Execution Premiums
The book “Execution Premiums” helps organizations link strategy to operation and hence ensure employees support the strategic activities when carrying out their activities. The author has provided a management system that helps solves short term problems and monitors the improvement of important operational processes in the organization. Most organizations have found it hard to align their strategy with operations and this has affected their performance. Managing strategy is different from managing operations in the organization. Both practices are important to the organization and they are supposed to be integrated so as to realize full benefits.
For instance, they help improve performance in the organization. Operational effectiveness and strategy work differently. A visionary strategy that is not connected to important operational processes and leadership in the organization cannot be implemented. Operation effectiveness in the organization has a lot of benefits. First, it helps reduce the costs and improve the quality. It also helps reduce process time and lead time in the organization. Organizations that do not have vision when developing strategies and do not get help are not able to realize the benefit of operational improvement.
Most companies fail to implement the strategy and managing operations well because they do not have the right management system that is needed to integrate the strategy and operations and align them.In addition, most organizations do not have strategy execution programs and this has made it hard for the organizations to execute their strategies. This is according to a survey conducted in 1996 by the authors. The results from the study showed that 10% of the employees did not understand the company strategy and this made it hard for employees to link their daily activities with execution. Moreover, the organizations did not discuss strategic execution (Kaplan &Norton, 2008).
As a result, the authors have developed a management system that can be used to incorporate strategy planning and operational execution in the organization. The management system helps connect formulation, planning and operational execution. The management system consists of six main stages. The first, stage involves developing the strategy. Organizations are supposed to develop the strategy using various strategy tools. The first step in developing the strategy is establishing the mission, values and vision of the organization. In this case, the organizations are supposed to define the purpose of the organization well.
They are also supposed to state the internal factors that guide their actions and what they intend to achieve in future. The mission, value and vision statement helps guide the organizations in formulating the strategy and executing it. Organizational values and mission are stable, but the vision changes often as organization have various aspirations. The mission statement is a precise statement that describes the organization. The mission statement should be stated clearly so as to inform the executive and workers about the overall objectives they have to achieve. The mission statement shows the kind of services or goods the organization provides to its customers. The values section lists the attitude of the organization.
The vision statement defines the long term and short term goals of the organization. It should have a “stretch goal”, time frame and state the niche.Leaders or managers in the organization are supposed to guide the organization in transforming the vision and mission and values. Most of the institutions that have had inspirational leaders like the FBI organization in US have transformed their organization well by developing clear, vision, mission and value. The organization should have an enhanced vision. The enhanced vision should state the “customer value proposition”, main processes, and intangible assets like people and technology that are needed to achieve the vision (Kaplan &Norton, 2008).The next step in developing a strategy is carrying out a strategic analysis.
Managers are supposed to review the current conditions in their operating environment and competitive environment. They are supposed to identify main changes that have happened since they last developed the organizational strategy. The organizations can use PESTEL tools to analyze the external environment (Kaplan &Norton, 2008).The PESTEL tool allows the organizations to analyze the political, social and economic environment. It also allows the organizations to analyze the environmental issues and legal issues. When carrying out an internal environment analysis, organizations are supposed to determine the operations, human labor and innovations in the organization.
They are also supposed to identify technology and the progress of strategies being used currently. In this case, the organizations can use SWOT analysis. The management team should develop the “strategic change agenda”. The agenda explains the need to change the strategy being currently used (Kaplan &Norton, 2008).The third step in developing the strategy is creating the strategy. They should state the niche the company will compete and “customer value propositions” that will be used to differentiate the company in that segment. The management should also state the main processes that are needed to differentiate the strategy and human capital needed to create the strategy.
Lastly, they should state the technology tat will enable the creation of the strategy (Kaplan &Norton, 2008).The second step in management system is planning the strategy. Mangers are supposed to plan the strategy by establishing strategic objectives and targets. They are supposed to identify the budget that will guide the action and allocate the necessary resources. During this stage, companies are supposed to develop a strategy map. A strategy consists of various dimensions of company change. For instance it can consist “of short term productivity improvement” and “long term innovation”.
A strategy map is important as it provides a visual representation of various strategic dimensions in the organization. A strategy map helps organizations manage various components of the strategy and ensure they operate well. Additionally, managers are supposed to convert the objectives identified into a score card of measures, target and gaps. The gap showed is divided into various sections that each strategic theme can fill within three years. They should also identify the programs that are needed to map the objectives. Organizations can use the stratex to fund the programs. Identify theme teams is important as it helps ensure the strategy are well developed.
The theme team provides feedback on strategy execution and accountability (Kaplan &Norton, 2008).The third step is aligning the company with the strategy. The organizational strategy should be connected with business unit strategies and functional unit strategies. This will make it easy for the organization realizes the benefits of having a multibusiness. In addition, the employees in the organization should understand the strategy and motivate them to ensure the strategy is effective (Kaplan &Norton, 2008).The next step is operational planning. The organizations should identify the processes that are needed to execute the strategy.
The organizations can execute the strategy using the objectives in the strategy map. The organizations should focus their total quality management, six sigma and reengineering programs on improving the process identified so as to ensure the strategy is effective. Then create dashboards to at as a guide and offer feedback on employee improvement efforts. The organization should convert the process improvement plan and strategic measures and targets on the score card into operating plan. This will help link the operating plan and budget.
Then develop a sale forecast by converting the strategic plan revenue targets. They should also use “Time driven activity based cost” to convert the sale forecasts into estimates of resource capacity that are needed for the forecast time. After that they should develop the operating and capital budget (Kaplan &Norton, 2008).The fifth step is monitoring and learning. After linking the strategy with operational plan, the organization should monitor the strategy and the performance outcome. This helps identify any shortcomings on the strategy and improve it using the information gotten.
The last step is testing and embracing the strategy. Apart from conducting the strategy review meetings, the organization should carry out meetings to test if the organizational strategic assumptions are valid. The organization should determine if the strategy is working or not using the results received from the review meeting. If the strategy is working, it should adapt it.The topics presented in the book have yielded useful insights as they have helped understand how organizations can link strategies with operations. They have helped understand the various steps that are needed to develop the strategy and align it with the organization.
The topics complement the content taught in class (Kaplan &Norton, 2008).The content in the book is important to management and personnel working in business organizations. First, the book has outlined the main challenges that managers face when implementing strategies in the organization. For instance, the studies carried out by the authors have revealed that most business does not have management systems and this hinders them from integrating strategies and business operations. It also presents the steps managers should follow when developing strategies and aligning them with the organizational operations.
Businesses can use the management system stated above. This will help them develop strategies that are effective and valid and hence improve performance in the organization. The strategies developed should be inline with organizational mission, values and vision. This will make it easy for managers to realize organizational goals and objectives. The book helps managers understand the importance of employees in implementing strategies in the organization. Employees are crucial in implementing strategies in the organization. This is because they provide human capital and can influence the performance of the strategy negatively or positively.
Organizations are supposed to motivate employees to ensure the strategy is effective (Kaplan &Norton, 2008).The content helps employees working in business organizations understand the importance of aligning strategies and organization activities. Hence, work towards achieving organizational goals. Organizations find it hard to implement strategies because the employees are not aware of the strategies. They also use the wrong methods to integrate strategies into business activities. Thus, the book is important to managers as it helps them achieve competitive advantage (Kaplan &Norton, 2008).
Reference
Kaplan,R.S.,&Norton,D.P.(2008).The execution premium. Linking strategy to operations for competitive advantage. Harvard business press.
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