SFO Blog - Helping You Build Your Company into a Strategy Focused Organization

Telling Your Strategy Story and Making it “Stick”

While having a strategy map is a massive step forward in aligning your organization with your strategy, it’s only a start. You need to share it with your entire workforce and the best way to do this is to tell your company’s strategy story. 

While your strategy map can ultimately stand alone in communicating your strategy, it’s never a good idea to introduce it to your employees in anything other than a forum that enables an interactive, two-way dialogue. Anything less sub-optimizes the traction your strategy (and strategy map) gets in your organization. This isn’t because your strategy map is too complicated for your employees to understand - it’s because an interactive discussion session allows you to share and explore your strategy with them.

So, why focus on communicating your strategy in the form of a story?

It’s because stories are “sticky” (an idea initially proposed by Malcolm Gladwell in his book “The Tipping Point” and then discussed in more depth by Chip and Dan Heath in “Made to Stick”) - they speak to people, stay in their minds almost word for word long after they are heard, and can be easily shared from person to person.

This is exactly what you want for your strategy so it’s to your advantage to translate it into a strategy story that will stick with your employees. 

In his book “All Marketers Are Liars”, Seth Godin outlines the “must have” features of a great, sticky story - it needs to: be authentic and consistent with everything else related to the story and your company; make a bold and exceptional promise; be trusted and credible and/or come from a respected source; share a subtle idea or concept quickly (following the “less is more” principle); appeal to the senses and emotions; and reinforce what people already believe. Additional principles from the Heath brothers include: being simple but profound; creating interest and curiosity; and providing concrete images and suggesting human actions.

 

To maximize impact, your company’s strategy story must include ALL of these features.

 

To share your strategy story begin by discussing your company’s core values – these are the foundation of your organization and strategy so take your time with them.

Next outline your mission and vision. Talk about these elements with passion and excitement so that your company’s purpose and ultimate destination come to life.

With these critical components of your strategy clarified, move on to discussing your customer value proposition. An engaging conversation about what your company does for your customers and how you make them feel is compelling for your employees.

From there, talk about the actions that will give the customer what they want and achieve the mission and vision. Leveraging the strategy map, the best approach is to begin at the top with the financial perspective. Start by summarizing the overall objective of this perspective (i.e. to achieve profitable growth through optimizing cost structures, growing revenues through new customers or by getting existing customers to buy more from us or by expanding into new markets, etc.) and then use the financial strategic objectives to discuss concrete examples of how the company can achieve its overall financial objectives. Move down the strategy map taking the same approach to reviewing perspectives.

The key to getting at the action-oriented details of your strategy is to engage employees in a discussion about the strategic objectives on the strategy map.  As you progress through your strategy story, also be sure to discuss and explore the cause and effect relationships between overall business objectives and specific strategic objectives – this helps make your strategy story coherent for your employees.

 

Sharing your strategy story should take 10 - 15 minutes or so. The key is to communicate the high level customer and business objectives and then engage employees in a guided conversation where they discover the critical sub-objectives in your strategy that produce desired results.  Sharing your strategy story in this way allows it to gain maximum traction with your employees.

Let’s take a closer look at why this is the case.

 

Sticky Principle 1 - Be Authentic and Consistent: A great strategy story resonates with people and is aligned with what you value as an organization. In addition, a great strategy story fits together via cause and effect in a way that makes sense and is easy understand and explain – that is, it “flows”.

 

Sticky Principle 2 - Reinforce What People Already Believe: Your employees already want to achieve your customer and business objectives and they believe that they can – your strategy story supports these desires, and provides employees with more information about and insight into the plan to get there. 

 

Sticky Principle 3 - Be Trusted and Credible: The person telling your strategy story must be respected by the audience and the story itself must have credibility by clearly demonstrating the delivery of value. Having a company leader tell the story is great but hearing the strategy story told with conviction by a peer gives your strategy story an even higher credibility rating with your employees.

 

Sticky Principle 4 - Be Subtle and Quick/Simple but Profound: What is more simple and profound than having your strategy outlined clearly on just one page?    

 

Sticky Principle 5 - Create Interest and Curiosity: Delivering your strategy story as an engaging two-way dialogue, not a presentation, creates interest and piques curiosity.

 

Sticky Principle 6 - Provide Concrete Images and Suggest Action: A great strategy story provides concrete images of what the strategy looks like in action and paints a clear picture of the impact it will have on customers and the business. With the help of your strategy map, you can do just this. Also, engaging employees in a two-way dialogue builds action right into the telling of your strategy story.

 

Sticky Principle 7 - Make a Bold and Exceptional Promise: A truly great customer and business strategy is full of stretch goals and audacious promises for the customer, employees, and the business itself.

 

Sticky Principle 8 - Appeal to the Senses and Emotions: As you paint a clear picture of what your strategy entails, and the results it will deliver for your customers, employees, and other stakeholders, work hard to engage the senses. Share your company’s strategy story with pride and enthusiasm and let your passion for the impact your company has on others stir the emotions of your employees.  

Be sure to continually create the ideal conditions for every telling of your strategy story. Craft a strategy story that includes all of these features and share it in engaging situations and ways so that it is memorable for your employees. Also, train ALL of your employees (not just your managers) to share your strategy story with others and give them the resources they need to do the job well.

 

Taking these important steps will ensure that the idea that is your strategy story is sticky and spreads throughout your company on an ongoing basis.

 

This is an excerpt from my forthcoming book Business Results Revolution: 3 Critical Questions and the Conversations That Transform Business Performance Every Day  Like what you’ve read? Please let me know. To add your name to the pre-order list for my book, just make your request via the comments section below or email me at sandy@jetrichardson.ca 

 

On Failure, Success, and Business (Canadian Style)

There was a provocative op/ed piece in The Globe and Mail newspaper last Monday. In it, Amanda Lang, Senior Business Correspondent for CBC News wrote that Canadians need to allow their kids to learn how to fail (read the article here). More specifically, Lang explored the idea that avoiding failure is a fundamental feature of Canadian culture that, in part, explains the chronically underwhelming levels of productivity in Canadian businesses. She suggests that the Canadian cultural traits of politeness, collaboration, valuing the collective over the individual, and celebrating participation over winning may be translating into behaviour that is focused on avoiding failure.

At the end of the article, Lang argues that unless we Canadians become comfortable with failure, and come to terms with the idea that there really is life after failure, business in the Great White North will never rise to the next level and fulfill its potential for extraordinary success in a global economy.

 

Lang’s article got me wondering – Are Canadians really uncomfortable with failure and are we programmed culturally to avoid failure at all costs?

It’s tempting to agree with her argument. You don’t have to look very far to see this effect in action – just watch Dragon’s Den (the Canadian version of Shark Tank). How many times have you seen the dragons fail to invest in a seemingly good business idea because the entrepreneur has a failure under their belt? And while you could argue that a television show doesn’t necessarily provide a real window on the investing climate in Canada, I would bet that it isn’t too far off. It seems that failure just isn’t something many of us Canadians want to be associated with.

 

But – is it really as simple as this?

I would argue that it’s actually a bit more complicated. In fact, I suspect that the real problem is in the Canadian relationship with the double-edged sword of success and failure.

 

The Canadian Perspective on Success

One way of defining success is to take an outcome-based approach and think of it as the state of reaching an intended objective - anything less is considered a failure. As a Canadian, I think that I can fairly say that we are, as a population, notoriously uncomfortable with success defined in this way. And setting BHAGS, achieving them, and leading in a global world (in other words, achieving large scale success) makes us almost squeamish.

Here’s an example. Just look at our collective discomfort with the “Own the Podium” sport development programme. Its primary objective is to put record numbers of Canadian athletes on the top of the podium in international sports competitions. The programme invests in those athletes with the highest potential for winning and regularly makes, and re-allocates, funding based on the “ROI” on the athlete development investment.

Aggressively pursuing success in this way just doesn’t feel “Canadian” to many. In fact, as a population, we tend to suffer from what is known as “tall poppy syndrome” - a social phenomenon in which people of genuine merit are resented, attacked, cut down, or criticized because their talents or achievements elevate them above or distinguish them from the group. Wildly successful individuals and companies that achieve stretch performance objectives and noteworthy results are often on the receiving end of envious comments and ridicule for having the audacity to dream big and actually succeed on the world stage. Given this environment, there is actually a big incentive to avoid being visibly successful from an outcome achievement perspective.

While Canada does have globally successful companies, it’s often a very well kept secret. Some might think that this is just good old Canadian modesty in action – I often wonder whether it’s an effort, unconscious or not, on the part of company leaders to be an invisible tall poppy.    

As a direct result of our collective uneasiness with outcome-based success, Canadian culture has gravitated to a perspective that feels a little more comfortable (and less risky). That is, while we acknowledge the outcome-focused all or nothing approach to success, we have, as a group, settled into believing that putting in a good effort and making progress, even if the intended outcome isn’t fully achieved, is an equally relevant form of success. Taking this approach allows us, as individuals and a group, to feel that we are experiencing success without having to commit, invest, and go big. That is, we appear to have created our own low risk road to success.    

 

The Canadian Perspective on Failure

People who take the outcome-based approach to success naturally define failure as not reaching their intended objective. When you define it this way, failure can be frequent and that hurts. No one (not just Canucks) likes to put their heart and soul into something that has a high risk of failure. But many people do just that because they have learned to get up time and time again after failure for the chance to taste success.

But what about Canadians who seem to take that process-based approach to assessing success versus failure?  I suspect that, as a population, we define failure more harshly – not just as not winning. I worry that we in fact equate failure with the worst possible, most extreme outcome - losing it all financially and/or emotionally. I know many individuals, entrepreneurs, and business leaders who actually see it this way. Most of us have never experienced losing everything and, as a result, we don’t have the faith that we could ever start over from a zero situation. We are generally petrified of “failure” – who wouldn’t be when you look at it like this?

And while we have all heard stories about those who arrived on our shores with almost nothing, only to achieve impressive financial success, this type of “American Dream” is not generally part of the Canadian cultural identity or the story we tell ourselves. In the end, I believe that the fear of losing big drives people and businesses into a risk-avoidance mindset that translates into hesitance to put it all on the line in an effort to achieve exceptional results and returns.

 

Could it be that the real problem in Canadian business is that we unconsciously fear, and therefore avoid, both outcome-based success and our collective definition of failure?  I think that it could be. Ironically, as we strive to achieve our process-based approach to success, avoiding the risk of achieving massive success and standing out from the crowd, we are also able to avoid the risk of significant loss. This “up the middle” approach could explain why many Canadian companies achieve incremental improvement and only modest levels of productivity, growth, and success.

 

In other words, could it be that being pretty good is just fine with us as a population and business community?

 

To be more successful in a global world, I believe that Canadian business would do well to adopt a new relationship with success and failure. Here are five steps executives and business leaders can take to assess and, if indicated, change mindsets:

 

1. Honestly assess organizational attitudes about success and failure. If required, begin a process of shifting core values to create more positive attitudes about outcome-based success and a healthier definition of failure.

 

2. Evaluate company goals, and performance objectives and targets. Are you settling for pretty good and incremental improvement? Why? If you are setting BHAG’s, are they big enough? Why or why not? Adjusting performance goals and targets alone won’t cut it – you’ve got to adjust mindsets as well.

 

3. Examine corporate behaviours. Do you lop off your tall poppies or do you support and celebrate achievers and achievements? Why or why not? How does the approach to tall poppies inside your organization impact the drive to make your company a tall poppy in your industry and in the global marketplace? What do you do to cultivate and invest in your tall poppies? What should you be doing more of?

 

4. How does your organization define and handle failure? Create an environment where failure isn’t necessarily the worst possible outcome and don’t jump to punishing failure as a first response. Change the focus to learning from failure and avoiding repeat mistakes. Build resilience in the face of failure – create organizational capability to recover and strive for success again.

 

5. Focus on risk mitigation and smart risk-taking rather than risk avoidance. This opens your organization up to more opportunities for creative thinking and problem solving, innovation, and quantum leaps in performance.

 

Unfortunately, as Amanda Lang suggests in her article, being satisfied with year over year incremental improvements is causing Canadian businesses to leave lots of opportunity on the table – opportunity that is being lost incrementally over time.

 

It’s time for a change.

Agree or disagree - what's your take? Does Canadian business have a challenge when it comes to achieving success and what do you think is the root cause? Please comment and add your thoughts.

Do you think that businesses in other countries face similar challenges? What are they and what do you think the solution is? Please share your thoughts.

What is a Customer Value Proposition?

We are all familiar with this term, however, because so few organizations actually manage to define and clearly articulate their unique (and differentiating) customer value proposition, it’s worth taking a moment to explore this important concept. In fact, your customer value proposition is more than a concept – understanding what will attract your customer to your company and what will compel them to do business with you are critical elements for the ongoing success and growth potential of your enterprise.

Let’s take a closer look.

What does your customer want from you? Is it a thing?  Is it a thing delivered in a very specific way? Is it to feel a certain way when they interact with you and/or when they use your products or services? Is it all of the above? If your goal is business success then you need to know the answer to these questions.

Once you do, you can develop your plan for giving current and future customers what they want, how they want it, in a way that makes them feel the way they want to feel.

This magic formula is your customer value proposition.

A clear and compelling customer value proposition helps you by creating a pool of loyal, repeat customers; attracting new loyal customers at a lower cost (through word of mouth and referrals by current loyal customers); and increasing the amount spent per loyal customer.  All this drives revenue growth. And, when you implement the business model that properly supports your customer value proposition in a cost-effective way, you grow your bottom line as well.

 

The First Half of Your Customer Value Proposition - Giving Them What They Want, How They Want It

What are the specific product or service features you offer? How does your product or service look, feel, and even smell? What does your product or service do? Product or service features make them stand out from the crowd and, in combination with the way you create and deliver your products or services to your customer, help attract customers to you.

When customers get what they want, how they want it, in a way that makes them feel the way they want to feel, they perceive value. When customers perceive that they are receiving value from a product or service, and the company that provides it, they are attracted to the company and what it offers.

It is important to realize, however, that different types of customers want different things from the products or services they buy and the companies they buy them from. The key is to match what YOUR customer wants with what you give them and how you deliver it.

When you do, you deliver the right value to the right customer and this is the foundation of business success.

 

The Second Half of Your Customer Value Proposition - Making Them Feel the Way They Want to Feel

Also called “the customer experience”, making customers feel the way they want to feel when they buy from you is dependent on two things: the nature and the quality of the interactions they have with you, and their perception of those interactions.  

Each interaction you have with your customers gives you the chance to either delight or disappoint them. If you’re smart, you’ll design “what” and “how” elements into every touch point or interaction they have with you. However, you must also build a certain amount of flexibility into your design so you can accommodate to unique customer points of view and successfully deliver the right feel to each individual customer.     

No matter how well you design your customer interactions, and what your objective measures of performance say about those interactions, your customer’s perception of their experience when dealing with you is the only reality that counts. Your customer’s experience of you is a combination of how the costumer consciously and subconsciously sees an interaction. Individual customers have a positive experience when (1) you deliver the experience you have promised; and (2) the experience meets the practical and emotional needs and expectations of that customer.

 

The key to designing and delivering a successful customer value proposition is starting with a clearly defined target customer. This gives you someone to get to know really well, allowing you to develop an intimate understanding of their evolving wants, needs, and expectations and what they value. With this information, you can identify and create products and services that will suit your target customer AND you can design a customer experience that will appeal to them on an emotional level.

When your customer value proposition is successful in giving your customers what they want, in the way that they want it, and in a way that feels right, you are providing your customers with an irresistible level of value.

And, for savvy companies, providing an irresistible customer value proposition is the key to acheiving breakthrough business growth.    

 

The Real Value of Strategy Map “Weighting” for Business

The issue of strategy map weighting has raised its ugly head again recently in some LinkedIn balanced scorecard and strategy forums.

And while the topic itself isn’t ugly, some of the exchanges have been. While some commentators have declared strategy map weighting “stupid”, I want to encourage practitioners not to throw an important concept out without further exploration and discussion because, in my experience, when applied in a specific way with a specific objective in mind, the idea of strategy map “weighting” can address a critical problem I see in 100% of the clients I work with – a lack of prioritization in organizational work effort, resource allocation, and operational and strategic decision-making.

First, let’s talk about the concept of weighting from a historical and technical perspective because it’s always good to know where we’ve been.

 

Weighting and the Balanced Scorecard

Back in the 1990’s when the balanced scorecard was new and we all thought that it was a performance measurement framework and activity, weighting your balanced scorecard indicators was very much in vogue. Balanced scorecard weighting was generally done in an effort to calculate an overall score for balanced scorecard performance. I even saw some executives being incented on increasing the overall balanced scorecard score for their organization over time because an improving score was considered evidence that the business unit’s overall performance capabilities were improving. At that time, we weren’t thinking about what “improvement” really meant (or whether increasing your overall balanced scorecard was even a good indicator of progress in the first place!). In the early days the concept of keeping score and improving on that score was seen as the primary goal of balanced scorecard utilization. Needless to say, the understanding and use of the balanced scorecard by many practitioners was formative and immature at that time!

In order to calculate an overall balanced scorecard score, everything needed to be given a weighting. The easiest approach was to begin by weighting the four balanced scorecard perspectives by allocating 100% over the various perspectives. From there the percentage given to a perspective was allocated amongst the indicators housed within the perspective (back in the 1990’s, it was rare to see strategic objectives included on a balanced scorecard). Weighting was often applied based on an unscientific assessment of the relative contribution of various perspectives and indicators to business performance results. Sometimes, thought was given to the concept of cause and effect in the balanced scorecard and greater weighting was applied in the “lower” perspectives and their associated indicators but let’s be honest - cause and effect was a new concept back then and we were still figuring out what the idea really meant in practice. Back then I saw weighting being applied to gap areas (i.e. opportunities for improvement), perspectives and indicators that had the highest external visibility, and a whole host of other, opinion-based/subjective reasons.

 

As our use of the balanced scorecard has matured, much has changed. The use of balanced scorecard “weighting” is rarely suggested these days because we generally use the balanced scorecard as a performance management tool that uses measures as indicators of organizational performance. That is, they are not diagnostic and, when approaching it as an internal strategy management tool, the balanced scorecard is best used as a facilitator of organizational analysis, dialogue, action, and change.

With this change in mindset, the concept of rolling up overall balanced scorecard performance into a score no longer makes much sense. Furthermore, the idea of weighting an indicator’s contribution to the color coding of the strategic objective it supports (assuming that you have progressed to including strategic objectives on your balanced scorecard) doesn’t add value to the role of the balanced scorecard as a performance management tool. In fact, in this context, balanced scorecard weighting can actually get in the way. That’s because weighting one indicator’s contribution significantly over another can actually mask areas of underperformance when looking at strategy execution capabilities and strategic progress.

As a result, I usually advise weighting all balanced scorecard indicators equally in relation to their contribution to their associated strategic objective unless there is fact-based evidence or a very clear business rationale to do otherwise. For example, 100% weighting is given in the case of just one indicator, 50% is given to each in the case of two indicators, etc. – you see what I mean. In my experience, there is rarely a clear rationale to approach weighting otherwise.

The only time that the balanced scorecard and/or balanced scorecard indicators may be weighted is when it is being used for the purpose of incentive compensation. There are lots of different factors that go into weighting a balanced scorecard for incentive compensation purposes – some of them related to areas of strategic focus and some of them related to the financials associated with the probability and size of the potential payout. Incentive compensation and indicator weighting is a complex topic best left to another discussion.

 

So, where are we now when it comes to balanced scorecard weighting? Generally, it really comes down to purpose. And, when the balanced scorecard is being used for the purposes of internal strategy management, weighting is generally not applicable because it just doesn’t make sense or add value.

 

Weighting and Strategy Maps

As you know, strategy maps were a later evolution in the balanced scorecard story. And while they were formally introduced to the world in 2001 and then again, more thoroughly, in 2004, many of us practitioners actually started creating our own strategy maps as early as the late 1990’s. Strategy maps were the missing link for many of us in building the bridge between strategy creation and execution and in maximizing the power of the balanced scorecard as a strategy management tool.  

By the time strategy maps came into greater use, our understanding of the relationship between the purpose of strategy management tools, cause and effect relationships, and weighting concepts had matured. As a result, strategy map weighting in the old sense was never a part of the package – it just wasn’t seen as relevant.

 

However, some practitioners did bring the concept of weighting back into play after we started using strategy maps with our clients but in a different way for a different reason and here’s why.

If you are an experienced practitioner, you know that, no matter how much you try to focus on “the vital few”, most initial strategy maps begin with upwards of 24 strategic objectives. While in theory we want to keep a company’s strategy map focused, reality is much messier. Many organizations just aren’t sure what their true value drivers are and/or organizational leaders can’t come to consensus on them. As a result, they are afraid to leave many business objectives off of their strategy map. And, no matter how much you want organizations to develop their strategy map based on hard evidence, most companies just don’t have the cause and effect data available to map out a sure-fire value chain (they need a draft strategy map and balanced scorecard to start testing this out!). As a result, most companies begin with a strategy map with a high number of strategic objectives.

When this happens, a strategy map can magnify a critical business problem – the failure to establish business priorities.

 

This is one of the biggest business problems today – the struggle to identify and focus on a few relevant strategic imperatives in the context of the bigger, long-term picture. Many organizations strive to put equal effort on all strategic objectives at the same time and end up achieving mediocre success in all areas. Unfortunately, a strategy map with 24 strategic objectives can cripple an organization that avoids making prioritizing decisions – no business can successfully work on 24 key strategic objectives simultaneously.

I personally saw many clients struggle with this challenge so, some years ago, I, and several of my colleagues, brought back the old idea of weighting and applied it to strategy mapping but in a new way – to identify subsets of strategic objectives having different levels of strategic priority over a period of time. Taking this approach has given strategy map users a way of identifying a few critical strategic imperatives in their business in a thoughtful and manageable way.

 

When I get my clients to do strategy map “weighting” or prioritization, I get them to ask this question: “Where should we put relatively greater work effort and priority over the next X months (usually 12 – 18 months)?” With this question in mind, participants apply weighting in a way that technically looks similar to the old balanced scorecard weighting approach – the key difference is in the question and purpose behind the weighting exercise.

Strategy map prioritization is an interesting exercise. There is almost always a 50/50 split in the approach participants take to applying their relative weightings. Half of the participants are guaranteed to leverage cause and effect concepts and select strategic objectives with the biggest performance gaps (current state versus vision state) lower down in the strategy map hierarchy. Others will select gap areas that represent high visibility outcomes (usually in the internal process, customer, and financial perspectives). The main thing the different approaches seem to have in common is that they focus on performance gap areas.

Talking about their different approaches to strategy map prioritization always allows members of an organization to really explore cause and effect concepts and come to consensus on (1) the way they want to think about the way their business works to produce results; and (2) where the most critical strategic gaps are in the business. The usual result is agreement on four to six strategic objectives that have clearly higher weighting or priority over the other strategic objectives on an organization’s strategy map over a defined period of time. And while all objectives will get some attention over the time period in question, members of the organization reach agreement that, when a decision must be made regarding work effort and the allocation of time and resources, the top four to six priorities will win out over the other objectives.

 

Strategy map prioritization is not a theoretical exercise – it’s a very practical one. Once they have weighted/prioritized their strategy map, my clients have used the weighting in many ways: to create multiple tiers of projects with tier 1 projects having the highest priority in budgeting and resource allocation; to evaluate and prioritize projects and work requests (i.e. work aligned with the top strategic objectives gets priority over other work); to evaluate the importance and impact of balanced scorecard results and to prioritize resulting corrective active plans; and in defining and weighting decision-making criteria. These are just a few examples.

The beauty of strategy map weightings is that they can be changed as required based on business conditions and learnings. Most importantly, this information provides guidance to managers and employees about prioritization decisions in their day to day work.

As my thinking about prioritization concepts has evolved, I have progressed on from having my clients weight the entire strategy map to having a fact-based discussion that asks each participant to identify the top three or four priority strategic objectives for the defined period of time. I have found that this more focused approach enables the same discussion and learning points and gets clients to the same result without the complexity of assigning weightings. And while there are a few downsides to this approach, the result is still the identification of relative work priorities for an organization within the context of all the strategic objectives on their strategy map and, most importantly, better, more successful strategy execution over the long term.

 

When considering weighting in the context of both the balanced scorecard and the strategy map it is important to avoid thinking about these concepts in purely black and white terms. However, over time, we have learned that some purposes and concepts just don’t go together in the case of some tools and we need to keep this information in mind as we move forward.

For example, the concept of strategy management and performance scoring are not a good match - they actually work at cross purposes. In contrast, the concept of strategy management and weighting for work prioritization appear to be in harmony because they share a common objective: excellence in strategy execution.

 

It is wiser, in my opinion, to think more deeply about the purpose of the tool in question and the purpose of a specific or associated activity. Taking this approach will set a better stage for the future evolution and practical application of strategy management tools in business.

 

The Four Foundations that Should Frame Every Business Strategy

If you look closely at the inner workings of successful companies, you quickly come to the realization that truly solid market-leading organizations and business strategies are built on four critical foundations: a set of core values; a mission or purpose statement; a timed vision statement; and a clearly articulated customer or stakeholder value proposition.

While this list won’t represent a new insight or a “rocket-science” approach to business strategy for many of you, it still surprises me how many companies seem content to cherry pick from this list of the four essentials and how they rarely incorporate all four elements into their business strategy. By not taking steps to incorporate all four foundations in their strategic thinking process, organizations are setting themselves up to sub-optimize their business strategy and strategy execution results.

Let’s take a closer look at each of these important foundational elements and talk about how they fit into the strategy picture.

 

Core Values

Core values represent the basic, shared beliefs that govern individual and group behavior in any organization. They both define and represent the way things get done and, as a result, form the foundation for the strategic objectives in a company’s business strategy and on its strategy map. Every action an organization takes should be in absolute alignment with its stated core values. In fact, the difference between successful and unsuccessful organizations is that the successful ones actually live up to their values all the time in everything they do. It is important to note that a company’s core values ideally remain stable over time.

Because you want your employees to put your core values into action every day, you need to keep your list of core values to a short, focused one – three to five core value maximum is usually a good number. In addition, it’s not just good enough to simply identify your organization’s core values. You should also write a clear behavioural definition for each value – that is, what it is and what it looks like in action. This is often a missing piece in company core values statements. By defining your core values in actionable terms, you make it much easier for your employees to make decisions and behave in ways that are in complete alignment with the company’s core values.

Successful organizations take their use of core values even further and build the expectation that employees will act in alignment with core values into the performance management process. They go so far as to include an assessment of employees’ performance against core values behaviour standards as part of performance review discussions. Taking this approach (1) communicates the importance of a company’s core values; (2) supports the requirement to align individual actions with core values at all times; and (3) evaluates and rewards behaviour and performance that is aligned with values and helps move the organization forward.

Imperative: It’s not good enough to go through the motions of creating a list of organizational core values. To achieve real business success, it is critical to take the time to identify and define core values and then ensure that they are put into action by all employees at all levels of your organization every day.

 

Mission

An organization’s mission defines why it exists, describes what business it is in and the contribution it makes, and states the value it adds to either society or the corporation it operates within. A good mission statement communicates the purpose of an organization and, importantly, it aligns with the organization’s core values. Mission statements endure over time and do not change unless a change in organizational direction results in a change in the nature of your organization’s purpose.

A winning mission statement is short, inspirational, and lofty – companies should always be striving to deliver on and achieve their purpose however they never actually get there. A typical mission statement says a lot and provides direction in broad terms but still leaves room for creative thinking about how to take action and actually achieve the mission or purpose.

Here are some sample mission statements that I particularly like:

3M - To solve unsolved problems innovatively.

Merck - To preserve and improve human life.

St. Mary’s Duluth Clinic Health System - Bringing the soul and science of healing to the people we serve.

Mary Kay Cosmetics - To give unlimited opportunity to women.

Many people believe that mission statements only apply for public sector and non-profit organizations largely because their ultimate purpose is to do good for society. The thinking is that, in the private sector, the ultimate goal is to make money/a profit – full stop. And while the making money bit is true, smart for-profit organizations realize that making money isn’t a purpose that truly inspires customers and employees. Most progressive thinking companies believe that if they focus on achieving an inspirational purpose that adds real value, the money, and if they plan right, the profits will follow.

Imperative: As you can see from the mission statements provided above, even private sector organizations today take the time to define an ultimate purpose for their company. By ensuring that its core values and mission are aligned, a company is setting the stage for the development of a more coherent business strategy.

 

Vision

An organization’s vision is built on its core values and is an extension of its mission. A vision should include a clear timeframe (often a three to five year horizon) and acts as a signpost on the journey to achieving the mission. It paints a clear and measurable picture of what a company wants to achieve by a defined point in the future. As a result, a vision provides an organization with a tangible way of assessing its strategic progress over a specific time period.

A vision stretches the organization’s capabilities and image of itself and it clarifies the direction of the organization. In addition, a clear vision helps all of a company’s stakeholders understand why and how they can support the organization as it strives to achieve these specific goals and objectives. Because they are time-limited, vision statements change after the vision period has been completed.

Imperative: Because an organization never achieves its mission, a time-limited vision offers the ability to assess progress on the mission journey against some clear measures of performance. The thinking goes that if the progress measures included within the vision have been set in the context of the mission (and, by extension, the values), achievement of the vision implies forward progress in the achievement of an organization’s mission.

 

Customer Value Proposition

An organization’s customer value proposition (CVP) is the combination of benefits it is going to provide to its customer. In other words, it is the big promise it makes to its customer that differentiates it from its competitors in the market place.

The key to success with customer value propositions is to leverage your understanding of your target customer AND the value propositions of your competitors to differentiate your company in the eyes of your target customer.

There are three classic customer value propositions that vary slightly based on the business sector but generally revolve around the same three ideas of value creation:

Operational excellence (leading to lowest price/cost for our products and services)

Product or Service leadership (by continuously updating products and services to keep them on the cutting edge)

Customer/Stakeholder intimacy (customizing our products and services to meet each customer’s/stakeholder’s unique needs)

Successful organizations (1) can clearly state their CVP and (2) every employee in the organization knows what it is. In addition, a company’s CVP, mission, vision, and core values must all be in alignment if it hopes to define and execute a successful business strategy.

Imperative: A company’s customer value proposition is the fourth fundamental for strategy success. Unfortunately, making the effort to define a clear and differentiating CVP is the most frequently skipped element in the strategy creation process, regardless of sector. I think this is largely due to the fact that developing a CVP requires multiple steps, a complex thought process, and the willingness to make a bet on a focused customer strategy – all of which can be daunting in a competitive marketplace. Even when companies do define a CVP, they rarely take the step of creating a customized CVP statement that is clearly communicated and understood across their organization. While better than not defining a CVP at all, failing to follow through in this way can also result in the sub-optimization of strategy development and execution success.

 

Once they have been defined, the four foundational elements of core values, mission, vision, and customer value proposition should be arranged on the strategy map in this way.

With the four foundations in place, they can be leveraged to define the value creating business strategy an organization is going to execute to satisfy its target customer or stakeholder and achieve its mission/purpose and identify the strategic objectives that populate the strategy map. Practically, strategic objectives are identified by keeping the four foundations top of mind as these questions are answered in the following order (in the case of a for-profit company):

Financial: How must we perform financially and what returns must we deliver to our shareholders?

Customer: What must we do for our customers and what benefits/big promise must we deliver so that they reward us with their business and loyalty?

Internal Process: What processes must we excel at to give our customers what they what, need, and expect from us?

Organizational Capabilities: What skills, capabilities, people, culture, technology, tools, and infrastructure must we have access to/in place to execute our processes and deliver our customer promise/value proposition?

    

There are four foundations that are essential for building a sound and solid business strategy: core values, mission, vision, and customer value proposition. By keeping these four elements in mind while answering the critical questions outlined above, companies are virtually guaranteed of creating a business strategy that is aligned with their core values, is geared to delivering their differentiating big customer promise, and gets the company moving on a path to mission and vision achievement.

 

Though simple enough in concept, in my experience, companies frequently fail to follow through on defining the four foundations. As a result, organizations that actually make the effort to complete this work find that they are able to lead and win in their selected markets more easily than they might have imagined.

 

Break Out of the Output Measurement Rut NOW!

I was recently teaching a class of Master’s students about the fundamentals of the balanced scorecard and the essentials of indicator selection when I was asked a great question: “Why do we seem to focus on output measures when we are measuring things in business?”

Before exploring this question, let’s take a quick look at the nature of, and options in, performance measurement.

 

Remember the good old days when we talked about leading and lagging indicators? We’ve come a long way since then and, while many people still talk about leading and lagging indicators, the thinking about this concept has changed a bit. Today, the concept of leading and lagging refers to the performance associated with a specific strategic objective itself rather than in relation to other strategic objectives on the strategy map or indicators on the balanced scorecard. As a result of this change in thinking, I actually prefer to characterize indicators as either predictors of future performance and results or indicators of past performance (often in the form of output and outcome measures).

The key is to remember that, for most strategic objectives on your strategy map, performance (and improvement) is generated through the execution of business processes. And while some strategic objectives may be achieved by completing strategic projects, most of the work that moves your business forward strategically over the long term is completed through the execution of business processes.

Looking at your business in these terms and linking business processes with strategic objectives allows you to make an interesting shift in thinking about alternatives for measurement when considering possible indicators for a strategic objective and your balanced scorecard.

Any business process owner you meet will tell you that there are actually four measurement opportunities when working with and managing business process performance: inputs, in-process, outputs, and outcomes.

Inputs are the things that trigger or start a business process moving. In-process measures are measures of things you observe while a business process is running. Outputs are the things produced immediately after a business process has been completed. And outcomes are the results achieved through, or impacts of, running a business process.

 

Here’s an example in action - let’s take a business process we can all relate to: Employee Recruitment

What triggers the recruitment process (input)? A vacancy or new position.

What do we see while the recruitment process is running (in-process)? Job postings, application and resume submissions, and candidate interviews.

What is the result of recruitment process (output)? A new, qualified employee in place in the open position quickly.

What is the impact of running the recruitment process (outcome)? Expanded organizational capability and capacity.

These are just some examples of the range of measurement opportunities/measures that could become indicators for a strategic objective such as “Attract Qualified Employees with Strategic Skill Sets”.

 

Generally, input and in-process measures translate into indicators that are predictive of future performance while outputs and outcomes are measures of completed activities and past performance. While you can’t change past results, predictive measures give you feedback early in a process and offer you the opportunity to take action, if indicated, to produce a better result by the time that process has finished running. 

It turns out that if you look at most of the measures used in business, they tend to be of the output variety. Some people believe that we tend to measure outcomes but that usually isn’t the case at all. This is largely because outcomes can be very difficult to measure. For example, measuring the outcome of employee development activities requires assessing the acquisition of knowledge and skills, and the application of these new learnings in the work place. This often involves measuring knowledge and application gap closure and assessing the value realized by the business through the acquisition and application of this new knowledge (something close to an ROI measure that can be notoriously difficult to measure when we are talking about the intangible aspects of the business). Measuring an outcome such as this, while critically important, can be difficult (often due to the complexity associated with the time lag and other factors that can come into play between the time of output and outcome measurement) and very costly.

While measuring outcomes is often considered the “gold standard” in results measurement, most organizations seem to settle for measuring outputs like % attendance at, or completion of, scheduled training programs (in the case of an employee training and development strategic objective) because they are readily available.

 

So, with all this in mind, let’s go back to our original question: “Why do we seem to focus on output measures when we are measuring things in business?”          

 

I believe that the primary reasons are because they are usually readily available, are easy to get, are recognized as evidence of the success of our business processes, and are generally accepted as the best measures of performance in business today. And while we would like to measure the impact of and/or the value of our business processes in moving our business forward, outcome measures can be difficult and expensive to get.

 

In a nutshell, output measures are usually cheap and easy.

 

Now, don’t get me wrong, if an existing output measure is the best indicator to select based on the definition of a strategic objective, by all means, use it on your balanced scorecard. However, be sure to remember that a balanced scorecard is not balanced unless it includes some combination of predictive indicators and indicators of past performance. This imperative often means exploring and adding some predictive input and in-process measures to your balanced scorecard indicator set.

 

I think that the real reason why we tend to focus on output indictors is because they are our best, most direct evidence of what has been produced by a process. That is, we ran XYZ process and output A was the result. Often, it feels like a huge leap of faith to measure an input or in-process measure in lieu of an output measure. Many people wonder “How can we be sure that this input measure is a good predictor of a future result (an output or outcome)?” I understand that concern because the answer is you don’t really know for sure without some experience and lots of data – data that most organizations just don’t have the time and resources to collect. And, without those causal relationships quantified, many organizations are afraid to replace output indicators with the predictive ones.

A practical way of adopting predictive indicators in your balanced scorecard is to create an index that includes a predictive indicator and an indicator of past performance that are both relevant to the strategic objective in question. Taking this approach allows you to (1) see whether there really is a relationship between your selected indicators (sometimes you think that there will be a relationship and it turns out that this just isn’t the case), and (2) build an understanding of the nature and strength of that relationship. In the best case scenarios, taking action on an underperforming predictive indicator and then seeing that you were able to prevent significant underperformance on the associated indicator of past performance can give you good insight into the practical value of a selected predictive indicator. Once you have developed this confidence, choosing to include predictive indicators, in lieu of output indicators, on your balanced scorecard doesn’t feel like such a gamble.

 

Output indicators are often the default and/or preferred type of measure for many balanced scorecards. Unfortunately, a focus on output measures alone severely limits your ability to leverage the balanced scorecard the way it was meant to be leveraged.

Is your balanced scorecard currently populated with output indicators? If it is, you aren’t alone.

Take the time to restore the “balance” in your balanced scorecard and increase its power. Simply look at the business processes that support each strategic objective on your strategy map, identify candidate input and in-process measures, and consider replacing some output indicators with predictive ones. Making this move will allow your balanced scorecard indicator set to help you produce even better business performance results and move your strategy forward more quickly and effectively.

 

Is Strategic Planning Too Focused on the “Negatives”?

Every once in a while, when I am working with clients, I run up against the sentiment that strategic planning is a process that, at its core, is focused on the negatives in business. That is, strategic planning appears to be primarily concerned with identifying and closing gaps in organizational direction and capabilities. Why, I get asked, doesn’t strategic planning focus more on identifying, recognizing and celebrating, and leveraging the successes and strengths an organization has?

When I was first asked this question a few years ago, it stopped me in my tracks. In fact, the question prompted me to ask myself – “Is the strategic planning process too focused on gaps and should strengths play a bigger role in the process?”

After thinking a bit about this question, I have formed the opinion that yes – perhaps the strategic planning process does take a bit of a lop-sided view of things with us traditionally focusing more on the gap side of the equation while taking our strengths for granted. I think that this approach is simply an outgrowth of some fundamental beliefs including (1) ALL organizational strengths are good (and should therefore be maintained), and (2) that they will somehow continue to remain our strengths over time. And, furthermore, (3) to move forward, companies need to put more energy into focusing on identifying and closing critical strategic and operational gaps.

 

While it makes sense to put a focus on closing key gaps, I have come to the conclusion that not giving due consideration to strengths translates into a flawed strategic planning approach. So let’s talk about the role the so called “positive” elements in business (i.e. strengths and opportunities) do, and should, play in the strategy development process.

 

A common precursor to strategy development is the SWOT Analysis and all its variants (e.g. PEST Analysis, Five Forces, etc.). While all of the SWOT elements can plan a role in determining strategic direction and developing an organization’s strategy map, the opportunities and threats play a vital role in informing many initial strategic decisions. Opportunities themselves are often identified in response to gaps in the external market including unmet customer needs and expectations, gaps in the customer service experience, and key competitor offering and capability shortcomings. Opportunities can also include emerging business and market scenarios, and future expected trends. Threats are situations and trends that could have a negative impact on a company’s ability to achieve business success.

These elements of the SWOT Analysis are usually used to identify strategic directions and a strategy that leverages selected opportunities and manages the key threats appropriately. Opportunities generally inform such strategic elements as a company’s mission, primary customer value proposition, and product and service decisions. Key threats are often addressed through strategic directions and strategies that either eliminate or effectively mitigate the serious ones.

 

This treatment of both the “positive” (i.e. opportunities) and the “negative” is fairly standard in traditional strategic planning approaches. As a result, I think that we could say that, going in, strategic planning is informed equally by positive and negative forces.

 

So perhaps, based on this initial assessment, the feeling that strategic planning focuses too much on the negatives is actually an incorrect perception. However, let’s look at what usually happens next in the planning process and how it might contribute to the assertion that there’s a negative focus.

 

Once a company’s strategic directions and strategy map have been created, the next step many organizations take is to assess current organizational and capability gaps in executing the strategy and achieving the desired business results. This is primarily done by leveraging the weaknesses identified in the SWOT Analysis to create gap closing projects. The thinking is that weaknesses must be effectively addressed to move forward. Rarely are strengths considered at this point, primarily because talking about organizational strengths simply does not fit into a gap closing paradigm. That is, items on the strengths side of the ledger represent things the company currently does well and, as a result, they are not naturally considered as a source of gap information.

 

I think that this apparent lack of consideration of the SWOT strength elements is probably the root cause of the complaint that strengths (aka. the “positives”) get overlooked during strategic planning.

 

A better approach to planning is to actually include a review of both strengths AND weaknesses when assessing an organization’s ability to execute and achieve its business strategy. The first step in this assessment is to take each strength and weakness element and evaluate its importance in, or criticality to, achieving the mission and vision, and delivering the primary customer value proposition. Any strength or weakness that is ranked as having low levels of importance or criticality should receive no further consideration in the planning process.

This is an important point so let’s pause here. What I am effectively saying is that all organizational strengths (and weaknesses) are not created equal and that, for example, a current organizational strength may not be strategically relevant. When this is the case, and a lot of effort and resources are going into maintaining that strength, there may be an opportunity to rethink those investments. Maybe that strength doesn’t need to be maintained at such a high level of capability. Or, more radically, maybe that strength doesn’t need to be a strength at all and the company wouldn’t suffer if it drifted down so it wasn’t a recognized strength anymore. This first step in the assessment process provides you with (1) an interesting opportunity to look at your organization’s assumptions about its strengths and their relative value, and (2) information with which to have an informed discussion about the wisdom of investments in non-strategic strengths.

The first step in this assessment process also allows an organization to evaluate the strategic impact of its identified weaknesses (or more positively phrased – its opportunities for improvement). As can happen with the strengths, this analysis can determine that some weaknesses may have little or no impact on an organization’s ability to execute its business strategy and deliver desired business results. When this is in fact the case, there is no need to assign resources to closing non-strategic organizational weaknesses.

 

With the sub-set of strategic strengths and weaknesses now identified, the next step in the assessment process is to evaluate the size of the capability gap for each strength and weakness. A gap is determined by comparing current performance against required future performance – when current performance does not equal required future performance, a gap exists. As gaps are identified they can be prioritized for closure. For example, an organization may choose to address big gaps with high strategic value before SWOT elements that have smaller performance gaps. A lot of discussion and consideration goes into prioritizing identified gaps but the usual result is gap closing projects that are implemented at strategically relevant timelines, often within the vision time frame.

Occasionally through this step in the assessment process, strengths are actually found to have performance gaps. That is, while performance capability is high, improvements may still be required to achieve future state performance levels. When this happens, the enhancement of a strength may be included as, or within, a gap closing project.

In some cases, current strengths are performing at future state levels. When this is the case, one option is to assume that, moving forward, the strength will be naturally maintained and, as a result, no extra effort and/or investment is needed to maintain that strength at current levels. However, sometimes there is the risk that, with the organization’s focus diverted to gap closing efforts, a current strength may “slip” in performance levels. When an organization determines that this is a possible risk, some make the decision to invest in a strength maintaining “project” to protect a key strategic strength. This is a particularly wise decision when the strength in question is a key differentiator or provides a company with a distinct competitive advantage in the market place.

 

With this background thinking in mind, let’s go back to the question we originally started with: “Is the strategic planning process too focused on the negatives in business?”

 

When people ask this question, it’s my experience that they are usually saying that they believe or are worried that organizational strengths don’t get equal (or more) consideration in the traditional strategic planning process. Generally, I would have to say that this is true and that both weaknesses AND strengths must be given equal treatment during the planning process if you realistically hope to become a better organization. That is, they must both be evaluated objectively relative to their contribution to strategy execution success and the size of the performance gap and then handled accordingly.

It would be a critical flaw in thinking to simply assume that all strengths are valuable to maintain and that effort should go into supporting all strengths equally. It is the same error as assuming that all weaknesses represent gaps that must be closed. The bottom line is that, as it is with most things, focusing attention and efforts too far on either end of the strengths-weaknesses continuum is a sub-optimal place to be. To ensure a sound business strategy, both strengths and weaknesses must receive equal treatment and fair consideration through the strategic planning process.

 

More worrisome to me, however, are the risks associated with judging strategic planning, including the evaluation of a company’s strengths and weaknesses, as a “negative” activity and experience. To be productive, strategic planning needs to be an honest, truth telling process where the act of telling the truth about where your company is trying to go, what your current capabilities are, and what you need to focus on (including the gaps you need to close) to get from here to there is perceived to be, at worst, neutral and objective, or, even better, considered to be a positive activity and experience that provides your organization with the best possible route to higher levels of business performance and success.

 

So, perhaps in the end, what is really required to answer the question “Is strategic planning too focused on the negatives?” is a fundamental shift in perception and perspective about the nature of strategic planning itself.

 

Why Your Employees Don’t Care About Your Business Strategy

A problem I hear frequently from business leaders is that they can’t get their employees interested in, or engaged with, their company’s business strategy. They say that their employees don’t seem to care. When I ask them why they feel this way, they cite lack of interest in participating in strategy information sessions and results sharing town halls, poor uptake of business update newsletters, and failure to look at balanced scorecard results reports as just some of the examples of low levels of employee engagement and interest in the strategy of the company. 

Unfortunately, many business leaders take this apparent lack of employee engagement as a sign that their employees aren’t really committed to the company or that they don’t care about the company and what it takes to be successful. Sadly, this attitude about employees is common in many companies today - many executives have come to the conclusion that employees just don’t want to get engaged.

Armed with the assumption that low employee engagement is an employee attitude problem, the usual solution is to push more, and harder, from the top in the quest to “fix” employees/the employee problem. Not surprisingly, the actual result achieved by these actions is exactly the opposite of the desired outcome. That is, it causes erosion in real employee engagement levels and reduced employee loyalty to the company.

 

Have you ever considered that employees don’t engage with a company’s strategy because they aren’t given the opportunity to engage in, and with, the strategy in a meaningful way in the first place?

And that many employees only APPEAR not to care while they actually really do and management just isn’t giving them a fair chance to show it?

 

Most of the employees I have met in my career have truly wished to contribute to the success of their organization and, when asked, have been more than happy to participate in a dedicated way in their company’s strategy creation, execution, and management processes. In my experience, the barrier to making this a reality isn’t usually employees at all. In fact, the problem is often a systemic one with the organization, and business leaders themselves, putting significant obstacles in the way of employee engagement with the business strategy.

What are these systemic barriers? Let’s look at the four top reasons why companies have trouble getting their employees truly excited about, and involved with, business strategy.     

 

 

Employees Don’t Know What the Business Strategy Is

You’ve heard this one before – only 5% of the workforce in the majority of organizations understands their company’s business strategy. This means that only a fraction of the employees in any given company understand what the business strategy is, what it really means, what it looks like in action, and why (and how) executing the strategy will drive business success - all despite the fact that many organizations hold splashy strategy launch events for their employees and produce beautiful materials that communicate their business strategy.

Despite these efforts, there’s still a disconnect. The primary disconnect for most employees is in the “what it really means” and “what it looks like in action” parts of the equation outlined above. The problem is that most strategies and strategic plans I’ve seen are written at a very high level. They include strategic direction statements like “Focus on Quality Operations” or “Excel at Innovation” and that’s it. While it sounds good and people nod their heads when they hear them, when employees go back to their front line work, you realize that what it means to “focus on quality operations” means different things to different people.

The problem is that a statement like “focus on quality operations” actually doesn’t tell you anything about what the company really means or hopes to achieve through a focus on a specific strategic direction and this leads to a lack of clarity about what it looks like in action. And while many strategic plans include lists of initiatives that support various strategic directions, these lists are actually not very effective in helping most employees see what “focusing on quality operations” looks like in action in their job. This leads us to the next barrier….     

 

 

Employees Can’t See Themselves in the Strategy

If the only way your employees can see the strategy “in action” is through the initiatives that align with each strategic direction, they will only be able to “see themselves in the strategy” if their work includes completing one of the identified strategic initiatives.

In reality, the work of most employees involves completing business processes, not working on strategic initiatives. Actually, most of the work that will contribute to the successful execution of a company’s strategy occurs through business processes. If a company hasn’t mapped its business processes with its business strategy, it is missing an opportunity to demonstrate how to put the strategy into action, and how employees fit in and contribute.

An employee’s work is important to them and they see doing their work as their way of contributing to company success. If employees don’t see how their day to day work (via the business processes they work on/in) fits in with, and contributes to, the business strategy, they can’t see themselves in the strategy. When employees can’t see themselves in the business strategy, the strategy just doesn’t register with them and, as a result, they don’t feel like the strategy has a direct relationship to their work.

Employees see their work as important and when the business strategy doesn’t connect with the real work they do, employees conclude that the business strategy doesn’t relate to/doesn’t concern them.           

 

 

Employees are Incented to Focus on Operations ONLY

Many business leaders and managers believe that employees should focus on their work alone - that is, they don’t need to understand the business and that the work of other departments is just a distraction. In fact, many organizations go so far as to use employee goal and incentive compensation plans to focus employees on operational performance exclusively. In the worst case scenario, this focus on operational results is misaligned with strategic goals and results, negatively impacting the achievement of strategic objectives.

Companies that focus their employees on operational matters only are placing significant limitations on the ability of their organization to achieve business success. For example, when employees don’t understand how the business works, as well as the strategic goals of the organization, they are at greater risk of making operational decisions that have a detrimental impact of the overall success of the company. In contrast, when employees understand the strategic priorities of the entire business and how all parts of the business need to work together to achieve success, they realize that operational decisions made in one part of the company have an impact in other business units and departments and they make these decisions accordingly.

Helping employees understand the relationship between operations and the strategic objectives of the organization allows employees to make more informed day to day business decisions and that always translates into better strategic performance overall. 

 

 

No One Asks Employees Their Opinion or Gives Them the Chance to Participate in the Strategy Creation and Management Process

Why is strategy making and improvement so often considered to be the sole domain of executives and business leaders? Why does the strategic planning and execution process tend to rely on numbers and data almost to the exclusion of the insights and wisdom of the people who are close to the action and the customer (i.e. the employees)?

The unfortunate fact is that the traditional approach to strategic planning and strategy management used by so many companies almost always unfolds in exactly this way with limited involvement by, and input from, a broad range of employees

Many organizations don’t even bother to engage their employees in the strategy making process while others make the offer and then complain that their employees don’t take them up on it. Unfortunately, in many of these cases, organizations don’t take the necessary steps to help their employees participate in strategy making and management activities. Not releasing employees from front line work and not making time for participation in strategic discussions part of every employee’s job are just two examples of the real barriers that prevent employee engagement with a company’s business strategy.

Not tapping into the knowledge and wisdom of a company’s employees during the strategy creation process is short sighted and can be expensive. For example, most customer facing employees can tell executives exactly what the company’s customers need and expect and how the company is doing at fulfilling them. Want to know more about the competition and the trends in the industry? A crack sales force can tell business leaders everything they need to know. With this much inhouse knowledge at hand, why spend the time and money on customer focus groups and analysis by consultants? However, many companies insist of doing just this.

In addition, employees have unlimited ideas about how to actually execute and improve a company’s business strategy. Unfortunately, most companies don’t tap into this critical resource.

Given the potential associated with employee involvement, and the lack of it in most organizations, is it any wonder that employees chaff at executing a strategy that they didn’t have a part in defining and which may not make sense or be easy to implement given the business realities at the front line of the business?

 

 

In my experience, most employees want to engage with their company by getting involved in strategy creation and execution – they really do care about the work of their company and they want it to be successful. The problem is there are just too many obstacles getting in the way.

How can business leaders increase employee engagement with their company’s business strategy?

(1) Ensure that employees have the opportunity, and are actually able, to participate in meaningful ways in the creation, execution, and management of your business strategy,

(2) Translate your business strategy into action via a strategy map and use it to tell your strategy story and engage employees further with your strategy and what it really means, and

(3) Use your strategy map to help employees see how their work contributes both directly (via business processes and strategic initiatives), and indirectly, to strategy execution success.      

 

In the end, it’s important to get your employees involved and engaged with your company and business strategy because, regardless of which business sector or industry you are in, high levels of employee engagement are good for your customers and stakeholders, your employees, and, ultimately, your business.  

 

The Essentials of a Great Balanced Scorecard Report

I frequently get asked for examples of really effective balanced scorecard reports. It seems that many people are unsatisfied with their initial attempts at balanced scorecard reporting. The usual complaints I hear about BSC reports include: “it doesn’t help us focus on what’s important”; “there’s still too much information in the report”; “it’s not easy to read and/or understand”; “it doesn’t include the “right” information”; and “it’s just plain ugly to look at”.

While there are lots of other areas of dissatisfaction, these are the main ones.

 

The key to creating a better BSC report is to rethink the idea of a results report all together. It is essential to start with the purpose of a BSC report first and then, with this in mind, create a new “style” of report that fits optimally with that purpose.

The biggest mistake I think people make when designing their BSC report is to assume that the format of the typical financial or MIS report will work for BSC results reporting. In almost all cases, if you think about the objective of the typical financial report versus a BSC report, you will not come up with the same answer. This should tell you something about the need to design a better BSC report.

 

So let’s take a closer look at the various purposes of the balanced scorecard and talk about the elements of a BSC report that align with/support them.

Measure and assess strategic objective health in “real time” – supporting BSC report elements: a color-coded strategy map; access to strategic objective definitions and “owner” names (i.e. accountability information); color-coded results data; results data versus performance targets (i.e. graphs, tables, trend charts, etc.); results commentary; and historical performance results data

 

Actively manage and improve the execution of your strategic objectives – supporting BSC report elements: a color-coded strategy map; results commentary including root cause analysis and corrective action plans; active links to root cause operational information; active links to critical business documents such as project charters and progress reports and process management information; active links to accountability information (i.e. who in your organization has accountability for various aligned strategic and operational elements of the business); and active links to internal discussion forums (including information on and ideas for improvement)

 

Evaluate and manage the progress and effectiveness of your business strategy – supporting BSC report elements: a color-coded strategy map; results data versus performance targets; results commentary; active links to internal discussion forums; active links to key internal information and external environment/market/industry and customer/stakeholder information and feedback, and information sites 

 

A catalyst for discovery, learning, problem solving, and the refinement of both operations and strategy on an ongoing basis/adjust and refine your business strategy as required – supporting BSC report elements: a color-coded strategy map; results commentary including root cause analysis and corrective action plans; active links to root cause operational information; and active links to discussion forums and relevant documents

 

A communication vehicle – What are key the elements of great communications? They are focused on the information needs of the audience so they give the audience the information they need, when they need it, in the format they need/want it in. They feature clear and focused messages. And, they are easy to understand. A great BSC report keeps all of these elements in mind by being uncluttered and easy to read/navigate and understand, and by presenting information to unique users in a way that works for them.

 

So – a great BSC report contains certain information elements presented in a logical order that is designed to help focus the viewer on layers of information that progress from the high level to greater amounts of detail. This approach helps viewers focus their attention more easily. However, a great BSC report must also be flexible to individual user preferences.

 

Here are some of the “must have” elements for a BSC report to be GREAT in my mind:

A “color-coded”* strategy map – I feel strongly that your BSC report should start here. Your balanced scorecard is all about your business strategy and measuring and managing strategic objective health - a color-coded strategy map gives you an overview of how each strategic objective is doing based on the performance of the associated balanced scorecard indicators. Further review of balanced scorecard results should proceed from there.

Some companies like to guide viewers from their strategy map and have them progress to the next level of detail/information following certain criteria. For example, they might look at all strategic objectives performing in the red and/or yellow zones; or they might look at all priority strategic objectives performing in the red and/or yellow zones; etc. Whatever criteria your organization chooses to use, your BSC report should guide your viewer to the next level of information and detail  in a focused way.

* just a reminder – a certain percentage of your viewer population is color blind. Rather than color-code performance results (strategic objectives and BSC indicators), consider using icons instead of colors to give viewers a quick way of assessing whether performance is under, at, or above target.

 

BSC indicators and their strategic objective – When your viewer looks at a BSC indicator, they should always be able to see the context for that indicator or where it fits in relation to the business strategy. Including strategic objectives in your balanced scorecard hierarchy keeps that relationship front and center.

 

Strategic objective and BSC indicator definitions – It is easier for viewers to make sense of what they are looking at, as well as the implications of certain performance results, when they can access strategic objective and indicator definitions. Make them easily accessible to your viewer.

 

Color-coded BSC indicator results – Before your viewer even sees results data, let them see color (or a performance icon). Color gives your viewer important information quickly and allows them to decide whether they want to go to the next level of detail of indicator performance results to investigate further.

 

BSC indicator performance data – Performance results should always include an actual result and a comparator. If you are using multiple comparators, your BSC report should allow viewers to see actual results versus their preferred comparator with just a click. Performance results should be available either by measurement period or in a year to date format – viewers should be able to toggle between views. Last but not least, results data should be available in your viewer’s preferred display style – for example, graphs, trend charts, table, etc. Graphical presentation should always be your starting point because it’s just easier for your viewer to assess performance quickly when there’s a picture involved. More detail oriented viewers can switch to a table presentation, for example, if they prefer.

 

Embed results commentary and other relevant information with indicator results data – Your BSC is meant to convey strategic information. “Information” is a combination of data, analysis and commentary, and other relevant documents. It is critical for learning and improvement that your BSC report present your viewers with a combination of data, commentary, and other relevant information, where available, for each indicator.

 

Other – A great BSC report is dynamic, is easily customizable to viewer preferences and needs, and “remembers” a viewer’s unique preferences from report to report.

 

By now, I’m sure that you are wondering how the typical BSC report can do this. The answer is that, in my opinion, it can’t.

 

The way we traditionally think of a “report” just isn’t conducive to great balanced scorecard reporting primarily because it’s static. And while you might be able include some of the elements outlined above in a traditional BSC report, you will never be able to give your viewer the ability to interact with the traditional BSC report in a way that is customized and meaningful to them (not without a great deal of time and effort that is). This is a critical limitation because having this ability is critical for really engaging your viewers/employees and stakeholders with your business strategy.

 

In fact, a great BSC “report” isn’t a report at all! A great BSC report is a dynamic interface on, for example, a computer, tablet, or mobile device that provides viewers with access to a defined suite of important strategic information that is presented in a way that helps the viewer navigate from high level information to detailed information while ALSO allowing them to have a customized experience with that strategic information.

 

However, your balanced scorecard report isn’t just a tool for displaying business performance results – it’s ultimately a vehicle for engaging your viewers/employees and stakeholders with your business strategy and getting them involved in the strategic conversation. Most importantly, a great BSC report facilitates the best use of the balanced scorecard within your organization and allows you take full advantage of the power of the balanced scorecard.

 

Organization’s that are truly committed to getting the most out of their balanced scorecard must rethink their approach to balanced scorecard reporting and make the transition to a dynamic type of “report” (like the ones provided by BSC software applications). To make the most impact, this new type of report must be accessible by all users and give individual viewers the option to quickly and easily customize their view of strategic information so that they can interact with it on their own terms and then participate in the process of shaping and executing your business strategy, on an ongoing basis.   

 

Using Social Media Tools to Super-Charge Your Strategy Execution and Business Performance Management Investments

The use of social media and social networking tools is exploding outside, and more recently, inside the business world. A few years ago, many business leaders were wary of using social media and networking tools in their company – they couldn’t really see the applications. Generally, the feeling was that things like Facebook and Twitter were for socializing outside of work and keeping up with your group of personal friends. And blogging and Wikipedia were simply interesting and potentially useful external information sources.

It didn’t take long, however, for savvy business leaders to see that you could transfer the concept of connecting with your friends to connecting with your company’s “friends” – AKA customers! Once people made this leap, we started seeing Facebook fan pages for companies and began hearing about businesses using Twitter to connect in “real-time” with their customers. Some leading companies were even able to harness social media for innovative and profitable marketing campaigns; to drive customer traffic to their businesses; to dialogue with customers about new products that will meet their needs; and to respond to customer inquiries pro-actively and quickly. These are just some of the examples we have all heard about. The best part is that social media and social media tools allow companies to get really innovative about how they connect with their customers.

 

With this experience under our collective belts, the time is right for business leaders to take the next leap and think about how social media and networking tools can help them connect with their company’s “internal friends” – employees, business partners, and suppliers. More specifically, there is a huge opportunity for companies like yours to leverage these powerful tools to connect with the other key players in the equation that drives business success, and get them intimately involved in designing and implementing your organization’s strategy for success.

If you’re going to take the time to make investments in strategy creation, execution, and management and change the way your organization works to produce better business performance results and sustainable success, why not consider taking action to multiply your efforts? Let’s look at the four key ways that social media and social networking tools can do this for you and your company.      

 

Supporting Better Strategy Communications

It is impossible to execute your business strategy if your stakeholders, including your employees, business partners, and suppliers, don’t know about/understand it. Not surprisingly, this is where communication comes in. The first thing that always astounds me is that so many companies don’t have a cohesive, formalized, and adequately funded strategy communication plan. So if you don’t have one, you need one. A good strategy communication plan addresses the communications required before, during, and after your strategy launch. A clear plan for ongoing strategy communications is absolutely critical for strategy execution success – don’t assume that after you launch, everything will take care of itself. Ongoing communications keep your strategy vibrant and alive in the minds of your stakeholders.

When companies do have a strategy communication plan, the next problem I see is what I call a “flat” plan – one that includes few, and possibly dated, approaches to, and vehicles for, communication. Do your communications revolve primarily around emails, town hall meetings, and hidden updates on your intra and internet? If this describes your approach then it is almost guaranteed that you are sub-optimizing your investment in strategy communications. What you need is a better balance (i.e. in face to face versus electronic modes; in long and detailed versus short and quick communication methods; etc) - this is where social media tools come in.

If, for example, your favorite communication method is email you should think again. I know some people who easily get 150+ emails each and every day and I expect that it’s the same for your employees, suppliers, and business partners. No wonder communications via email never get to these people! Short, targeted messages that are prioritized and customized based on each audience’s information needs, sent via Twitter and/or by instant messaging, have greater impact and are more likely to get through to busy, distracted people.

Many people prefer to watch their information rather than read it. Posting short and informative videos on a YouTube-like platform can help get key messages across to your target audience better and faster. While face to face interaction is a critical must in strategy communications, town halls can be replaced with web conferences, Skype sessions, and online chats from time to time. These alternatives are particularly useful when time, distance, and availability to participate make face to face communications challenging.

I could go on but I think you get the idea. Leveraging social media tools, blending them thoughtfully with other communication vehicles, and using the best combination of communication modes and content to get your messages out will only serve to enhance the uptake and effectiveness of your strategy communication (and execution) efforts.

 

Creating Two-Way Dialogue and Building Employee Engagement

While effective one-way strategy communications are good, two-way communication and dialogue are even better! You know that you have really moved your strategy management efforts forward and that your strategy has become the “way we work” (a key goal for strategy execution success) when your employees, business partners, and suppliers are talking about your business strategy with you and with each other. Until now, there weren’t many effective ways of getting the conversation going. And while some organizations have been able to facilitate excellent conversations of this type in group meetings, many more meaningful strategy conversations go on between colleagues as sidebar conversations. Unfortunately, these never filter up and throughout the organization. Essentially, most strategy conversations that happen throughout an organization go unleveraged and most employees don’t get the opportunity to benefit from the great discussions that happen in group meetings they can’t attend.

Social media tools can play a critical role in (1) getting two-way dialogue going; and (2) getting more people aware of, and involved in, the conversations. For example, online groups, discussion forums, and chat rooms can facilitate more frequent and broader conversations about strategy and strategy execution between people from across your organization while also capturing these conversations in a format that can be shared, searched, and leveraged as part of a company’s strategic learning and strategy re-creation processes. Where appropriate, group discussion meetings can be broadcast over the web and/or video-taped so that non-attendees can either participate virtually in a discussion or benefit from seeing what others are thinking and saying about the business strategy and the opportunities for implementation and improvement (for example). These are just two ways that social media and networking tools can be used to facilitate better two-way, strategy-focused dialogue in, across, and beyond an organization. Best of all, these tools can both enhance the opportunities for employee, supplier, and business partner engagement with the business strategy AND build greater levels of employee engagement.

And why should you care about employee engagement? High levels of employee engagement have been routinely shown to translate into high levels of customer and stakeholder satisfaction and loyalty which, in turn, translates into strategy execution success and better business performance results.           

 

Facilitating Learning and Knowledge Sharing

Let’s be honest. You never get your business strategy right the first time. Plus, things change – your external operating environment, your customers’ needs and expectations, and your internal capabilities. All of this means that your business strategy must be dynamic, agile, and flexible to change. How do you do this?

 

How do you capture the important changes that require a strategic response?

 

How do you funnel customer and operational insights, that could have a meaningful impact on your business strategy, into the strategy refinement process?

 

How do you share knowledge and information about what works best to execute your business strategy, including customer and operational best practices and imperatives, effectively across your organization and with suppliers and business partners? And how do you do this quickly when a key direction or strategic business priority has changed?

  

In most organizations, there is simply no easy way to do these things well. As a result, learnings never get passed along, insights never get shared widely, and opportunities to keep your business strategy relevant and effective in the current environment are lost. All of this costs money and slows down the progress of your business.

Social media and networking tools such as blogs, chat and discussion forums, document and site links, and wikis (a website whose users can add, modify, or delete its content via a web browser using a simplified "markup language" – thanks Wikipedia!) are just a few examples of tools that can help facilitate organizational learning and best practice sharing. Essentially, tools such as these can begin to FINALLY make the concept of knowledge management, as it relates to the essentials of your business strategy, a reality in your organization.      

 

Making Collaboration and Innovation a Reality

If we all waited around for the CEO and senior executive team in any organization to come up with all the best ideas about strategic direction and strategy execution and improvement, businesses would move forward at a snail’s pace! Most successful companies know this and that is why they take action to harness the brainpower of the collective group (including employees, suppliers, and business partners) and get them thinking about, and working together on, meaningful ideas and initiatives that will transform the company strategically.

These companies have found ways to get collaboration and innovation going smoothly across their organization. And while they can and do form innovation teams, they also realize that great collaboration and innovation activities often happen organically - coming and going in a very dynamic way.

In order to remain responsive to the prospect of spontaneous collaboration, these organizations implement such tools as employee profiles, groups, chat rooms and discussion forums, and wikis to facilitate connections and make collaboration easy for everyone. When sanctioned innovative teams leverage these tools in their work as well, the result is optimized collaboration and the generation of new innovations that will move the organization, its business strategy, and performance results, forward in a positive way.    

 

A Final Word on Social Media and Networking Tools

There is no doubt in my mind that companies that choose to leverage social media and networking tools to support their strategy execution and business performance management efforts will see a huge ROI on their investment. However, I must point out that there are some risks associated with social media tool use (a quick search on the topic on the internet yields numerous articles by lawyers on the risks and mitigation strategies organizations should think about when utilizing social media platforms in business). For example, security and privacy concerns related to using external platforms such as Facebook and YouTube should be considered. Also, questions exist about content ownership when using external platforms for business purposes.

However, the good news is that applications that provide secure and highly functional internal social networking platforms are now available (check out: www.igloosoftware.com).

 

I predict that this is just the beginning of a wave that will give early social media tool adopters a huge business advantage. I hope that you will consider catching this wave and riding it now in an effort to realize the benefits - super-charging your strategy execution and business performance management investments!