Saturday, August 19, 2006

execution - 3 (last)

The discipline of getting things done
(chapters 7 to 9)

The authors then detail the strategy process which they emphasize as making the link with people and operations.
The basic goal of a business is simple enough: to win the customer’s preference and create sustainable competitive advantage, while leaving sufficient money on the table for shareholders.
However, despite such simple business goal, most strategies fail because not enough importance is given to the hows.
Citing example of AT&T, the authors reveal that the strategy in the company was disconnected from both external and internal realities. It didn’t test its critical assumptions to see if they were robust, and had no alternative plan.
Building blocks of a strategy contain the substance of a strategy. Further to it, it is essential to understand the distinction between strategy at business level and strategy at corporate level. Corporate level strategy is the vehicle for allocating resources among all of business units, but it is not the sum total of such parts. A corporate strategy also defines the walls of a company – the business it wants to be in and the general arena of play.
When a business unit creates a strategy, it clearly lays out in specific terms the direction of the unit: where it is now, where it will be going in the future, and how will it get there.
A business unit strategy ideally should be less than fifty pages and the essence should be describable in one page.

Who build the plan? To be effective, strategy has to be constructed and owned by those who will execute it, namely the line people. Staff people can help by collecting data and using analytical tools, but business leaders must be in charge of developing the substance of the strategic plan.

A strong strategic plan must answer the following questions:
What is the assessment of external environment?
How well do you understand the existing customers and markets?
What is the best way to grow the business profitably, and what are the obstacles to growth?
Who is the competition?
Can the business execute the strategy?
Are the short term and long term balanced?
What are the important milestones for executing the plan?
What are the critical issues facing the business?
How will the business make money on a sustainable basis?

The authors some relevant questions and methods to conduct a strategy review and warn on over reliance on data. The strategy review is also a good place to learn about and develop people. A few of the relevant questions are:
How well versed is each business unit team about the competition?
How strong is the organizational capability to execute the strategy?
Is the plan scattered or sharply focused?
Are we choosing the right ideas?
Are the linkages with the people and operations clear?

Equally important is the follow through of the strategy review.

The authors emphasize on a robust operations process which takes forward the strategy. An operating plan is a total responsibility. It ties thread through people, strategy, and operations and it translates into assigning goals, and objectives for the next year.

For a better operation process, synchronization is important for excellence in execution and for energizing the corporation. Synchronization means that all moving parts of the organization have common assumptions about external environment over the operating year and a common understanding – the left hand knows what the right hand is doing.

Sound assumptions are key to setting realistic goals. Once the assumptions are pinned down, the next step in the operations process is to build the operating plan itself, which takes place in operating review. The operating plan starts with identifying the key targets: revenues, operating margins, cash flows, productivity, market share etc. Operating plan covers all the major programs for the coming year – marketing and sales, production, functional operations, capital spending and so on.

The outcome of the operations process is the identification of targets that clearly and specifically reflect not only what a business wants to achieve but also what it is likely to achieve.

A follow through of the plan and contingency plans make the process complete.

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