no use to the organisation! Also, make sure you focus on the way you secure agreement on the objectives. It’s the quality of the objectives – including the link with the overall company objectives – AND the acceptance of the objectives that will make your individual objective-setting a success.

Monitor & Coach

Regular coaching motivates people and increases their chances of success dramatically. It also simplifies the final performance evaluation. In fact, regular coaching is far more important than the formal review meeting somewhere around the middle of the year. Providing feedback in the right way − which is a key coaching skill − is a crucial step in boosting performance!  

Evaluate Performance
Most organisations conduct a formal performance evaluation at the end of the individual performance management cycle. Ideally, the evaluation should answer the question: have the individual performance objectives been achieved? Be sure you make an honest assessment. There are several techniques that can help you. One of the best known is the STAR technique.  Although many organisations link performance to remuneration, performance evaluation is − and should be − a separate process.

 

"vmost" tool for aligning strategy

In the routine day-to-day activities it is easy to lose track of your original business strategy. Your strategies become redundant, vision and mission lose relevance, tactics may not lead to the results you want-and you may not even realize that you've inadvertently changed direction. VMOST tool helps avoid this by checking whether the five VMOST elements – Vision, Mission, Objectives, Strategies, and Tactics – are in alignment. It helps you re-connect to your vision, throw up problem areas you need to address and helps create and evaluate plans. 

Understanding the VMOST Tool

1. Vision – This is your organization's purpose, in terms of its values or how it goes about doing business. It should inspire staff, and help customers understand why they would want to use the company's products or services.
2. Mission – This is also your organization's purpose, but expressed in terms of key measures that must be reached to achieve your vision.
3. Objectives – These are specific goals that you must meet to achieve the mission.
4. Strategy – This is the overall plan you'll follow to meet your objectives.
5. Tactics – These are specific sets of actions needed to execute your strategy.

Looking from the top down, you need alignment because a clear vision drives the mission – which, in turn, lets you set your objectives or goals to achieve that mission. You design strategies to meet your objectives, and you implement your strategies with specific tactics or activities. Looking from the bottom up, your tactical actions should fulfill your strategies, which help you meet your objectives, which help you accomplish your mission, which, in turn, helps you realize your company's overall vision.

Use the Tool

Step 1: Choose the scope of your analysis. Do you want to assess how well your whole organization's day-to-day activities contribute to its vision? Or do you just want to focus on your own contribution, or that of your team? 

Step 2: Collect the five sets of information for the scope you chose in Step 1:

• Vision statement.
• Mission statement.
• Key objectives.
• Strategy document.
• Tactics used to deliver that strategy. 

Step 3: Answer the following questions:

• Do the key measures in your mission statement fit the values described in your vision statement?
• If you achieve the objectives, will the measures in the mission statement reach the levels described in the mission statement?
• Does your organization's strategy support the achievement of the objectives?
• Will your tactics deliver the strategy?

If the answer to every question in Step 3 is yes, you can be reassured that you, your team, or your entire organization – depending on your scope from Step 1 – contributes to your overall vision through your day-to-day activities.

However, if you answered no to any of the questions in Step 3, you need to adjust or redefine one or more of the VMOST elements. For example, if the tactics will not deliver the strategy – and if no tactics you can identify will deliver the strategy – you'll need to reconsider everything else.

Stakeholders and classification

Classification of stakeholders

Stakeholders can be broadly categorised into three groups:

• internal, e.g. employees;
• connected, e.g. shareholders;
• external, e.g.government.

Internal stakeholders: are intimately connected to the organisation, and their objectives are likely to have a strong influence on how it is run.

Connected stakeholders: Connected stakeholders can be viewed as having a contractual relationship with the organisation.

External stakeholders

External stakeholders include the government, local authority etc. This group will have quite diverse objectives and have varying ability to ensure that the organisation meets their objectives