Organizations in the knowledge era face particular problems when attempting to develop strategic differentiation through strategic planning and execution. The key difference when compared to previous era’s is the fact that employees are the key drivers of successful execution but as highly independent knowledge workers it can be extremely hard to get them to share a vision and buy into organizational strategy which is crucial for strategy implementation. Not only that, since many workers have grown numb to the many strategic initiatives thrown at them, getting them to believe this time will be different is a major challenge.
In his book (Strategy and the Fat Smoker), David Maister states:
“In the last two-and-a-half decades, I have been trusted to see a large number of strategic plans from a wide variety of professional firms around the world, including direct competitors. What is immediately noteworthy is how similar (if not identical) they all are.”
He goes on to say:
“Real strategy lies not in figuring out what to do, but in devising ways to ensure that, compared to others, we actually do more of what everyone knows they should do.”
The view of strategy that Maister takes is one based on operational and execution success, one which I believe should be more widely understood and accepted within any firm. The alternative view is propagated in the positioning school of strategy such as that proposed by Michael Porter (Harvard professor) who claims that firms should seek unique strategic positions based on detailed analysis of the market. Similar views are suggested by the authors of the book, Blue Ocean Strategy (W. Chan Kim and Renee Mauborgne) who suggest firms should reconstruct the value proposition and create new, uncontested market spaces. Their research, and similar to much academic research which compares the success and failure of comparative firms, often suffers from what Phil Rosenzweig called the Halo effect in his book of the same name. He says:
“Much of our thinking about company performance is shaped by the Halo Effect, which is tendency to make specific evaluations based on a general impression. When a company is growing and profitable, we tend to infer that it has a brilliant strategy, a visionary CEO, motivated people, and a vibrant culture. When performance falters, we’re quick to say the strategy was misguided, the CEO became arrogant, the people were complacent, and the culture stodgy. Using examples like Cisco, ABB, IBM, Lego, and more, I show how the Halo Effect is pervasive in the business world. At first, all of this may seem like harmless journalistic hyperbole, but when researchers gather data that are contaminated by the Halo Effect—including not only press accounts but interviews with managers—the findings are suspect. That is the principal flaw in the research of Jim Collins’s Good to Great, Collins and Porras’s Built to Last, and many other studies going back to Peters and Waterman’s In Search of Excellence. They claim to have identified the drivers of company performance, but have mainly shown the way that high performers are described. My book is the first to show why, for all their claims of voluminous data and rigorous analysis, their research is fundamentally flawed—and why their conclusions about the drivers of company performance are unfounded”.
There is little doubt that strategy development and execution must be closely tied together for any strategic initiative to be successful, especially in the knowledge era where it is the workers/employees who live and breathe the strategy every day in their interactions with the market place. It’s no use developing a customer centric strategy which is intended to cross sell the firms services if the people inside the firm won’t commit to learning about other functions and thinking about how these can add value to the needs of the customer. To change the behaviour of employees one must address the underlying cognitive issues that are driving them towards the same behaviour day in and day out, these may include:
- Poor leadership – people observe senior management and don’t see them practicing what they preach
- Remuneration and management structures – people don’t see how their investment in bringing the strategy to life fits the existing structure of the firm and its incentive systems
- Knowledge and skills – people don’t believe they have the knowledge and skills they need to bring the strategy to life
- Link – people don’t see the link between certain behaviors, initiatives (such as KM) and firm performance
- Competitiveness – people don’t understand the foundation of customer value and competitiveness and think that basic training can solve sales declines
- Marketing – senior management who believe that marketing is about cost as opposed to creating market insight and customer value
- Time – partners who think they don’t have the time to engage in non billable activities since they are too ‘busy’ with client work and such time is not recognized as an investment by the firm
- Success – management who believe the firm is doing well and will continue to do in the future, so why change?
There are probably many other cognitive factors one could list, but addressing the underlying reasons why people won’t change their behaviour would be time and money better spent than engaging in the endless stream of seminars and training that most firms seem to think will drive the culture change for successful implementation.
In reality, firms have an intended strategy which then seems to divert based on what Henry Mintzberg called emergent strategies into a realized strategy. This learning view of strategy can be leveraged into producing the desired behaviour change needed for the successful execution of a firm’s strategy. There are often pockets of success in the firm where groups or sub sets of a group are producing excellent results that are somewhat aligned with the firm’s new strategy even though this has developed emergently and through trial and error of the people involved. If these examples could be studied, ‘packaged’ and shared with other groups/functions within the firm they can create a compelling example of the benefits of a clear strategy and how people within their own firm make it actually work. Even better would be to get these people who are demonstrating excellence to be involved in the ‘teaching’ of these success examples throughout the firm in the form of participant centred workshops where cases and interactive discussion are the foundations of reflective learning. These examples can be extremely powerful in showing reticent teams the tangible benefits of change and when aligned with other firms processes and systems can go a long way in helping people engage in the required behaviour changes.
In their book, The Workforce Scorecard (2005, HBS Press), and their later book The Differentiated Workforce (HBS Press, 2009), Becker, Huselid, and Beatty make a strong case for altering the way firms determine, measure and reward key performers by focusing on their contribution to the strategic capabilities and direction of the firm, as opposed to a person’s level of seniority and job title. Whilst their recommendations may be somewhat narrow (for example, differentiating the work force by implementing strategy may be just as appropriate as by capability) the authors make some interesting points that when tied together with what we know about firm performance, can be extremely beneficial in creating the desired change of people’s behaviour and recognizing how various processes intertwine to enhance performance. The ideas of the Balanced Scorecard (Kaplan and Norton) could also be used but in a wider perspective as proposed by Neely, Adams and Kinnerley in their book The Performance Prism which takes a much broader perspective of performance management. One I think better which is better suited to the context of the knowledge era.
Of course, such systems have unintended consequences which lead to what Henry Minztberg calls emergent and realized strategies as firm members engage in behaviours that they believe are beneficial to them and aligned with the implicit norms of the firm. The benefits of trying to identify and codify these variations in execution is the value creation it can add to the firm since there will always be a group of people who are creating client value that does not necessarily align with the stated strategy and objectives of the firm. This creates a basis for powerful learning and the potential creation of new wealth creating opportunities.
In larger firms there will be examples of this realized strategy that are extremely positive and could be used as case examples of what the firm is actually trying to achieve. These strategies could be tied back to the systems, processes, original strategy, leadership, and culture of the firm that demonstrates what works and what could be improved. The problem is too many firms try to change behaviour (and hence implement strategy) through isolated non systemic approaches which don’t address the key influences on the strategy execution behaviours of people which in reality are many (an obvious one is archaic remuneration systems). Additionally, isolated training activities such as sales training have little impact when conducted this way.
Research conducted by Janine Waclawski (Human Resource Development Quarterly, 2002) shows that large scale change efforts (defined as those that address mission and strategy, culture, leadership, and structure) produce better performance outcomes than those which only tackle a sub set of these factors. Since we know from empirical research that a market orientation is the most significant factor that affects firm performance (although this research is also subject to the halo effect), looking at the strategy execution and development process to initiate behaviour change from an holistic perspective makes sense.
Strategy & Competitiveness 