An “execution premium” refers to the extraordinary value created when a company clearly defines its strategy and demonstrates the ability to execute it in the marketplace. This premium can manifest through metrics like share price, revenues, brand recognition, customer loyalty or employee commitment. To systematically link strategy and execution, an integrated management system connects strategic planning and operational implementation. Key stages include: formulating the strategy; planning measures and initiatives to guide actions and allocate resources; aligning the organization accordingly; ensuring operations align with strategy; monitoring progress and taking corrective actions; and continually testing assumptions and adapting as needed. By integrating these stages into a closed feedback loop, companies stand a greater chance of achieving an execution premium. Fragmented connections between strategy development and operations remain common. With the proliferation of strategic and operational tools, taking a systems approach to link the two can help overcome implementation difficulties and realize the full potential of transformational strategies.
Annually, a company's management team gathers to review and update its strategy, adapting to market developments. This process is crucial for incorporating changes, whether they require minor adjustments or a complete strategic overhaul due to significant shifts in the competitive environment. The initial phase of crafting a 5-year strategic plan involves re-evaluating the company's vision, which encompasses its purpose, values, and aspirations. An updated mission statement, concise yet comprehensive, should reflect the organization's raison d'être and its commitment to delivering value to customers. Following this, a values statement should outline the desired internal culture, highlighting the attitudes, behaviors, and character traits the company seeks to foster. Additionally, setting new 3-10 year goals that are both aspirational and measurable is essential, akin to President Kennedy's 1961 goal for a manned moon landing before 1970, which served as a source of inspiration and a benchmark for accountability. With a renewed vision, the management team must then determine the necessary strategic adjustments to achieve these objectives. This involves a thorough analysis of the company's current standing, benchmarked against competitors and industry trends, possibly through a SWOT analysis to identify strengths, weaknesses, opportunities, and threats. The next step is formulating the strategy, specifying how the company plans to achieve its goals. This could involve targeting specific customer segments, identifying new customer needs, co-creating value with customers, scenario planning, or employing a formal strategy map. The chosen strategy should be succinctly documented using the OAS framework, which outlines the objective, advantage, and scope. For instance, Southwest Airlines' strategy might emphasize becoming the most profitable U.S. airline by offering low fares to price-sensitive travelers. The decision between making incremental changes or undertaking a major transformation depends on the effectiveness of the current strategy, significant market shifts, or new triggers such as expected continuous losses, the appointment of an external CEO, technological disruptions, macroeconomic factors, or regulatory changes. Although not formally part of the strategy management process, executive leadership support is vital at every stage to ensure breakthrough performance. Moreover, a comprehensive management system is necessary to integrate and align various strategic planning and execution tools across the organization, ensuring they work in harmony.
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