Archive for October, 2014

Good Strategy Execution Pays Off

Tuesday, October 28th, 2014

I’ve believed for many years that how a company executes its strategy is more important than how it develops the strategy.Good strategy execution pays off well when you focus on these 7 key capabilities

I’m talking about the business strategy, the one that deals with all parts, departments or functions of a company.

My point could also apply to departmental or specific strategies; for example, sales or marketing strategies, since theoretically, these all flow from the business strategy and are integrated with it.

Previously, I’ve never had any evidence to support my belief since common sense, apparently, does not qualify as evidence.

No more.

Earlier this year, no less an authority than McKinsey & Company¹ gave me evidentiary support for my arguments.

They used their Implementation Capability Assessment to separate companies that are good at execution from those that aren’t. The survey then found that good implementers:

  • Maintain twice the value from their prioritized opportunities after 2 years.
  • Score their companies 30% higher on a series of financial performance indicators.

So there! Executing well pays off – literally.

How do you know if your company is a good implementer or a poor implementer?

McKinsey identified 7 key capabilities for executing well. Every company may have them to some extent. Yet businesses which are good at execution, are almost twice as good at them.

The 7 capabilities are:

  1. Ownership and commitment to execution at all levels of the company.
  2. Focus on a set of priorities.
  3. Clear accountability for specific actions.
  4. Effective management of execution using common tools.
  5. Planning for long-term commitment to execution.
  6. Continuous improvement during execution and rapid reaction to amend plans as required.
  7. Allocation of adequate resources and capabilities.

Finally, here’s the good news. Good implementers believe that execution is an individual discipline, which can be improved over time.

Does this confirm my belief that how a company executes its strategy is more important than how it develops the strategy?

Partially. More importantly, it does demonstrate that time spent improving a company’s ability to execute is time well invested.

As for the comparison to developing a strategy – I’ll just have to keep on looking.

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¹ “Why Implementation Matters”, McKinsey & Company Insights, August 2014

 

If you enjoyed this post you’ll also enjoy To Grow or Not To Grow – That Is The Question

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

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How Do You Know If Your Company Will Fail?

Tuesday, October 21st, 2014

Let me go back almost 20 years to give you some context.How do business owners know if their company is on the path to decline?

My last real job (that’s what my wife calls the jobs I had before I became a consultant) was running the Canadian subsidiary of a 100-year-old, multi-national corporation.

Our owners, a much larger, publicly listed corporation, had bought us years before as a ‘cash cow’. There was, therefore, very limited investment in any aspect of the operations.

When I joined, the core business was rapidly being replaced by a new technology. We developed a new strategy for Canada and quickly set about executing it.

But, even when we appeared to be having some success with the new strategy, I used to ask myself if it was already too late – and how I would know if it was.

Now let’s return to the present day.

I’m re-reading Jim Collins’ book “How The Mighty Fall”. It was written as a result of a CEO asking how he would know if his company, successful as it had been, was already on the path to decline.

Imagine me asking the same question as the CEO of one of America’s most successful companies – several years before he asked it. It would indeed be remarkable, were it not for a few important details.

Clearly the circumstances were different. The CEO was being more farsighted than my employers had been.

And, more importantly, I’ll bet that many business owners have worried – and still worry – over the same question. I’m sure they started long before I asked it and some are still asking it now.

So why even raise the topic?

For one thing, if Collins’ book had been available in the mid-1990s, I would have had my answer. I would have known that, in time, the company would be sold to a competitor and, when that didn’t work, be absorbed by another competitor and almost completely disappear.

For another, “How The Mighty Fall” should be mandatory reading for all business owners. Or at least for those who understand that their past successes offer no guarantee, or even protection, for the future.

One point that caught my attention – and I’m only on page 48 – is that complacency was responsible for only one of the failed companies.

Another is that being an innovator was no protection from failure.

I would have assumed the opposite in both cases. So, perhaps I’m not as far ahead as I thought…………

 

If you enjoyed this post you’ll also enjoy Targets Are Targets, Results Are Reality

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

Knowing and Doing – The Difference Affects Results

Tuesday, October 14th, 2014

There are advantages to getting older.Knowing the right thing to do and doing it to get results

Knowing the right thing to do.

One is you realize that to be successful, you only have to apply a few simple principles, most of which contain an element of common sense.

Another is that you learn that applying those principles is surprisingly difficult to do.

This last pearl of hard-earned wisdom helps when I read articles and posts about ways to improve business results, that we’ve known about for years.

It prevents me from becoming cynical – even when the authors package them as a new breakthrough that only they were capable of making.

Why is that?

It’s because I know that we – owners, executives, and even consultants – are constantly blind-sided by the day-to-day pressures of running a business. And that makes us lose sight of these fundamentally simple, common sense concepts.

So there’s a real benefit to having them repeated.

Doing the right thing.

Someone much smarter than I am once said “Knowing the right thing to do isn’t difficult. Doing the right thing is what’s difficult.”

I know that’s true.

We work every day with business owners and their teams who often know what to do to be successful (they have a good strategy) but who have difficulty actually doing those things (executing their strategy).

We’re no smarter than they are.

But we have the benefit of being able to focus on linking their strategy to action, helping them get buy-in throughout their organization and then holding them accountable for doing what they said they would.

No distractions for us.

Staying focused on a manageable number of activities which will have a high impact on the future and produce a high return on the resources invested in them, produces good business results.

No surprises there, right?

I could have used a bunch of big words to make the same point.

Or I could have proclaimed this was a new technique that would guarantee results.

But it’s not. It’s wisdom that’s been well proven over time.

Something, however, that bears repeating by a third party that, because of their perspective, can see woods without being blinded by the trees.

It’s worth thinking about as many of us head into annual business planning season.

 

If you enjoyed this post you’ll also enjoy A Lesson in Strategy Execution from a Successful Business Owner

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

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