STAGE 4c) OUR STRATEGY - ALIGN
“What gets measured gets managed.”
Peter Drucker, Management Guru
It is not enough to plan action, the leadership team needs to proactively align the entire organisation behind the new strategy. This alignment can be achieved through:
- Communication. The leadership team is fully familiar with the strategy, but often assumes incorrectly that the rest of the organisation is too. Managers need to cascade the key strategic messages to their reports, not in powerpoint documents but in simple stories that will resonate with the front line.
- People Decisions. Whatever you communicate, people will pay the most attention to people decisions - who gets promoted, who get fired, who is put in charge of the critical strategic initiatives.
- Measurement. The new strategy will require new metrics, which will need to be reflected in performance management systems.
We have to translate our strategy into detailed targets that can be cascaded down the organisation and embedded into budgets. Most companies operate off the annual budget or Annual Operating Plan (AOP), and if the strategy is not reflected in the budget it will not happen. We will set specific product/market targets and allocate our discretionary resources to support our new strategy.
Our strategy is based on assumptions we made about the future. We can create experiments to test these as cheaply and quickly as possible (as per Lean Startup Methodology)
We want to find leading metrics whenever possible in order to identify if our initiatives are succeeding as soon as possible. Managing by lagging indicators like P&L is like driving a car by looking at the rear view mirror. For example, if we are launching a new consumer product, leading indicators could be repeat purchase, purchase frequency, Net Promoter Score and referrals.
Given competitive moves and future scenarios are uncertain, we also want to establish a business intelligence system to track key external triggers.
Questions to answer
- What are the results of the tests/pilots we set up to test the key assumptions underlying our strategy?
- Have we set up regular progress reviews for our Strategic Initiatives?
- What are the most important metrics for our strategy? What are the LEADING indicators that it is working?
- Are there qualitative indicators we should monitor?
- Do we have a business intelligence system in place?
The Balanced Score Card (BSC) is a valuable tool to ensure that we are measuring all aspects of the business We should identify the indicators that are most important to our strategy in four areas:
- Financial - tend to be LAGGING indicators
- Customer - indicators that truly measure lasting success with customers
- Process - the internal processes that are critical for this customer success e.g. if our value proposition is about new innovative products for customers, we will want to measure how fast our product development process is working with a Time to Market metric
- Organisation/Learning - are we investing in building our organisation for the long term?
- Future Financial Projections
- Link to Budget and People processes
- Leading vs Lagging metrics