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May 2, 2005

Driving Strategy to Success

Executives and business experts are generally agreeing that improvement in profitable competitiveness must now come from taking measures beyond cost-cutting. Profitable competitiveness is their basic idea of good performance. It reinforces the idea that the business should organize how it competes according to the chance of profit; so, changes in the perceived sources of profit should change the competitive strategy.

What should stay under very close examination, naturally, is the idea of these "profit sources". In one view, the strategy should actually create and/or secure the sources; this is a fundamental part of understanding the quality of the strategy. Another part concerns how usable the strategy is by the organization, for the purpose of creating and securing profit sources.

Accordingly, as the conventional idea of performance management goes increasingly mainstream, what we see talked about is that companies are increasingly concerned with the ability to "execute" the strategy. Naming the problem in that way intuitively makes sense, given the outlook described above. But to solve the problem, it first needs to be defined in a different way.

To begin the redefinition, let's dump the word "execute" and use the word "drive". To illustrate why this makes sense, let's imagine that we're competing in a autorace on a difficult closed-loop track. One of the key things we need for success is a car that "handles" well enough for us to actually make each section of the track "conform" to what we need to get out of it. For example, a steeply banked curve is an area where a poor-handling car will fail to keep us positioned the way we need to be throughout the curve, and we may fly off the curve against the crashwall or at least lose crucial time recovering from poor position in the curve. But in an excellent example of relativity, a great-handling car is said to "flatten" the curve because it can hold us in the optimal position throughout the entire curve, for least risk and highest speed (combined). The great thing to see about this is that although the actual physical curve of the track does not change shape in either case, the effective shape of the curve does change along with how we can handle it. Our great-handling car re-shapes the curve to our needs.

Strategy is like that great-handling car. With it, we can reshape the entire "track" into an optimum competitive environment. But that assumes our own compatibility with the car, which in turn assumes that we are ourselves capable of operating the car appropriately.

If performance is a measure of profitable competitiveness, and we rely on strategy to establish that performance, then the strategy's reliance on our operational compatibility and capability is clearly 50% of the "source" of the competitiveness. The strategy is designed to reshape the environment (so there's the other 50%), but that effect won't occur if we, the driver, do not or cannot use the strategy in accordance with its design.

So, let's use that conventional working definition of "performance", in which managing performance improvement means increasing profitable competitiveness. That means doing something that might best be called co-opting the strategy. Literally, to co-opt means "to take or assume for one's own use; to appropriate..."

This idea includes a couple of great things that are useful to us. For one, it immediately suggests that a good strategy can be built, bought or borrowed; naturally it can be home grown but it doesn't have to be.

The other thing is even more interesting: think of "co-opt" as relating to the strategy through a combination of "co-operating" with it and "adopting" it. To co-opt a strategy, you cooperate with its intent and you adopt the strategy's attitude towards the environment that it wants to reshape.

Now we see the issue of strategy in light of a more tangible performance management agenda. When the organization's behavior shows that the organization wants to do what the strategy wants to do, the organization is driving the strategy, and the profitable competitiveness premised (if not promised) by the strategy is more likely to be demonstrated.

For managers, seeing that the organization drives the strategy is probably a much more important perspective on things than is the evangelical idea that "strategy drives the organization."

In co-opting the strategy, cooperation with the strategy's intent must be a desire of the organization, and this is likely cultivated through incentives or there will be much less persistence to it. However, adopting the strategy's attitude towards the business's operating environment is even more essential, since this attitude is what reshapes the environment to the business's purpose. The reshaping is where strategy actually creates and secures the sources of profit. Without adoption, no strategy can take credit for any success. Thus, strategy adoption is something that must be at or near the top of a manager's agenda, and we must develop clarity on how the particular and various managers should actively and practically repond to that priority.

Posted by Malcolm Ryder at May 2, 2005 7:56 AM

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