By Graham Kenny hbr.org
A business involved in conducting clinical trials for medical and pharmaceutical companies recently sent me a copy of their strategic plan for review in preparation for a forthcoming strategic planning workshop. I studied the nine pages carefully. But despite its promise to outline the company’s “Mission, Vision, Strategies, and Actions,” the document contained no real strategy.
This is not an unfamiliar experience for me. I come across it all the time because a company’s managers often confuse a strategy’s design with its execution. Recognizing the difference between these two will have a major and positive impact on your organization’s performance.
Strategy design involves detailing positions to take on what I call strategic factors. These are the decision criteria used by key stakeholders, i.e., the criteria used by customers in deciding to buy from a business, or by employees in deciding to work for an organization, or by suppliers in deciding to supply to a company. Strategy design concerns the position that, for instance, Ford or Toyota as a company takes to woo customers on factors such as product range, price, retail locations, product quality and image.
Positioning can be quite subtle and can equate to the different brands of a business. Take, for example, the Accor hotels group. Accor carries a range of brands each catering for a different set of target customers with varying positions on customer service, price, and quality. It has a luxury end (Raffles, Fairmont, Sofitel), a premium space (MGallery, Pullman, Swissôtel), midscale (Novotel, Mercure, Adagio) and economy (ibis, hotelF1).
Strategy design must take place at the organization level because each business faces its competitors in the marketplace. They compete, company against company.
The reason executive teams struggle with strategy design is that they don’t adopt organization-level thinking at the start. They rush to execution at a strategy retreat, because they invariably arrive ready to address what they need to do. Unless the doing impulse is switched off, until design is ready, the cart gets put before the horse. This has clients leaving their retreat with a hodgepodge of actions but still no clear idea of where their organization is heading or how it differs from competitors in the marketplace.
I could see this in the clinical trial company’s strategic plan. It had pages of actions and they were fine – up to a point. The problem, as my pre-workshop interviews with members of the executive team exposed, was that the organization is “drowning in things to do” – the words of the CEO. Another executive suggested that the company needed “clarity about where we’re heading.” Yet another proposed that “we need a bigger picture around the strategic stuff” adding that “we get sucked into micro measurement.” Another executive described this abundance of activity as “leaving staff feeling quite lost.”
What the planned workshop had to achieve was clarity on the company’s positioning on the strategic factors for its key stakeholders and a stripping away of non-essential actions leaving only those which clearly drove these positions. To do that I needed to shift the executive team’s thinking away from individual action and up to organizational positioning.
What we concluded at the workshop was that there were two fundamentals that would drive the business’s success over its rivals – lower prices and superior client service. The CEO described the company’s larger competitors as “very expensive.” As work was won from clients on a tender basis, price would be positioned case by case. Where the company stood on service could be stated overall.
To lift the executive team’s thinking to the strategy design level I employed a technique which I’d used in the past to yield dividends. I asked, “As an organization what is your position on client service?” The wording and emphasis are deliberately chosen to shift thinking away from individual action.
The team crafted the following response: “A service tailored to each client’s specific needs involving a unique combination of pre-clinical planning with the avoidance of regulatory hurdles to streamline the product approval process.” Reduced lead times through the approval process allowed clients to commercialize their products sooner, giving them a first-mover advantage in their markets and delivering income flows from their products much earlier.
Lower prices and better service can be a killer combination, and this has proven to be the case. It has given the company a significant competitive edge over its rivals. From a base relatively small compared to its larger competitors, the CEO reports a “28 per cent year-on-year sales growth for the last three years.”
In preparation for your next strategy retreat recognize that underpinning the essential difference between strategy design and execution is level of analysis. While most participants may be unaware of it, it is one of the most important and useful concepts in social science. Strategy design operates at the organization level.Strategy execution operates at the individual level. If you don’t make this distinction, you’ll be committing the error I’ve seen in many clients. You’ll mistake individual action for strategy. And that can be disastrous.