Topic1-ExecutionPremium Zimbabwe DPN

The New Science of Strategy Execution Topic #1: Creating An Execution Premium
Dr. David P. Norton

Director, Palladium Group, Inc. Author, The Balanced Scorecard
Harare, Zimbabwe 25 April 2012
The ability to execute strategy is the issue of greatest concern to CEOs.
120425_Topic1-ExecutionPremium_Zimbabwe_dpn
2012 David Norton and Palladium Group, Inc.
Most organizations have difficulty executing strategy.
Less than 10% of Strategies effectively formulated are effectively executed

- Fortune
Only 15% of the 794 (Federal Government) programs reviewed in Fiscal 2005 were rated effective.
- Barrons
Between 1988 and 1998, only one of eight companies was able to deliver 5.5% annual real growth in revenues and earnings while covering their cost of capital
- Chris Zook, Profit From the Core
Why do organizations fail to execute strategy?
#1. You Cant Manage Something That You Cant Describe!
#2. They Dont Manage Strategy

95% of the typical work force doesnt understand the strategy
There is no generally accepted way to describe a business strategy
60% of organizations do not link strategies with budgets 70% do not link management incentives to strategy 85% of executive teams spend less than one hour per month discussing strategy
Palladium Balanced Scorecard Hall of Fame for Executing Strategy

By Industry 2000-2010
The Execution Premium: Behind every story of shareholder value, there is another story of value creation. That is the real story of strategy execution.
Infosys
Revenue up 310% EPS up 305%
Execution Premium
Valuation
Profitable Growth
Financial Perspective
Active clients rose from 293 to 500 Big accounts ($20M+) up from 6 to 27 Innovation (new product revenues) up 48%
Brand Value Customer Satisfaction
Customer Perspective
Key Process Effectiveness
Internal Perspective
Ranked #1 employer in IT sector (Dataquest) Ranked Indias best managed company
Technology Support Best Employer
Learning & Growth Perspective
Our BSC helped us deliver superior performance consistently and predictably in all facets of our operations.
Kris Gopalakrishnan CEO
The Execution Premium: Behind every story of shareholder value, there is another story of value creation. That is the real story of strategy execution.
MOGAHA
Quality of Life:
# of Hospitals increased from 323 to 427 (6 yrs) Income levels and property tax grew
Constituents
Profitable Growth
Execution Premium
Customer satisfaction increased by 12 points (1 yr)
Reduced civil petition processing time from 9 days to 1 day
Knowledge Management System log-ins increased from 9,000 to 375,000 (1 yr) Received Best Government Innovator Award
We will make the utmost effort for continuous and long-term development of our organization. I am confident that the BSC will support us in this endeavor.
* MOGAHA: Ministry of Government Administration and Home Affairs 120425_Topic1-ExecutionPremium_Zimbabwe_dpn
Mogaha Minister Park

7
The Execution Premium results from aligning key processes, human capital and information with customer and shareholder priorities.
Quality of Life: # of Hospitals increased from 323 to 427 (6 yrs) Income levels and property tax grew Customer satisfaction increased by 12 points (1 yr)
Revenue up 310% EPS up 305%
Execution Premium
Valuation Profitable Growth
Active clients rose from 293 to 500 Big accounts ($20M+) up from 6 to 27 Innovation (new product revenues) up 48% Ranked #1 employer in IT sector (Dataquest) Ranked Indias best managed company
Reduced civil petition processing time from 9 days to 1 day Knowledge Management System log-ins increased from 9,000 to 375,000 (1 yr) Received Best Government Innovator Award
Our research shows that there is a consistent set of management practices applied by successful BSC users.
Principles of a Strategy-Focused Organization 1. Mobilize change through executive leadership 2. Translate strategy to operational terms 3. Align the organization to the strategy 4. Motivate to make strategy everyones job 5. Govern to make strategy a continual process
Managing strategy is managing change.

Management Best Practice
Principle 1: Mobilize Change Through Executive Leadership

1.1 Leaders drive strategy execution
1.2 Executives make the case for change

1.3 Well articulated strategy exists 1.4 Leaders reinforce strategic priorities 1.5 Office of Strategy Management established
Execution is the most unappreciated skill of an effective business leader

Lou Gerstner , Former CEO, IBM
10
It is not a simple process for a CEO to mobilize transformation.
While many people believe that chief executives wield direct and easy influence, the reality is that any CEO has a difficult time influencing his or her organization
A CEOs attempts at command and control undermine the authority of senior executives
Bad news is filtered before it gets to me

Graham Sher CEO, Canadian Blood Services HBR, October 2005
11
Organizations must simultaneously balance process with leadership.
Military Officers Attracted to The Balanced Scorecard . Why?

Leaders inspire employees to Managers institute systems to ensure that all an make day-to-day decisions that enhance organizations long-term viability. organizations long-term viability.policies. institute systems to ensure that employees conform with top-down Managers all employees conform with top-down policies.
Organizations, however, require more than just leaders. They They Organizations, however, require more than just greatgreat leaders.need need executives who can simultaneously lead manage. executives who can simultaneously lead andand manage.
Lead and Manage Your Organization with The Balanced Scorecard, Robert S. Kaplan, BSR, July-August 2002
Leaders inspire employees to make day-to-day decisions that enhance an
12
Principle 1: Mobilize Change Through Executive Leadership

We Must Change! Why?
Burning Platform ATT Canada
Competitive Threat GE
Shareholder Expectation Ingersoll Rand
Appeal to Excellence Wells Fargo US Postal
We Must Clarify Our Strategy
We Must Act as a Team

CEO MKTG CFO
Executive Team
OPS
Held together by a shared view of the strategy

R&D HRO CIO
SMO
Strategy Map
We Must Develop a New Way of Managing Our Strategy
9/10 Fail
The New Science of Strategy Execution
Office of Strategy Management
13
You cant manage what you cant describe.
Principle 2: Translate Strategy to Operational Terms

2.1 Strategy translated to strategy map 2.2 Strategy described in Balanced Scorecard 2.3 Targets identified for all measures
2.4 Strategic initiatives rationalized

2.5 Accountability assigned
14
A strategy map describes how the enterprise creates value for shareholders and customers.
Sustained Shareholder Value
Productivity
Revenue Growth
#1. Financial performance, a lag indicator, measures the tangible outcomes from the strategy.
Product/Service Attributes
Price Quality Time Function
Relationship
Relation
Image
Brand
#2. The customer value proposition defines the source of value.
Process Perspective
Operations Management Processes Customer Management Processes Innovation Processes Regulatory and Social Processes
#3. Strategic processes create value for customers and shareholders.

Human Capital Information Capital Organization Capital
#4. Aligned intangible assets drive improvement in the strategic processes
15
Organization: Mobil NAM&R
Practice: 2.1 Strategy Map Developed

Increase ROCE to 12%
Revenue Growth Strategy

New Sources of NonGasoline Revenue Increase Customer Profitability Through Premium Brands
Productivity Strategy
Become Industry Cost Leader Maximize Use of Existing Assets
Delight the Consumer
Win-Win Dealer Relations Differentiators
Basic
Clean Safe Quality Product Trusted Brand Speedy Purchase
Friendly Helpful Employees
Recognize Loyalty
More Consumer Products
Help Develop Business Skills
Build the Franchise
Increase Customer Value

Understand Consumer Segments
Operational Excellence
Improve Hardware Performance Improve Inventory Management
Good Neighbor
Create NonGasoline Products & Services Best-In-Class Franchise Teams On-Spec On-Time Industry Cost Leader
Improve Environmental, Health and Safety
A Motivated and Prepared Workforce

Climate for Action
Aligned Personal Growth
Competencies
Functional Excellence Leadership Skills Integrated View
Technology
Process Improvement
16
Organization: Mobil NAM&R

Strategic Themes
Financially Strong
Practice: 2.2 Balanced Scorecard Created

Strategic Objectives
F1 F2 F3 F4 F5 Return on Capital Employed Existing Asset Utilization Profitability Industry Cost Leader Profitable Growth
Strategic Measures
ROCE Cash Flow Net Margin Rank (vs. Competition) Full Cost / Gallon Delivered (vs. Competition) Volume Growth Rate vs. Industry Premium Ratio Non-Gasoline Revenue and Margin
Financial
Delight the Customer
Win-Win Dealer Relations
Customer
C1 Delight Targeted Consumer

C2 Improve Dealer Profitability
Share of Segment in Selected Key Markets Mystery Shopper Rating

Dealer Gross Profit Growth Dealer Survey New Product ROI New Product Acceptance Rate Dealer Quality Score Yield Gap Unplanned Downtime
Build the Franchise Increase Customer Value
I1 Innovative Products and Services I2 Best-in-Class Franchise Teams I3 Refinery Performance
Internal
Operational Excellence
I4 Inventory Management
I5 Industry Cost Leader I6 On Spec - On Time
Inventory Levels Run-out Rate

Activity Cost vs. Competition Perfect Orders Number of Environmental Incidents Days Away from Work Employee Survey Personal BSC (%) Strategic Competency Availability Strategic Information Availability
Good Neighbor
I7 Improve Environmental, Health & Safety
Learning & Growth
Motivated and Prepared Workforce
L1 Climate for Action L2 Core Competencies and Skills L3 Access to Strategic
17
Strategy describes how an organization intends to create value for its stakeholders.
Private Sector Organizations The Shareholder
Government & Non-Profit Organizations The Mission Stakeholder
"If we succeed, how will we look to our shareholders?

Fiduciary Perspective
"If we succeed, how will we look to our taxpayers (or donors)?
"To achieve our vision, how must we look to our customers?
"To achieve our vision, how must we look to our customers?

"To satisfy our customers, at which processes must we excel?

Learning & Growth
To satisfy our customers, financial donors and mission, what business processes must we excel at?
Learning & Growth
"To achieve our vision, how must our organization learn and improve
To achieve our vision, how must our people learn, communicate, and work together?
Strategy maps are simple models of the value creation process.

18
Strategy maps and scorecards are being used in non-profit as well as for-profit organizations.
Students Master Curriculum
Student Achievement
Students are Nationally Competitive
Customer and Stakeholder Involvement and Satisfaction
School Climate is Safe and Enriching
Parents are Involved and Satisfied
Community is Involved and has Positive Perception
Efficient and Effective Instructional and Administrative Processes
Instruction is Effective
Transportation is Safe and Efficient
Facilities are Safe and WellMaintained
Resources are in Place for the First Day of School
Students have Nutritious Meals
Staff Learning and Growth
Staff are Competent
Teachers and Other Employees are Satisfied
Financial Performance
Sound Fiscal Management
Fulton County School System Strategy Map

19
Strategy maps and scorecards are being used in non-profit as well as for-profit organizations.
Strategic Objectives
1. 2. Mastery of Curriculum Nationally Competitive 1.1 1.2 1.3 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 3.1 3.2 3.3 3.4 3.5 3.6 3.7 4.1 5.1 5.2 5.3 5.4 6.1 6.2 6.3 7.1 7.2 8.1 8.2 9.1 9.2 9.3 9.4 9.5 10.1 10.2 11.1 11.2 11.3 12.1 12.2 13.1 14.1 14.2 14.3
Performance Measurement
Curriculum-referenced texts High school graduation tests High completion rate Norm-referenced tests SAT AP enrollment AP exam scores Joint/post secondary option enrollment Performance of graduates: technical & college or employment in first year Remediation in first year HOPE retention in second year Attendance - % of students absent 10 days or less Attendance - average days tardy (ES) Student ratings of climate Participation in extra-curricular activities Recognition in state and national programs for music, art, dance, civics, and academics Parents perceptions of safety Students perceptions of safety Perceptions of: quality, responsiveness, communication Perception of quality, communications and safety Volunteer hours Dollars, service, and product donations Number of community organizations and businesses involved Teachers trained on the 8-Step Instructional Process Teachers using student assessments for instructional planning and adjustment Use of technology Preventable accidents On-time bus delivery Facility inspection reports Backlog of maintenance requests Required items in schools by start of school: Textbooks Teacher vacancies at start of school - 1st day Classroom teacher vacancies at the 15th day Student enrollment forecast Cost center budgets to school on time Meals per labor hour Participation rate Teachers with at least 7 years of experience Teachers with advanced degrees Nationally board certified teachers Staff attendance Staff attrition Staff ratings of communication, teamwork and morale Expenditures: direct instruction support, instruction, pupil services, instructional services, media services, general administration Variance of budget to actual: revenue, expense Fund balance
Student Achievement
3. Safe and Enriching Climate
Stakeholder Involvement & Satisfaction
4. 5.
Involved and Satisfied Parents Positive Image Within the Community
6. 7.
Instruction Transportation Facilities and Construction Readiness for Start of School
Instruction & Administrative Processes
8. 9.
10. 11.
Nutrition Competent Staff Employee Satisfaction Teacher Satisfaction Sound Fiscal Management
Staff Learning & Growth
12. 13.
Financial Performance
14.
Fulton County School System Balanced Scorecard

20
Making the whole greater than the sum of the parts.
Principle 3: Align the Organization to the Strategy

3.1 Corporate role defined 3.2 Enterprise scorecard guides business units 3.3 Business unit scorecards guide support units 3.4 Scorecards align suppliers and/or customers 3.5 Scorecards align Board of Directors
21
Use strategic themes to achieve vertical and horizontal alignment.
Scorecard Cascade
Corporate Scorecard Shared Services Business Units
Departments
Teams & Individuals
22
Dubai Electricity & Water Authority
23
Dubai Electricity & Water Authority: Cascading Flow Plan from Corporate to Divisions
24
Strategy is formulated at the top and executed from the bottom.
Principle 4: Make Strategy Everyones Job

4.1 Strategic awareness created 4.2 Personal goals aligned 4.3 Personal incentives aligned 4.4 Competency development aligned
A real and revolutionary opportunity lies in studying and assessing how wellprepared a companys people, systems and culture are to carry out its strategy.
Tom Stewart, Editor, Harvard Business Review
25
How Do We Create Strategic Readiness?
Create Strategic Awareness Communicate Communicate Communicate
Align Personal Goals Personal Scorecard
Make Strategy Everyones Job
Provide Necessary Skills Strategic Job Families Strategic Readiness
Align Personal Incentives Variable pay Team based
You need a formal process to improve workforce readiness. Strategy should be linked to existing HR programs for performance management.
26
Case Study: Making Strategy Everyones Job at Hilton Hotels

Education Personal Goals
Balanced Scorecard
Communication
Incentive Compensation
27
To make strategy management sustainable, strategy must be imbedded in the governance process.
THE EXECUTION PREMIUM
Principle 5: Make Strategy a Continual Process

Resource Management 5.1 Budget is linked to the strategy 5.2 Planning for HR/IT linked to strategy 5.3 Portfolio of strategic initiatives linked to themes Key Process Management 5.4 Process improvement linked to strategy 5.5 Best practice sharing in place Learning and Control 5.6 Strategy reviewed and adapted on a regular basis 5.7 Data and analytics guide strategy
28
How can we make strategy management a sustainable competitive advantage?
1
Most Balanced Scorecard Hall of Fame companies achieve dramatic results in 2-3 years
Bank of Tokyo Canadian Blood Service Marriott VC Mobistar Tata Motors China Micro Resource Coffee Growers Assoc. HSBC Rails KeyCorp Ricoh Thai Carbon Black 2 yrs 2 yrs 2 yrs 2 yrs 2 yrs 3 yrs 3 yrs 3 yrs 3 yrs 3 yrs 3 yrs
3
The Solution: Imbed the BSC strategy management approach into the governance structure Integrated system (XPP)
Execution Premium ($)
Common platform (BSC) Responsible specialist (OSM)
1
Mobilize
(3-6 mos)
2
Sustain
12-24 mos)
Align
(6-12 mos)
The Problem: The executive sponsor of the BSC program leaves. The new executive had his/her own approach to strategy management. The BSC approach is abandoned.
29
Process Matters! Organizations with a formal strategy execution process in place are dramatically outperforming organizations without formal processes.
Do you have a formal strategy execution process in place? Describe your organizations current performance.
.We have breakthrough results
Yes
(54%)
No
(46%)
12%
7%
we are performing better than our peer group

Sub-Total performing at the same level as our peer group.
58%
70% 18%
20%
27% 30%
Winners
performing at a lower level than our peer group

not performing at a sustainable level Sub-Total
9%
3% 30%
27%
16% 73%
Losers
Source: BSCol Research (Survey of 143 performance management professionals, drawn from BSCol On-Line Community, March 2006)
30
Strategy Management State of the Art

Do you have a formal management process in place?
Process
10
Percentage of Companies with a Formal Process

20 30 40 50 60 70 80 90 100
Translate: Clear articulation of the corporate strategy and measures Initiatives: Manage a limited number of key strategic initiatives Update: Regular update of strategy to account for changing conditions Reviews: Regular meetings to report on and to manage the strategy Communicate: Communications about the strategy Align: Alignment of business units/support units to strategy HR: Organization Development Finance: Link strategic initiatives to the budget IT: Service Level Agreements (Survey of 143 performance management professionals, BSC Research, 2006)
43 46
77 76
Losers
33
43
75
Winners
28
The Execution Gap
75
73
28
63 64 36 41 60 64
26
31
The New Strategy Management System What does it look like?

2
TRANSLATE THE STRATEGY Strategy Map / Themes Measures / Targets Initiative Portfolios Funding / Stratex DEVELOP THE STRATEGY Mission, Values, Vision Strategic Analysis Strategy Formulation
ALIGN THE ORGANIZATION Business Units Support Units Employees Strategic Plan Strategy Map Balanced Scorecard Stratex
TEST & ADAPT
performance measures
Profitability Analysis Strategy Correlations Emerging Strategies
results
PLAN OPERATIONS Key process improvement Sales planning Resource capacity plan Budgeting Operating Plan Sales Forecast Resource Requirements Dashboards Budgets

MONITOR & LEARN Strategy Reviews Operating Reviews
results
EXECUTION
Process Initiative
32
Strategy Management requires a new way of managing. You must build a center of competence to lead these changes.
A New Way of Managing

Enterprise
Financial Management
Human Resource Management
Marketing / Communications
Technology Management
Strategic Planning
Office of Strategy Management
Organizational Unit A
Organizational Unit B
Organizational Unit C
Organizational Unit D
Execution is a specific set of behaviors and techniques that companies need to master in order to have competitive advantage. It is a discipline of its own.
Larry Bossidy and Ram Charan Execution: The Discipline of Getting Things Done
33
Overview BSC Hall of Fame Strategic Performance Composite

HoF Strategic Results *
Financial
+ 150%
Shareholder Value
+ 180%
Profits
+ 120%
Revenue
Moody / S+P
P/E Ratio
Customer
- 50%
Customer Dissatisfaction
#1
Market Share
#1
Brand Ranking
Process
+ 50%
Key Process Execution
#1 Best Process External Performance Awards
Learning
+20%
Employee Satisfaction
-50%
Employee Turnover
#1 Best Employer External Awards
EXECUTION MEASURES
Measures that drive performance (drivers) or reflect performance within the action cycle (outcomes)
* Results achieved over a 3 year interval 120425_Topic1-ExecutionPremium_Zimbabwe_dpn
ACHIEVEMENT MEASURES
Long term external measures that indicate a sustainable ability to grow
34
The Balanced Scorecard Management System, built upon a consistent philosophy of management, permits sustainable organization performance.
The Balanced Scorecard Management System
An Integrated Management System
TRANSLATE THE STRATEGY Strategy Map / Themes Measures / Targets Initiative Portfolios Funding / Stratex
DEVELOP THE STRATEGY Mission, Values, Vision Strategic Analysis Strategy Formulation
ALIGN THE ORGANIZATION Strategic Plan Business Units Support Units Employees Strategy Map Balanced Scorecard Stratex
TEST & ADAPT
Profitability Analysis Strategy Correlations Emerging Strategies
results
PLAN OPERATIONS Key process improvement Sales planning Resource capacity plan Budgeting
Operating Plan Sales Forecast Resource Requirements Dashboards Budgets
MONITOR & LEARN
Strategy Reviews Operating Reviews
results
EXECUTION
Process Initiative
The Balanced Scorecard Management Philosophy
A Philosophy of Management
1. 2. 3. 4. 5.
MOBILIZE: Executive Leadership to Mobilize Change TRANSLATE: Translate Strategy to Operational Terms ALIGN: Align the Organization to the Strategy MOTIVATE: Make Strategy Everyones Job GOVERN: Make Strategy A Continual Process
The Balanced Scorecard Value Creation Model
An Economic Model of Value Creation
Four measurement perspectives balance lag and lead indicators Measures and targets define performance gaps Strategic initiatives close performance gaps
Strategy is
A hypothesis of value creation Multiple complimentary themes A customer value proposition Alignment of business processes Readiness of intangible assets
35

Topic1-ExecutionPremium Zimbabwe DPN

Transféré par

Informations du document

Description originale:

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Topic1-ExecutionPremium Zimbabwe DPN

Transféré par

Droits d'auteur :

Formats disponibles

The New Science of Strategy Execution Topic #1: Creating An Execution Premium

Dr. David P. Norton

Harare, Zimbabwe 25 April 2012

The ability to execute strategy is the issue of greatest concern to CEOs.

2012 David Norton and Palladium Group, Inc.

Most organizations have difficulty executing strategy.

Less than 10% of Strategies effectively formulated are effectively executed

2012 David Norton and Palladium Group, Inc.

Why do organizations fail to execute strategy?

#1. You Cant Manage Something That You Cant Describe!

#2. They Dont Manage Strategy

There is no generally accepted way to describe a business strategy

2012 David Norton and Palladium Group, Inc.

Palladium Balanced Scorecard Hall of Fame for Executing Strategy

2012 David Norton and Palladium Group, Inc.

Brand Value Customer Satisfaction

Key Process Effectiveness

Ranked #1 employer in IT sector (Dataquest) Ranked Indias best managed company

Technology Support Best Employer

Learning & Growth Perspective

Customer satisfaction increased by 12 points (1 yr)

Brand Value Customer Satisfaction

Reduced civil petition processing time from 9 days to 1 day

Key Process Effectiveness

Technology Support Best Employer

Learning & Growth Perspective

Mogaha Minister Park

Revenue up 310% EPS up 305%

Brand Value Customer Satisfaction

Key Process Effectiveness

Technology Support Best Employer

Learning & Growth Perspective

2012 David Norton and Palladium Group, Inc.

2012 David Norton and Palladium Group, Inc.

Managing strategy is managing change.

Principle 1: Mobilize Change Through Executive Leadership

1.2 Executives make the case for change

Execution is the most unappreciated skill of an effective business leader

2012 David Norton and Palladium Group, Inc.

It is not a simple process for a CEO to mobilize transformation.

Bad news is filtered before it gets to me

2012 David Norton and Palladium Group, Inc.

Organizations must simultaneously balance process with leadership.

Military Officers Attracted to The Balanced Scorecard . Why?

Leaders inspire employees to make day-to-day decisions that enhance an

2012 David Norton and Palladium Group, Inc.

Principle 1: Mobilize Change Through Executive Leadership

Burning Platform ATT Canada

Shareholder Expectation Ingersoll Rand

Appeal to Excellence Wells Fargo US Postal

We Must Clarify Our Strategy

We Must Act as a Team

Held together by a shared view of the strategy

We Must Develop a New Way of Managing Our Strategy

The New Science of Strategy Execution

Office of Strategy Management

2012 David Norton and Palladium Group, Inc.

You cant manage what you cant describe.

Management Best Practice

Principle 2: Translate Strategy to Operational Terms

2.4 Strategic initiatives rationalized

2012 David Norton and Palladium Group, Inc.