How to Really Link Strategy with Execution
Most companies implicitly execute as if they were pursuing a Best Product commodity strategy. No degree of competent execution can save them from this never-ending treadmill. The core processes of the company need to be aligned to the chosen strategy in order to make progress against their strategic agenda and avoid a commodity-like outcome. The Delta Model identifies the core processes of the business and provides a guide for how they need to function differently to achieve different strategic positions.
The Triangle provides us with guidance on how to get the strategy formation dialogue started. The Adaptive Processes tell us how to carry the strategic position to a high level of execution excellence. Each strategic positioning included in the Triangle requires a very different set of tasks and activities to drive successful implementation — "execution itself is not the problem, linking it to strategy is".
To really link strategy with execution, we have identified three business processes that we feel capture quite concretely the nature of the managerial work, and whose roles need to change depending of the strategic options they are supporting. These processes are:
- Operational Effectiveness — the production and delivery of goods and services. This process should produce the most effective cost and asset infrastructure to support the chosen strategic position of the business.
- Customer Targeting — the management of customer interfaces. This process should drive the identification and selection of attractive customers and the enhancement of customers' performance to establish the best revenue infrastructure for the business.
- Innovation — the process of new product development. This process should assure a continuous stream of new products and services to maintain the future viability of the business.
What we find particularly intriguing is that most managers naturally define each process according to a Best Product strategy. Namely, Operational Effectiveness seeks to establish an internally efficient cost infrastructure; Customer Targeting seeks coverage through distribution channels; and Innovation seeks the proper development of the firm's products aided by appropriate platforms and first-to-market expectations. However, the requirements of these adaptive processes are quite different when they support the Total Customer Solution (TCS) and System Lock-in (SLI) strategic options.
In the Total Customer Solution strategy, Operational Effectiveness has as the key objective the maximization of the customer value, and it is supported by the combined value chain of the firm and its customers. Customer Targeting is aimed at developing individual customer bonding, by increasing marketing intelligence and customer interface. Innovation is targeted at the development of a composition of customized products jointly with the customer.
In the System Lock-in strategic position the role of each process continues to change and adapt. Operational Effectiveness is concerned with enhancing the overall system performance, by consolidating strong partnerships with complementors. Customer Targeting attempts to consolidate harmonized system architecture through a network of complementors and complementor interfaces. The ultimate Innovation goal is to develop an appropriate industry standard, managing the breadth and range of applications and interfaces.