book.chapter Corporate strategy overview

Effective corporate strategy execution hinges on clarity and focus, avoiding ambiguity. It must be crafted with practical implementation in mind, determining the composition of the corporate portfolio, the number of operational units, and the distribution of resources among them. While nominating a strategy is straightforward, execution is complex due to several factors. Managers often excel in planning rather than execution, as their training emphasizes strategy formulation. High-level managers may delegate the execution to mid-level and lower-level staff, expecting them to resolve any issues that arise. There's often a disconnect between those who devise strategies and those who implement them, leading to a lack of understanding of on-ground challenges. Execution is time-consuming and requires maintaining a connection to the overarching goals, which is difficult. It's a process involving more individuals than the development phase, complicating communication and alignment. Despite these obstacles, successful execution starts with a robust strategy at both corporate and business levels. A sound strategy is realistic, balancing cash generators with users, ensuring proper business unit mix and positioning, managing risk, fostering competitive advantage, and considering market influences. It's built on realistic assumptions and thorough analysis. A well-crafted strategy aligns corporate and business unit goals, preventing resource allocation conflicts and establishing clear performance metrics. Open planning sessions can help align strategies at all levels. It also translates into actionable short-term objectives and measurable operational metrics, allowing for performance tracking and necessary adjustments. A strategy should challenge the organization appropriately, spurring the development of capabilities needed for effective execution. It considers the organization's resources, global market demands, and leadership goals. Lawrence Hrebiniak emphasizes that strategy is the cornerstone of execution efforts, and sound planning is crucial at both corporate and business-unit levels. Conversely, a flawed strategy leads to poor execution. Hrebiniak notes that good execution rarely compensates for a bad strategy, which can result in frustration and futile hard work. Vague strategies or frequent changes are equally frustrating. Short-term focus is vital for successful execution, with short-term objectives providing metrics to evaluate plans and efforts. If corporate planning is weak, it can have dire consequences on strategy execution and overall performance. Insufficient resources can stifle growth, and cash generators may be overburdened, affecting future capabilities. Thus, a good strategy is indispensable for effective execution.