12 SEPTEMBER 2017
Executing strategy: the four stages of success
Photo: Stock.xchng, rore d
Most CEOs are good at talking about company strategy. Once a year they remind everyone what it is and say how well the company is doing at fulfilling it. Then they leave it to everyone else to execute.
95% of CEOs think their people are committed to their strategy but an astonishing 80% of senior executives don’t know what the strategy is. That filters straight down through all levels to the employees on the factory floor. Whose fault is that? If you’re a senior leader at that organisation, it’s yours.
Selling the strategy
People don’t wake up one morning committed to a strategy. They need it to be sold to them. They need to be emotionally committed to it, which is totally different from simply knowing it. To win emotional commitment, you have to take people through four stages.
Stage 1: I know
I know what the strategy is.
Stage 2: I understand
I know what you want me to do and I know why it’s important for the organisation and for me.
Stage 3: I think I will/I can
I trust that this is possible and can see how we’ll do it.
Stage 4: I will
I will do it.
The first stage – the communication stage – is the easiest because it’s practical. But you need to go beyond simply communicating your strategy; you need to make people understand what’s in it for them in following this particular strategy. If they don’t have that, they won’t invest emotion into their jobs and they probably won’t execute the strategy. It’s that simple.
The third stage is about making the strategy believable and achievable. The best way to do that is by generating early victories. The first early victory is unlikely to make people believers in the strategy. But over time you generate more victories and as they see these results, they start saying ‘maybe we can do this.’
Finally, you have to win people’s hearts. You can do this by making your people feel special and by making them feel a team. This doesn’t happen by chance – it happens with hard work, and it takes time.
It should be obvious that this doesn’t happen quickly. You’re not going to win emotional commitment overnight because people need to see tangible results. The stories you hear of motivational and charismatic leaders saying, “Follow me and we’ll all achieve our goals!” are myths. All charisma allows you to do is communicate. For people to believe in you, they need to see you succeed.
Look at Apple. When Steve Jobs set about to develop the Macintosh in 1983, few people believed that he can succeed against the formidable IBM. But after generating victory after victory, his people bought into his vision and the Macintosh ended up being a great success for Apple. This pattern has continued over the last 20 years. Apple is now an organisation that people love to work for. If you talk to an Apple employee, you will feel their passion, pride, excitement for their company. I challenge you to go and find one and ask them about their job. Their chest will pop out with pride.
When you engage people emotionally, you win their passion. The sense of pride Apple employees feel comes from knowing that their company has changed the world and continues to do so. You don’t need to be CEO of Apple to do that.
Lan & Spar: fighting together
Lan & Spar is a small Danish bank. Peter Schou, the former CEO, more than tripled its market share from 1.5% to 5% simply by developing a clear strategy and emotionally committing people to implementing it – uniting his people to effect massive change within the organisation. He says he did this “easily” because the bank was in financial crisis when he came on board. Everybody could see that change was needed. But what if there’s no crisis?
If you haven’t got a crisis, you need to create one,” Schou said. “You have to force them to open their eyes. You do this by challenging them and by encouraging them to ask the difficult questions: where are we, where are we heading and what are our problems? You have to do this even when the organisation is successful.”
By asking his people what needed to change at the bank, Schou instantly captured their emotional commitment. His low-cost, focused strategy was implemented through an open, entrepreneurial and customer-oriented culture. Young and open-minded people were hired and given autonomy to run the bank, bringing it from number 42 in Denmark in 1988 to number 10 in 1997.
The butterfly effect
Small changes make a big difference. Sometimes when I talk to leaders about the importance of executing strategy, they claim it’s like climbing Mount Everest. ‘How will I ever manage this gargantuan task?’ they cry. This is where the butterfly effect principle comes into play.
Take a step back and look at how you create culture in your own home, with your family. Where did your children get their values from? Children observe their parents doing things every day and as a result they do the same. Exactly the same principle applies at work. Ask yourself what kind of behaviours you want from your people. Behave like that yourself and slowly people will copy you.
Do children know the difference between right and wrong because their parents wrote the rules down and stuck it up on a noticeboard? Values need to be more than just communicated. You need to model them. That’s what takes people beyond the “I know” stage to the “I will” stage. Too many companies put their values in the Annual Report and think that’s enough. It’s not. Values at work must be part of everyone’s psyches and hearts, as they are in their homes.
Creating an environment for success
Before you can win this all-important emotional commitment, you need to lay the groundwork. In other words, you need to create an underlying environment that supports your strategy. This is made up of four elements:
- Underlying incentives. What gets measured gets done.
- Culture and values
- The structures and processes you put in place
- The actual people you hire, their skills and mind sets
Consider for example how the incentives in the company drive the behaviours of your people. Let’s say you are a multinational with a subsidiary in Italy. Italy is very well known for its design capabilities. So you go to Italy and you say to the regional manager, “I want to take five of these designers to the UK to strengthen our design team there.” And he says no. Why? Because the Italian regional manager’s performance is measured by how well Italy has done. The underlying incentives don’t support the strategy.
Put in place the right environment that will support the strategy. Even at the upper echelons of global business, some people are not aware of this. They think strategy is just an intellectual journey. The only path to long-term, sustainable success – the emotional commitment of your people – isn’t easy, but it is rewarding. Just the first few steps on the journey will give you the confidence you need to continue.
And be assured that you’re not leaping into the unknown: the best-known, most successful companies in the world are doing it too.
Costas Markides is Professor of Strategy and Entrepreneurship; Robert P Bauman Chair in Strategic Leadership; Executive Education Faculty Director.