Companies have historically struggled with executing their strategies. Research shows that executional excellence is the number one challenge that corporate leaders face.1 In a global survey of over 500 executives, PwC’s Strategy& found that only four percent of executives indicate that they are not concerned about any barriers to strategy execution.2
Just over five years ago after conducting an extensive research study, we came up with our framework for superior strategy execution, which is defined as the following: Execution = Alignment x Mindset x Capability, or E=AMC. These three core elements are all critical for effective strategy implementation, and when addressed in a thoughtful, comprehensive, and high-impact manner can lead to exceptional strategy execution.
Recently, we conducted a research study with the Economist Intelligence Unit titled “Cracking the Code: The Secret to Successful Strategy Execution & Lessons for the C-Suite.” In that ground-breaking research we further validated and demystified our strategy execution framework. Additionally, we used the study to ask an important question: when it comes to strategy execution which is most important – having strong alignment to the strategy, having the right mindset or having the capabilities needed for success?
First, let’s visit the definition of each factor:
Alignment: In order to execute on a strategy, employees need to have a thorough understanding of:
- What is the strategy?
- Why is the strategy important?
- How will the strategy be implemented?
- What is their role in the execution, and who else is involved (and how)?
Without all employees having the same understanding of these key elements, your organization will never be able to successfully bring the strategy to life.
Mindset: Research has shown that effective strategy execution requires tremendous personal commitment among employees. The right mindset around the company’s direction and strategic priorities delivers real business results. Another recent research report conducted by the EIU and sponsored by BTS, titled “Mindsets: Gaining Buy-in to Strategy,” found a strong correlation between companies with strong buy-in to organizational strategy at every leader level (not just the C-suite) and above-average profitability.
The following are the three critical drivers of mindset:
- Belief – Employees in the organization believe that the strategy is the right way to go and that the organization can actually achieve it.
- Passion – Employees are confident that the strategy is going to make a difference for the company, the customer and themselves.
- Urgency – Employees have a sense of urgency and understand that if they do not make the strategy a reality, it will compromise the future of the business. Execution must be a priority.
Capabilities: A diverse range of capabilities are necessary for strategy execution. Above all others, however, there are a few key capabilities that, when broadly developed, accelerate execution and deliver rapid business results. These include, but are not limited to:
- Business Acumen and Decision Making
- Management and Leadership Skills
- Sales Skills and Focus on Accelerating Customer Results
In developing your leaders to be able to successfully implement the strategy and deliver rapid business results, these capabilities are critical areas to focus on. To accelerate execution, leaders need to fully understand the business and drivers of business success, as well as be able to effectively align, motivate and develop their people. This includes foundational leadership skills as well as deep expertise in developing talent, performance management, coaching, feedback and more.
Alignment, mindset and capabilities are all critical to strategy implementation – but what did the research find to be the most important?
To our surprise, capability came out as the single most important predictor of success; when surveyed leaders are “highly confident” in their managers’ ability to lead successful execution, the probability that their company is a performance winner is 71 percent. In addition, only 16 percent of respondents from top-performing companies were concerned about the ability of superiors to execute, while twice as many (32 percent) of executives at underperforming companies expressed concerns about execution capability. Mindset was the second most important predictor of success, with a 57 percent rating, followed by alignment at 52 percent.
The moral of the story is: Companies that develop great leaders and invest in building the right mindset among their people find that alignment will take care of itself, or at least have a much easier time building it. But companies that focus first on trying to build alignment without having the right capabilities in place are most likely doomed from the start. Part of this leadership capability is the ability and focus on personalizing strategy – connecting people to the strategy and showing what’s in it for them. Don’t minimize the importance of great leadership in your company for getting things done.