Successfully developing and executing on strategy is absolutely critical for business growth, performance and future-proofing.
For any business embarking on developing and executing strategy, it’s necessary to do so from two lenses. The first one is from the Board perspective – what the Board is trying to achieve on behalf of the investors and shareholders. The second, is from the management perspective in developing and executing strategy that is achievable and ambitious, and ensuring that the entire organisation can effectively work towards those common goals.
Here at Active Directions, when we talk about strategy planning and execution we define three focus areas – Strategy and Growth, Strategy and Risk and of course Strategy Execution.
Strategy and Growth
Within this first phase, it’s important for businesses to identify and articulate their next stage of growth. This could be through new markets, new products, new customers, new acquisitions – any opportunity that will help take the business to that next level.
This part of strategy planning is underpinned by analysis of the business’s current financial and operational performance as well as analysis of future market trends in order to draw out strengths, weaknesses, opportunities, and threats to the business.
We like to look at how can we take advantage of the business’s strengths to maximise market opportunities, as well as looking at how we minimise the weaknesses. During this phase we identify all potential strategic options and then prioritise them with a focus on those that have a high growth impact, but come with low risk.
As we build out the detailed strategy we make sure that we are considering three aspects of strategic requirements. Firstly, we ensure a clear direction is set by the Board. Secondly, we check for broad alignment between the Board and Management regarding the strategic direction, and ensure that management is empowered to develop the detail. And finally, we consult with the broader organisation to collate their input into the strategy and specifically, how it will be achieved at an operational level.
Strategy and Risk
One critical element of successful strategy planning and execution is linking strategy and risk – we like to call it finding a business’s Risk Appetite. We do this by working with the Board to understand what risks they are willing to take (for example the preference for one area of return over another) and those they are not (safety, core values, operational standards). This defines clear boundaries for management to work within and empowers them to get on with the job. It also means that the Board is there to support and provide direction if the limits are pushed for whatever reason.
A common scenario that we often see, is a business pursuing growth strategies that will help maximise an exit value in the mid-term. In this case we always want to evaluate whether new strategic initiatives may put the current value of the business at unnecessary risk. For example, if a business has the potential to go into new markets, it’s important to ensure that they protect their current market position and product offerings.
Strategy Execution, is where we see a lot of organisations fall in their delivery. That’s why we recommend businesses prioritise a plan for executing on their strategy. This includes a joint understanding of the roles and responsibilities, the KPIs and success measures along with a cycle of accountability. This is where we find sprint planning to be the most effective way to review, plan and deliver on strategic initiatives.
If we continue the previous example of an exit scenario, it’s critical that a business continues to focus their sprints on those identified initiatives that are going to affect enterprise value.
Whilst it falls to the management team to continuously monitor and review through this execution phase, it’s also critical that the Board is set up to review and give feedback on strategy progress. A simple and effective way to do this is by having the board ask what we call “Very Good Questions” of their management team for example:
- From an organisation perspective, does this new market/product feel right relative to where we compete now?
- How do we define success? How should we measure whether we have achieved success?
- Does the CEO have the right people in place to deliver?
In the case of growing private and family businesses it may also mean the need to begin to have a formal structure in their Board Meetings and a distinction in the agenda between management reporting, strategy reporting and risk management.