We at P5G often stress the importance of taking a so-called “comprehensive approach” to continuous improvement, which means addressing four major CI work streams that need to function in a highly integrated fashion to ensure that CI both serves the needs of, and generates value for, the business. Those work streams include:
- Strategy deployment
- Improvement project execution
- Best practices implementation
- Performance analytics
The next four articles in the CI Management series will tackle each of these work streams in the order shown above starting with strategy deployment. This article will focus less on the specifics of how to do strategy deployment (which is a topic that has been written on extensively) and more on describing two common mistakes many organizations make and how to avoid them.
Mistake 1: Overinvesting in Strategy Setting
Few would argue that setting a proper strategy at the enterprise level is crucial to the success of the business, and therefore, it’s important to undertake a thoughtful, analytical approach that incorporates all of the proper inputs into strategy setting, which typically fall into one of three categories:
- Macroeconomic environment – the purpose is to understand how the external environment (i.e., circumstances beyond those taking place in your industry) will impact industry dynamics. This analysis should seek to answer the question, “what will affect growth of the industry as a whole?”
- Industry environment – the purpose is to understand the nature of competition in your industry – greater competitive forces negatively impact your pricing power and vice versa. Porter’s 5 Forces model is an often used approach toward an analysis such as this. In Porter’s model, you analyze the industry environment from the following perspectives:
- Extent of industry rivalry
- Threat of substitute products
- Threat of new entrants
- Bargaining power of suppliers
- Bargaining power of customers
- Internal environment – the purpose is to understand the how you compare to others in your industry as it relates to your products, people, core values, financial position, customer relationships, brand identity, etc. It’s important to consider both tangible and intangible resources when conducting this analysis.
The output of this analysis should be a clear and concise set of enterprise-level strategic objectives that will drive all effort and decision-making for the next 12-24 months. Where many organizations stumble however, is in the layering of those strategic objectives throughout the organization. And in our experience, they stumble in part because they make site and functional level strategy setting unnecessarily complex, which both delays the process (raise your hand if your organization didn’t get your strategy fully deployed until you were 3 months into the New Year) and disengages the workforce (the exact opposite of the effect you should be shooting for).
At its core strategy deployment is about answering one simple question at every level of the organization…what does the business require of me in order to be successful? When framed in this way, the process for setting strategy at the location or functional level does not appear to need to be engineered to the nth degree. Quite the opposite actually, the answer to this question should be fairly obvious if the enterprise level strategic objectives are clear and concise. We favor an approach whereby a corresponding set of strategic objectives are defined to mirror the objectives established just one level above. In many cases an initial set of directionally correct strategic objectives can be defined in an hour or two if the right people are in the room and there is someone available to facilitate the process. There may be some work required after the fact to validate and finalize that initial list but the point I’m making is that it shouldn’t take an inordinate amount of time to get to the right answer. My sense is that there is a feeling among some that strategy setting, because it is important to the business, must be a laborious, time intensive process when, in fact, by making it that way we’re taking value out of the organization, not adding value to it.
Mistake 2: Underinvesting in Strategy Management
If the first mistake is complicating the strategy deployment process, the second (and often more costly) is to take a passive approach toward managing strategy execution under the false assumption that the mere existence of a strategy will drive the right behaviors. In our experience many organizations develop their strategy at the beginning of their year, document it, store it somewhere (SharePoint site, corporate shared drive, etc.), and allow it to collect virtual dust for the next 12 months until it’s time to start thinking about next year’s strategy. In the meantime, they develop a governance model around a set of operational metrics that probably matter to the business in some way but aren’t explicitly tied to one or more strategic objectives while other more forward looking metrics may get ignored entirely. In other words, they’re shooting in the general direction of the target, but they aren’t using their gun scope to precisely zero in on the bulls eye.
And this phenomenon doesn’t just constrain the value of metrics tracking and reporting. It hurts the CI program as well because the improvement agenda of the business – projects to pursue, business processes to implement, training to provide, etc. – is only effective to the extent that it resides within the shadow of business strategy. Therefore the improvement work at every level needs to be explicitly linked to the strategic objectives at that level. Otherwise the organization runs the risk that CI is, at best, viewed as a “nice to have” for the business or, at worst, is perceived as a distraction to the business.
Make Strategy Deployment Simple, Make Strategy Management Possible
Helping companies to avoid the two mistakes addressed above were was part of the reason why we created the layered strategy deployment tool in EON. Our strategy visualization feature, shown in Figure 1 below, allows users to easily define strategic objectives at every level of the organization and see how they connect up and down the organization along with the overall health of those objectives (i.e., serious risk, moderate risk, on track).
In addition, EON’s project management tool integrates with strategy deployment by allowing users to assign improvement projects to their corresponding strategic objectives, which gives users the ability to see those connections and update the health and status of all improvement projects linked to each objective (see Figure 2 below).
If you’d like to learn more about, EON, the world’s first comprehensive management platform for modern improvement teams, please don’t hesitate to contact us.