Let's look deeper into what we think about strategy execution and what's required to make performance really the focal point in terms of the strategy of the organization. They say if you steal from one person, it's theft. And if you steal from many people, it's research and we actually have some research that backs up. Some of the things that we want you to learn about strategy execution. There's a study recently by McKinsey that found a very strong relationship between the execution capability of the firm and its eventual performance. Some other studies that get at this, one by John Kotter, that surprisingly found that, about 70% of strategic initiatives failed not because the strategy was bad, but because the organization was poor at execution. That's a big number and we would actually see some other studies that maybe make that number as much as 90%. There's nothing wrong with the strategies, they're actually successful, but the organization is failing in some way to put it into action. Some more evidence around this, a study at the University of Chicago found that 75% of the time of senior leaders is spent on execution issues. A conference board study said that CEO's found this to be the number one issue, it was so critical, finding those ways. Finding the elements that lead to strategic execution. In fact, the joke was that execution was so important to these CEO's. It was not only the number one, but number two issue as well. But lots of studies are saying that organizations struggle with this. An HBR survey of over 1000 executives found that companies, only in about a third of the time were good at execution, and the rest of the time they struggled. What's behind that? What's behind that? When asked about whether the organization was set up for success, a surprisingly small percentage said that their organization actually creates the opportunities for sustained advantage. Only about 15%, which is very, very small, and about 62% of the time, the organization neither helped nor hindered. It was almost neutral and just not really playing a role. A problem almost about 25% of these organizations are saying that the design, the structure, the systems of the organization hold the firm back from succeeding in their performance. That number is way too big and you can see the distribution in this. Raises the issue of what's going on, in terms of a firms ability to execute performance. We want to understand that a little bit better. And part of that is, what do we even mean by execution? Is there a clear idea in organizations of what's required? Former CEO of Honeywell, Larry Bossidy, said when you ask people about what it takes to execute? People think they know. Execution is a function of getting stuff done, but what he says is his experience is when you go deeper and ask them how you get things done, the dialogue goes downhill rapidly, and people don't really have a clear idea of what's necessary to make a strategy work. That's what we want to look at. We've worked with dozens of companies, this is a partial list to ask them what's required for execution in your organization? How do you approach it? Where are the stumbling blocks? What are the best practices that you've learned? And there was a lot of sharing in these executive round tables about the keys to effective execution. Couple things we found from that. First of all, strategy is more than implementing a plan. Execution is about organizational design, it's about the culture of the organization. It's about processes, the systems and technologies and about the human resources. There are a lot of elements that go into successful execution. And they have to be managed as a system. The other thing is, is that, it's not a big curtain up, a static event, a one time action. That execution is enduring and it results from a series of integrated decision overtime. We have to think of this as investing in the capability. Earlier in this course, you really focus on core capabilities. I think it's fair to say, that strategy execution has to be thought of, is that kind of capabilities well. And the third point we learned from this is, that it requires discipline investment and at least four key organizational demands. In fact, we want to organize the rest of this module, around this four domains and a model that we use for, we call The 4A Model, it's alignment, it's ability, it's the architecture, the firm and it's agility. And underlying these four different aspects of execution are two dimensions. One dimension is that, you're managing the resources of your organization. Not surprisingly, there's a human resource that has to be critical to the execution formula. But the other is the organizational resources, the structures, the systems, the processes. And to execute effectively, managers have to think about how they're having those two sets of issues work together. The other dimension is what we would call energy. One executive told us that energy is probably is the least appreciated dimension of performance in organizations and we want to think of energy, both as the potential for the organization, but the creative capacity of the organization and drive performance. But also this energy in motion, a kinetic energy. When you're executing your strategy, is the leader and our managers creating that momentum, the flow of energy towards the performance of the firm. So resources are important and energy may be one of the most critical aspects of execution. And what we'll do is we'll go through each one of these and look at what's required and what are some of the best practices for implementing those elements of execution. As we go through the module, let's keep in mind a couple of things. First of all, strategy is a key differentiator versus top, versus bottom quartile firms. Across the industries that we've looked at, it may even be more critical than the strategy itself. It's how do these organizations execute, and what's the difference that makes them performance? It's also the sine qua non, the without this nothing much else matters in terms of competitive advantage. It's a requirement, and as we've noted, many firms struggle. They struggle in terms of the execution and they actually have a hard time sometimes, even articulating their approach. And so, part of what we want to do is to get clarity around how execution occurs. At the end of the day, it's multi-dimensional. This is an enduring commitment of a lot of different elements that must come together and it needs to be thought of as an investment. An investment in the capability of the organization.
