What Are the Fundamental Steps of Strategy Execution?
Planning and executing a strategy can be challenging, and it can feel overwhelming no matter how long you’ve been in your industry. Co-founders Pascal Dennis and Laurent Simon had a discussion on what the fundamental steps of strategy execution are, so you can make sure you can not only develop a winning strategy, but also be able to measure, adjust, and deploy it, with all team members on the same page.
Laurent:
Hi Pascal! How are you today?
Pascal:
I’m really well. And you?
Laurent:
Very well. Thanks. So I understand that today we’re going to start with the fundamental steps of strategy execution. Is that right?
Pascal:
That’s right.
Laurent:
Could you refresh our memory on what are those key steps?
Pascal:
Develop the plan, deploy the plan, monitor the plan and improve the system. These four steps underlie all effective strategy deployment systems.
Laurent:
Excellent. Let’s start with the first one. How do we develop the plan?
Pascal:
First define your Aspiration. And that typically comprises two things, something for the heart, and something for the head. The former entails finding the few words that define who you are, what you believe in. The latter entails defining the hard targets you must achieve. These typically include hard financial targets such as Revenue and Profitability
Next, you have to define your Winning Logic, your hypothesis based on a solid understanding of your current condition and most recent history. Once you’ve defined you Aspiration and Winning Logic, you have to answer the questions:
- “Where will we play”? For example, what markets, and what products?
- “What capabilities do we need to develop to effect this winning logic”?
- “What management systems do we need”?
Your answers to these questions are effectively your plan. Now you need to articulate it on one page. This can a letter to all employees and the Board, or a one-page ‘strategy canvas’ or a ‘Strategy A3’. Clarity and simplicity is the mark of a good plan. Complexity is usually a sign of confused thinking.
Laurent:
Very good. And what do you do with this output, this so-called one page strategy artifact? Do you make it public or keep it a secret?
Pascal:
You want to deploy the plan throughout the organization so that everyone in the organization knows your Aspiration and Winning Logic. That’s a tremendous enabler. It aligns people, and informs their decisions: “Should we do this or that?”
“Well, this initiative is aligned with our winning logic and the other is not.” It’s a basic and effective form of triage.
Key point: a critical element of strategy is saying No!
Laurent:
Excellent. Shall we move to step two then? Now that we have the plan, how do we deploy it?
Pascal:
Deployment means translating the overall aspiration and winning logic into bite-sized pieces, devolving the elephant, if you will, and giving parts of the job to the right groups within the organization.
The formal process is called Catchball, and through Catchball, we translate a given critical gap into its constituent parts via analysis and direct observation. Each constituent part represents a blocker, and each blocker has a root cause. And that is what our teams need to fix. In summary, deployment means breaking down the gap (elephant) and spreading the work among the relevant teams.
Laurent:
To make sure that people understand – the image of a Catchball is I send you the ball, and then you send it back to me for a few iterations. Is that right?
Pascal:
That’s correct. It’s an iterative process, a series of frank discussions wherein we ask and validate what the gap is that we have to close, and what are the constituents of that gap? In other words, the blockers, the root causes, and what our countermeasure plan is. What is our winning logic to close that gap? And through this back and forth, we achieve a shared understanding.
We seek to achieve ‘radical transparency’ thereby, to use Ray Dalio’s splendid phrase.
Laurent:
Can you also help people understand how this relates to what is also called cascading the strategy downstream?
Pascal:
Cascading strategy means the higher level cascades winning logic and metrics to subordinate levels. The cascade comprises a translation based on the back and forth of Catchball. We thereby seek a shared understanding of what we need to do, and how we’ll measure our activities. In fact, the senior level should encourage the more junior level to suggest the tactics and metrics.
Typically the translation entails going from more abstract metrics at the top level to more concrete metrics at the front line. For example, Financial KPIs at the most senior levels are usually abstract ratios – ROI, EBITDA and the like. As you cascade those metrics and activities to the front line, metrics should become more and more concrete.
For example, abstract productivity or cost ratios turn into dollars of scrap, minutes of overtime, or lost orders. Activities also become more and more concrete. For example, an abstract idea like “expand our activities within this market”, on the front line becomes something like, “deploy these specific products at these price levels, through these distribution channels”.
Laurent:
That’s very good because I know that most organizations use the word cascading, but in my opinion, it doesn’t capture the key elements related to Catchball, which is fundamentally a dialogue. Cascading feels like it only goes one way from the top to the bottom, whereas what you’re really saying is there is a direction coming from the top, then there is a proposition coming from the bottom that is reviewed by the top, which is then refined, sent back to the bottom, which is resent back to the top.
Laurent:
And then it becomes, “Okay, let’s go. Everybody has had their say, we’ve considered all aspects and here’s the decision, here’s the budget and here’s the roadmap and the priorities.” Is that correct?
Pascal:
Yeah. So thereby we achieve a shared understanding and engagement because I, as the subordinate, have had a chance to articulate my opinions. In fact, I’m encouraged as the junior member to articulate the hypothesis. It’s validated by my boss, but it’s understood that I’m going to articulate the hypothesis. So I feel this is my plan. I’m very motivated.
Laurent:
It makes total sense. And what’s the typical timeline that people should expect from a well-organized Catchball process?
Pascal:
I think within a couple of weeks, we should be able to break down a big gap into its constituent blockers and root causes and articulate a winning logic and start to implement. So it’s not a long time.
Laurent:
And how many people typically are part of this process?
Pascal:
The leader of the given division or department or facility and his or her direct reports. So it’s normally five, six, eight people at the most passing the ball back and forth.
Laurent:
Very good. Well, thank you so much. Should we move to the third step then? How do we monitor the plan?
Pascal:
So monitoring the plan entails developing a tiered management system, which connects the front line with the senior leadership team. The common thread in that connection is our aspiration and winning logic. ‘Level one’ typically is the front line, and level three or level four is senior management, depending on how big the organization is.
Pascal:
The management system is like your nervous system, information flows up and support flows down. And as I mentioned earlier metrics or KPIs tend to go from abstract at the most senior level to very concrete at the front line, because by definition, you’re getting closer and closer to the customer. You’re getting closer and closer to where value is created. And those kinds of metrics are usually very concrete.
Pascal:
As I mentioned, in tiered management information flows up, and support flows down. Effectively, it comprises a series of short, focused and connected meetings. And we prefer that these meetings be ‘stand-up’ meetings with a standard agenda and cadence. Our ideal is Ray Dalio’s ‘radical transparency’ idea. What happened yesterday? What’s today’s work? What are our biggest problems or blockers? What are we doing about them?
We always have our eye on the aspiration and winning logic. So every day we validate what we’re doing and our alignment to our aspiration or ‘True North’.
Laurent:
Very good. So the mental model that you’re using is a fractal image, meaning you replicate the sense structure at different layers in the organization, and therefore they are looking at the same thing, but at a different level of granularity. Would that be a good summary?
Pascal:
Exactly. Right. We’re asking the same fundamental questions but over different time frames and organizational segments. What happened in the previous cycle? What worked? What did not work? What are our biggest blockers? What is the work in this cycle? And what are we doing about our blockers?
These are the core questions. The level of magnification simply changes. So if you’re at the most senior level, the period might be a month, or it might be a quarter. If you’re on the front line, the period is probably a day, but it’s the same fundamental process.
Laurent:
I think people are very familiar with the concept of daily stand-ups, whether they work according to the lean principle or the agile ways of working. What you are adding to that is a mechanism to facilitate the report outs of what’s happening versus the direction given by the top. Is that correct?
Pascal:
Yeah, that’s right.
Laurent:
It’s cascading, but bottom up kind of thing, going against the gravity?
Pascal:
Exactly right.
Laurent:
Can you give people a sense of whether or not this would add to their daily workload or whether that would release their capacity?
Pascal:
Well, it’s enormously liberating because unfortunately in many organizations, we spend much of our time simply chasing down information or fighting fires or learning about fires or abnormalities. Whereas, if we have a daily stand-up, within that 10 or 15 minute period, all those questions are answered. And we achieve a shared understanding of what’s happening right now. We can see what our biggest problems are and what each level is doing about them. As an individual or a team, you learn what you have to watch out for, because of this or that abnormality. So we’re all literally on the same page and we can relax. So now we’re free to do our work. So it’s an enormous enabler.
Laurent:
Very good. Shall we then move to the last step number four. So can you please clarify, what do you mean by improve the system?
Pascal:
At the most fundamental level, we mean improve the strategy deployment system and the management system. So it means assessing, after each cycle:
How well did we develop our plan, and deploy our plan? How well did we monitor our plan? In other words, how effective was our tiered management system? How well do we solve problems?
Such regular reflection ensures that our nervous system keeps getting better. Now, on a more basic level, ‘improve the system’ simply means locking in the learning that our daily management has uncovered, with Lean fundamentals like visual management and standardized work.
Pascal:
It also means upgrading our learning management system, for example. So there are two levels of meaning. One is improve the management system and our strategy deployment system. And the second is improve our work system; in other words, how we do our work, how we train our people, and
how we lock in improvements.
Laurent:
So you are referring to the image of the tree system we like to use, which is the management system, the work system and the people system. Is that correct?
Pascal:
Exactly right.
Laurent:
So what you’re describing now feels like a nervous system, if I was to use the image of a human body. The strategy execution is basically the nervous system so the brain gives instruction to the parts of the body. And then the parts of the body are sending back a signal to the brain so that the brain understands what’s happening.
Pascal:
Exactly. And as with the body, abnormalities are not bad, in fact they alert us to critical information. If I put my hand on a hot burner, the pain signal tells me I have to take action. Similarly, the purpose of our management system is to quickly highlight abnormalities so we can fix them. In large organizations, it is normal to have abnormalities. The point is, how quickly do we surface it, fix it and share the learning?
Laurent:
So adjusting is absolutely critical. That’s being agile. That is also called Agile Governance what you’re describing.
Pascal:
Exactly. The big challenge is that each person contains at least two people. We have the thoughtful, reflective ‘Self 2’ who accepts the signal for what it is – a heads up that helps us to improve. I’m told Self 2 is informed by our Pre-Frontal Cortex (PFC). But we also contain an erratic, quick to react, irrational Self 1 who may see the signal as a threat. “Somebody is making me look bad!” I’m told Self 1 is informed by our ‘amygdala’ or ‘reptilian’ brain. In any event, our inability to manage and integrate Self 1 is the cause of many tragedies, no?
Laurent:
Interesting indeed. The last question I have for you is how do we engage people so that they surface and fix problems that they’re aware of? I remember your famous formula around problems are golden. But as you say, Self 1 may be terrified to the bearer of bad news. What’s the counter measure on your experience?
Pascal:
Well one of my heroes is the late great Paul O’Neill, who took Alcoa from a very difficult situation into one of the most admired and valuable companies in their industry. And his mantra was: What did we discover is broken today? How did we fix it? And how will we share the learning?
So leadership must adopt Paul O’Neill’s mantra. The leader has to get out of the ivory tower and be visible. They need to develop corresponding ‘Operating Rhythms’ and lock them into their calendars. For example, if your standard is, “I’ll attend two team stand-up meetings per week, you’ll have 100 opportunities to reinforce core values, as well as, aspiration and winning logic. By being there, and being informed, you show you’re really interested in what the team is doing. Your body language, questioning, persona, and affect shows respect and excitement around the surfacing of problems.
Pascal:
Senior leaders should adopt the attitude of “That’s great. Tell me more about that. That’s extremely valuable”. So leadership is essential in creating this kind of a culture wherein we surface the abnormalities so we can fix them. That’s why we have a management system.
Laurent:
Splendid, thank you very much for your good insights.
