ON STRATEGY, EXECUTION AND DOCTRINE

Business schools, consulting firms and management literature tell us a lot about strategy and all the popular tools and methods used by execs around the world to come up with a winning one. I am not going to ask you which of these tools or methods work best for you and your company. Instead I would like to ask you the following.

Do you know what makes successful strategy execution a gamble or even next to impossible?

Indeed, no doctrine.

Strategy is the answer to the fundamental question about how a company aims at achieving competitive advantage given the limited resources and capabilities it has access to. For this reason strategy is about making fundamental choices to align aspirations with resources and capabilities. It therefore makes explicit what to do and what not.

The missing piece

However, we all know that strategy execution is about making far more decisions further down the road. The tricky job here is to ensure that decisions made by people across the entire organization remain consistent with the strategic choices made in the board room. This holds true especially during tough times when everything turns to be an urgent priority and entropy seems to grow exponentially. But if strategy itself does not provide enough guidance to know how to proceed, what else does?

The answer is doctrine – or more precisely, a set of fundamental principles accepted as true without further proof or argument that serves as an authoritative framework for making decisions and for converting informed decision into timely action. Doctrine ensures a common understanding about how to think and take action. In latin doctrina means instruction. So it does not prescribe what to think – this is what dogma aims at.

You may have heard about doctrine in the context of military training and operations, or politics. But how does it apply to strategy execution in business?

The framework

Put yourself into the cockpit of a fitness club operator who follows a cost leadership strategy to provide quality service at low price. The key to establish a competitive advantage based on cost leadership is low operating costs (especially rent and staff), standardized offering with no frills, high asset utilization, workflow automation or self-service, and economies of scale that go along with the increasing number of big box fitness clubs. As a matter of fact all this is what makes such brands like Fitness World, BasicFit , McFIT or PureGym super successful.

Now what principles could be assembled into a doctrine to provide a unified framework for all decision makers who execute a cost leadership strategy no matter their role or management tier in the organization?

More often than not the general starting point seems to be the Pareto principle – also known as the 80/20 rule. I know plenty of people who claim they let their companies obey to this rule. In business it is said that 80% of all results achieved by an individual, team or organization can be attributed to 20% of all activities undertaken by people in charge. It is all about the right choices and priorities. First, save the world. Then, eventually, feed your dog. The assumed accuracy behind this rule is somewhat misleading. But this shall not be the point here. There is enough anecdotal evidence out there that supports the rule as being essentially valid. However, such evidence is almost always ex post or, in other words, retrospective in nature.

I am pretty much sure that successful strategy execution can hardly rely on a single general principle with little practical help before action is taken. What we rather look for is a comprehensive and coherent set of principles that can be applied ex ante by means of specific tools. Like for instance the Manifesto for Agile Software Development written in 2011 with its twelve principles and a box full of tools and best practices. Only how do we get away from software development and get closer to strategy execution?

As a matter of fact, we do not have to search for too long. In 2017 John Doerr published a NYT bestselling book entitled ‘Measure What Matters’ (acclaimed book but it is miles away from the Pulitzer prize; and I am sure you know what I mean with this off the record comment). The roots of this work go back to the 1970s and Andy Grove of Intel who distilled four management principles and integrated them with the working elements of Peter Druckers’s tried and tested methodology called Management by Objectives (first appeared in the 1950s) to arrive at Objectives and Key Results (OKR). And this OKR thing is nothing else but a complete framework for adaptable, incremental and efficient strategy execution.

I do not claim OKR is the only doctrine. Neither do I see it as a superior one. But its universality and simplicity convinced me to deploy it in the weeks to come. Here I shall show you what doctrine is all about. So let us look at the four principles which together underly Objectives and Key Results. What follows is based on John Doerr’s book, but blended with my own reflections and ingredients.

Principle #1: Focus and commit to priorities

The executive team makes the strategy explicit by declaring what the organization needs to do within a defined period of time (quarterly execution cycles are best practice) and what not to do or what activity or asset has to be acquired or dropped in order to defend or gain competitive advantage. This is the departing point for top-level objectives. And they must go for the far horizon, mirror strategic aspirations, serve as bold inspiration, and for all these reasons are anything but mundane. They must provide leverage.

An objective is well defined if three to five key results achieved either in subsequent or parallel way are sufficient to reach it. Otherwise they dilute focus. By definition, key results are challenging and metric-driven (often linked with KPIs), chase quantity but safeguard quality at the same time, and include a short term deadline to push work forward. If all key results have been delivered, the objective depending on them has been achieved. Otherwise the procedure to define objectives is flawed.

Focus is when the executive team defines only a few sharp top-level objectives or elevates lower-level but mission-critical ones to the top. Putting a limit lets the executive team maximize the amount of work not done that does not contribute to strategy execution.

Principle #2: Align and connect for teamwork

Everybody who owns an individual or a group objective defines the required key results to deliver. No co-ownership is allowed. Otherwise accountability is at danger. Open access to top-level and any other objectives and key results makes sure that day-to-day activities at lower levels can be tied with strategic and higher level choices to ensure vertical alignment. Transparency of objectives and key results seeds collaboration and exposes redundant or counterproductive efforts that can be cleared to better allocate resources.

With scale, alignment grows more complex. Higher level key results become objectives one level downstream in a multi-tier management organization. While such a waterfall approach makes operations more coherent, it also spurs adverse effects. Time intensive sequential breakdown of objectives into key results into objectives kills front line agility and disconnects lateral relations across departmental lines. For this not to happen at least one from a set of objectives assigned to an owner should emerge from the bottom up and then converge toward an objective that sits one or, if justified, several levels higher in the organization or just a door away inside an interdependent business unit. The latter ensures horizontal alignment.

Top down and bottom up alignment together with the freedom to align with peers preserve autonomy and creativity which are essential for customer service that is able to handle exceptions and potential innovation to spark. It goes without saying that this bidirectional approach does not exclude a more directive top-down cascade in times of urgency or when structured execution is still in its infancy.

Principle #3: Track for accountability

Objectives and key results once defined must be tracked at all levels to know when to continue work and when to reexamine and update what has been planned, or when to adapt as events unfold and circumstances change, or when to drop an objective or key result midstream (and notifying  everyone who depends on it) and start a new one if justified. When the execution cycle ends unfinished objectives are dropped if their momentum has passed or are continued with an unchanged or modified set of key results.

The vertical cascade breaks when reality at a particular level of the organization starts to diverge from the plan or the plan no longer holds true and the negative status report does not make the round, and for this reason no upstream dependency is able to deploy a fallback solution to restore all affected objectives. It is therefore crucial to monitor and share progress towards objectives and key results and to flag what needs attention. Without regular status updates (weekly update is best practice) objectives and key results slide out of sight. Instant feedback helps to keep momentum or get things back on rails again.

When the execution cycle ends all objectives undergo scoring. The arithmetic mean of completions rates of key results (weighted if appropriate) being associated with the objective is calculated. Custom thresholds are defined to mark objectives either green, yellow or red. The computed score is a guide for self-assessment and contextual feedback to be provided by the owner of the objective. Thus, the final score is always man-made. This helps the organization to gather learnings for the next execution cycle.

Principle #4: Stretch for amazing

There are bread-and-butter objectives which strive for operational excellence and firm up existing competitive position. And then there are landmark objectives which stretch the organization because they are about risky new projects, cutting edge tech, new markets or product categories, turnarounds or moonshots – simply all those things that question current modus operandi. They sharpen entrepreneurial spirit to let the organization achieve far beyond the norm.

Landmark objectives require full commitment and peak performance from all people involved who are expected to rethink and reframe the problem area before they move on. It is not about doing things faster, cheaper or better and to arrive at modest gains. It is all about doing new things or old things in a completely new way to fuel competitive advantage. Therefore landmark objectives are considered a success if the completion rate is 60-70% or higher at the end of the execution cycle because what has been achieved is usually remarkable anyway.

If you stretch for amazing, the key success factor is communication. The executive team must convey two things: strategic importance of the landmark and the belief that this objective can be achieved. Because landmark objectives are a risky business, there must be resources in place to fall back upon if things crash so the organization does not slide into survival mode. But if a landmark is achieved, the reward must be anything but to play the game again.

The live mode

Nobody else but the CEO has to answer two strategic questions and be held responsible for the outcome: What business are we in and what business are we not in? What should it be and what should it not be? In a subsequent step the whole executive team has to think high (the organization’s big picture and future) and low (the details of today within own backyard) to define objectives and deliver the right key results that together implement strategy.

Even if highly desired by many folks I know, there is no and cannot be a formalized, single, replicable way of setting up objectives and key results based on a complete and consistent logic that satisfies the criteria of empirical evidence and scientific rigor. There is not algorithm or if-then template. We rather must rely on our intuition, creativity, past experience and best practices from somewhere outside the organization. For this reason we all need to keep in mind that any doctrine behind structured strategy execution is more art than science and therefore requires the right people in the right seats.

No doubt, measuring something and making it public inside the organization tells people that it matters. But this is not a self-selling item. Objectives and key results to enter live mode require somebody skilled to setup and roll-out a structured strategy execution system, and somebody to shepherd the organization and to iterate over execution cycles. Perhaps the right starting point is to  populate the organization step-by-step with objectives and key results by starting at the higher management levels or by choosing a single business division to serve as the pilot for implementation.

Conclusion

Doctrine is the missing piece between strategy and its execution. Let me put all four grand military concepts – doctrine, strategy, tactics, and operations – into one phrase to make the point. In business settings doctrine is an instruction that tells us how we proceed to execute strategy, which itself is a broad description of how we are going to fulfill our mission given the limited resources and capabilities at hand, whereas tactics comprise the specific actions used to implement strategy, and operations are what they are, operations. Again, as I said before. OKR is not the only doctrine that can be applied. It is one of several I know. And it has also certain shortcomings, likewise its alternatives. But it is highly universal and quite straightforward to implement. However, this does not mean that it works like a pill – instant betterment with little secondary effects. A structured process is needed to arrive at structured strategy execution. Otherwise it will turn into just another management fad.