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Mind the Gap: Connecting Execution to Strategy

by Jonathan D. Becher | SAPinsider

October 1, 2010

How can your company join the 10% of organizations that effectively execute on their business strategies? With insights on the bigger picture, SAP Executive Vice President Jonathan Becher offers five ways to better align strategy and execution to help keep organizations on track.
 

Consider what an enterprise must do in order to align strategy and execution. Once its leaders have formulated their strategy, they need to devise plans, budgets, and measurements to execute it. Any risks to these plans must be well understood and documented, and the plans need to be communicated down the chain to all of the relevant stakeholders.

Once plans are set in motion, the enterprise needs organization-wide transparency so that leaders can monitor, in real time, how the plans are carried out. Insights that become visible because of this transparency need to be channeled back to managers for decision support. Alerts triggered by unexpected events and risks emerging from underlying systems need to be sent to key people. Managers need to refine the strategy and influence the actions of other stakeholders. And the cycle continues.

It’s a closed-loop process for optimizing business performance; missteps can significantly affect performance (see Figure 1). Overcoming those missteps is not an easy feat, but it’s achievable.

Figure 1 When striving to align strategy and execution, organizations should be aware of three drivers that can hinder business performance

5 Ways to Better Align Strategy and Execution

Aligning strategy and execution is a well-identified goal — but how can you actually realize it? Here are five tips to help keep your organization on track.

1. Choose KPIs Wisely

All too often, I see organizations rush to deploy metrics based on what data is readily available and easy to track, rather than on indicators that deliver true insight into their business. You’re likely familiar with the phrase, “What gets measured gets done.” But I prefer this quote attributed to Albert Einstein: “Not everything that can be counted counts, and not everything that counts can be counted.”

When you choose key performance indicators (KPIs), make sure that you assign target value up front. If you don’t, how will you know if you’re making progress toward your goal? Also remember to measure impact rather than just activities. Do you want to know how much water is going through the pipes, or whether the grass is getting greener?

2. Don’t Over-Rely on Financial Indicators

Organizations often use financial figures to address the gap between strategy and execution, using them to show whether they are meeting or exceeding target revenues, profitability, and cost-cutting goals. But financials are not useful for proactively managing organizational performance to ensure future success. While they help measure today’s performance against the past, they have little predictive power — as we have seen all too clearly in the past few years.

Financial figures don’t warn of issues that jeopardize future success, such as declining employee morale, customer satisfaction, or product quality. Moreover, many employees don’t fully understand financial measures. As an abstract view of organizational performance, financial numbers provide little guidance for employees as they make decisions, determine priorities, and allocate resources on a daily basis. Make sure your tools can measure more than financial indicators.

3. Remember That People Are the Key Drivers

When aligning strategy and execution, tools will take you only so far — you need to involve your people as well. Failing to educate and motivate stakeholders gives rise to an army of employees operating with disparate agendas and doing little to effectively advance organizational objectives.

Individual employee goals, assessments, and incentive plans are very important to this effort. Research reveals that 70% of organizations don’t tie incentives to strategy.1 Incentives don’t have to be just bonuses (although money is always popular); they can be recognition or other non-monetary rewards.2

A well-articulated strategy doesn’t just issue mandates; it motivates employees. Most employees want to do their jobs better, but they don’t understand how what they do is linked to corporate, group, or even departmental strategy. This is why I often say you don’t have to measure to improve — just explain where you want to go.

4. Propagate Best Practices

I’m a staunch advocate of sharing best practices. They make it easier for employees to obtain information, learn from colleagues, and implement well-defined processes. At the heart of what companies are trying to do is alignment — getting everyone on the same page. Thus, what works in one department should be shared with another. This can be as simple as sharing business intelligence (BI) reports in a common library, adopting common definitions of terms (it’s amazing that organizations often have multiple definitions of words like “customer”), or adopting a single application to limit control gaps in your processes.

5. If You’re Unsure of Which Solutions to Use, Ask Us

With the acquisition of Business Objects, SAP has become the place to go for all the solutions required to bridge the strategy-to-execution gap and boost performance. Our SAP BusinessObjects solutions span the disciplines of BI, enterprise information management (EIM), enterprise performance management (EPM), and governance, risk, and compliance (GRC). To address targeted, industry-specific requirements, we also offer SAP BusinessObjects analytic applications, which build on the rest of the portfolio.3

To align strategy and execution, you need to involve all of these areas; the solutions are designed to work in concert to leverage visibility and knowledge gains across lines of business. And it’s important that the SAP BusinessObjects solutions work with SAP and non-SAP systems, since — I broad-mindedly admit — execution doesn’t take place on SAP systems alone.

If you have any questions about which SAP BusinessObjects solutions to use, we are here
to help. As a first step, I recommend visiting www.sap.com/sapbusinessobjects.

Get Answers to the Questions That Will Make or Break Business Performance

SAP customers usually get high grades on process efficiencies. But world-class processes don’t necessarily translate into strong business performance unless they’re governed by great strategies. Conversely, great strategies don’t achieve great results in a vacuum. They have to be executed on time, on budget, and on target. And the organizations that execute them need to have a transparent view of their operations from top to bottom, the agility to respond to change, and the trusted information that lets them act with confidence.

The SAP BusinessObjects portfolio offers the functionality to achieve this critical alignment. Our solutions for BI, EIM, EPM, and GRC have been designed to work smoothly together and offer results quickly — whether on an SAP platform or a heterogeneous collection of software. In the current economic climate, these solutions become indispensable. They provide answers to the questions that either limit or unleash corporate performance:

  • Is the organization doing what we say we want to do?
  • How do we know we’re all headed in the same direction?
  • How do we prioritize based on what’s important rather than what’s on fire?
  • Do we have confidence in our decisions?
  • Are we sure that our actions are in compliance and that we can track the potential risks to our objectives?
  • What should we do next?

Only by ensuring that its day-to-day operations align with its long-term vision can a company become one of the 10% of organizations that effectively execute on their strategy.4 

Jonathan D. Becher (jonathan.becher@sap.com) is an active participant in the performance management community, a frequent speaker at industry conferences, and a published author on various subjects. As Executive Vice President of Marketing at SAP, he is responsible for championing SAP’s efforts to help organizations close the gap between strategy and execution so they can optimize business performance. He joined SAP through its acquisition of Pilot Software, where he was President and CEO.

1 Robert S. Kaplan and David P. Norton, “The Office of Strategy Management,” Harvard Business Review (October 2005). [back]

2 For more insights on incentives, please see Jonathan Becher’s blog entry, “Cash or Non-Cash Rewards?”. [back]

3 For an overview of the SAP BusinessObjects solution portfolio, please see Paul Clark’s article "How Well Do You Know the SAP BusinessObjects Portfolio?" in this issue of SAPinsider. [back]

4 See footnote 1. [back]

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