Yogi Berra once said that “if you don’t know where you are going, you will likely end up somewhere else.” The same is true in business. Unless you have a carefully crafted business strategy, you are essentially flying blind. With a clear business strategy for your firm, you can guide your way through uncharted business waters. A well thought out strategy enables you to properly allocate resources, communicate direction to employees, customers and other stakeholders.

Former U.S. President and military commander, Dwight D. Eisenhower, remarked that "a finished plan is generally worthless, but careful planning is absolutely essential." In other words, while a given plan may change based on what happens with your business, taking the time to thoroughly examine where your firm is now and where it is headed gives you the information to make course changes intelligently, against the backdrop of a clear business strategy.

Without an effective, well executed strategy, it is often easy to get caught up in the day-to-day management of the operation and lose sight of where you are going. The need for speed in dealing with demanding customers or clients can lead to a quick fix mentality in the search for answers. Instead, what is needed is to step back and carefully consider where your business is headed in terms of industry and competitor changes, the needs of customers, local, regional and national markets, and product or service mix. The world is moving too fast to just hang on.

Consider Kmart vs. Wal-Mart

Kmart, a leader in the discount retailing industry in the late 70’s, had close to 1900 stores and average revenues of well over $7 million per store. Wal-Mart, on the other hand, was a much smaller retailer with just over 200 stores and average revenues per store only half those of Kmart. But just ten years later, Wal-Mart had become the largest and highest profit retailer in the country with an annual growth rate at 25% per year with a 32% return on equity.

What happened? Kmart’s response to business challenges was to try to seal off and defend its markets, a common tactic years ago when the industry was characterized by defined markets, stable customer needs and clearly defined competitors. Today, however, “owning” a market segment has become more difficult as product life-cycles have shortened and competitors have multiplied. Success within most industries today depends upon anticipating and adapting to quickly changing customer needs and market trends.

Wal-Mart found competitive advantage by realizing that success would not come from capturing and holding a market but by being nimble and responsive to changing market conditions. It built business processes and core competencies in such areas as transportation and information sharing which allowed it to respond to rapidly changing conditions and move inventory quickly to serve store-by-store customer demand.

Kmart’s inability to respond to changing market conditions and to continue to ride a dead strategy eventually led to its reorganization under Chapter 11. It’s a fact that those organizations that adapt to changing conditions thrive and grow. Those that remain unaware or misjudge these challenges and opportunities and fail to develop a new business strategy eventually die.

Why Build a Strategic Plan?

In a word, the answer to this question is focus. Strategy creates context for operating decisions. It establishes the playing field and provides guidance for decision-making about the types of experience and skills needed by employees, how marketing and advertising should be positioned, the priority of initiatives, how to structure the organization, and a host of other issues. If an organization has unlimited resources, a strategic plan would not be necessary. Unlimited resources would provide the ability to invest in whatever came along. But most organizations do not have unlimited resources so a plan is necessary to guide decision-making, channel resources and define direction. Because of that, building a strategic plan should be well worth the time it will take to develop it, debate it and secure agreement on its direction.

Developing a New Strategy

Strategy is the way in which an organization meets the challenges and opportunities of its environment. It is often an overused and misunderstood concept. Strategic thinking does not necessarily imply long term. In some industries, long term is less than one year. It is not tactics, though strategy needs to be supported through tactics. It doesn’t necessarily imply something big. The decision to move across town may have more human impact than the decision to do business in another city.

Strategy is a set of choices that defines the nature, direction and value system of an organization. It is not a document. It is a mindset which should be understood by every person in the organization and used to guide all decision-making within the organization. In developing strategy, leaders make conscious and informed choices about who they are and what they stand for:

· What are our core values and beliefs?

· What markets and customer groups will we serve?

· What products or services will, or will we not, deliver?

· What competitive advantages will cause us to succeed?

· What core competencies must we have to fuel our growth?

· What infrastructure, core processes and resources must we have to succeed?

· What financial results will we achieve?

· What should be our planning horizon?

· What is the quality-of-life contribution we want to make to our customers, our employees or the places in which we operate?

Plan Implementation

Without a clear implementation strategy, even excellent business plans hardly stand a chance. In the United States, the average firm only achieves about 63% of its strategic plan. Studies also show that 90% of strategies that fail do so because of lack of execution. Research in the last several years has pinpointed many reasons why business plans fail. Most of the reasons have to do with "operator error" and include the following:

1. Poorly understood strategy -- most organizations have a strategy but most people in most organizations don’t know what that strategy is. One study by Renaissance Solutions revealed that fewer than 5% of employees on average know what the plan is and 85% leadership teams spend less than one hour each month discussing strategy.

2. Weak strategy execution -- Studies show that up to 90% of strategies fail due to execution.

3. Entropy is another roadblock. Entropy is an inverse measure of a closed system’s capacity for change. The more entropy, the less the system has capacity to change. Businesses are systems and, as such, are susceptible to entropy. Once a business makes plans, the chaos of everything changing around it gradually erodes those plans. An organization must have a systematic way to offset these forces or it eventually will become ineffective

4. Lack of a systematic approach – When an organization reaches a certain size, different people or departments handle different functions. Lack of alignment is a possible consequence, that is, sales, marketing, accounting and other vital functions are not working together and not in full support of the strategic plan.

5. People are not engaged – An engaged worker is one who is personally committed to the goals of the company. Unfortunately, 90% of the time what passes for commitment is compliance. If you cannot get people engaged, no improvement will last.

6. A gap between knowing what to do, and doing it. Robert Sutton and Jeffrey Pfeffer wrote about this phenomenon in their book, “The Knowing-Doing Gap”. The hard part, they wrote, is not about compiling information and plans about what to do. The hard part is transforming that knowledge into action. Many things can get in the way including substituting talk for action, employee fear or mistrust of management, using the firm’s history instead of sound judgment to dictate action, and badly designed or complex measures.

Overcoming Barriers

For effective implementation to happen, an "execution mentality" must be present. In an environment where strategic plans and initiatives are well implemented, an execution mentality has to be present. In this environment, execution represents a primary value; activities and effort are not enough. There must also be measurable results and a get-it-done attitude. People are expected to step up to challenges. Lackluster performance is not tolerated though the emphasis is on constructive improvement rather than punitive measures.

Establishing a culture of execution begins with a written business plan which clarifies mission and vision, enterprise goals, measures and targets, and illuminates company values for all employees. The plan should be created with the help of the individuals who will be primarily accountable for its execution. This means that the head of each major business unit will have contributed to the research, visioning and formulation of the plan.

Similarly, as the plan is cascaded through the organization and enterprise goals are translated into departmental and individual objectives, the people who will be responsible for executing the plan should be involved in developing their part of it. At each step it is important to identify the critical variables and potential potholes that could derail the plan, and develop contingency actions so strategy implementation can remain on track.

It is critically important to monitor performance at regular intervals. We recommend quarterly intervals but some firms review progress monthly or even weekly to get real time feedback on how the plan is progressing. Set milestones or interim goals at various intervals as a further check of whether the plan is on track.

Another essential is solid communication at all levels of the organization, to further illuminate plan particulars, to report on progress, and to recognize achievement. Everyone needs to know what is expected of them and how their progress will be measured. Regularly inviting employees on the front line to comment on progress will go a long way to informing you about how the plan is working and what obstacles remain.

Delegating Assignments

Often a large issue in building a culture of execution is the art of delegation. Many things can go wrong. First, when you delegate an assignment, employees have to be given full authority to complete the assignment. Micromanaging the process will set the employee up for failure.

Many times, accountability is confused with responsibility and the confusion works against execution. Responsibility is a commitment you make to yourself based on your own internal standards. Accountability is a commitment you make to another person based on mutual obligations each makes to the other (e.g. “a fair day’s pay for a fair day’s work”). If the employee lacks authority to complete an assignment, neither accountability or effective execution will be achieved leaving the employee with only his or her responsibility mixed with lingering resentment that they cannot control the outcome.

In delegating, managers are responsible for explaining all of the dimensions of the employee’s accountability. Accountabilities have many dimensions including tangible dimensions like results expected, an execution timeframe, “stretch goals”, and boundaries such as rules and limits. There are also intangible dimensions with accountability like teamwork or stewardship, that is, the accountability to effectively care for and manage all resources.

The barriers to effective execution can be overcome by educating managers about the importance of effective communication in delegating and driving performance. Managers should be well schooled in the skills of goal setting, measurement, coaching and providing feedback.

The Role of the Leader

Execution will not happen if the senior leadership is not out in front of the process. It is essential that leaders be hands-on rather than hands-off, meaning that even if you have delegated full accountability for an assignment, it is important to monitor progress and follow up with people at regular intervals. Being available as a resource, role model and as a coach can go a long way in making sure that plans stay on track and progress is being made. The opposite is also true – if the leadership is not involved, people will believe that what has been planned is really not a priority.

In their book, “Execution, The Discipline of Getting Things Done” , authors Larry Bossidy and Ram Charan list seven essential behaviors for leaders who want to make sure execution happens. These seven behaviors include:

1. Know your people and your business

2. Insist on realism

3. Set clear goals and priorities

4. Follow through

5. Recognize the doers

6. Expand people’s capabilities

7. Know yourself

To this list we would add one additional behavior -- build trusting relationships – as a necessary ingredient in developing an engaged and accountable work force.