A Proven Formula for Balancing Strategy and Execution as a New CEO
In their recent Harvard Business Review article. "How CEOs Can Balance Strategy and Execution," Michael Watkins and Millan Alvarez-Miranda posit, "Every CEO must simultaneously develop strategy and drive execution — and the need to do both at once has never been more urgent. As we emerge from the Covid-19 crisis, companies will need to drive short-term results while also rethinking strategy amid seismic shifts in competitive environments and ways of working. It’s not strategy vs. execution; it’s strategy and execution with the right balance in the right timeframes."
Here are four traps the authors caution CEOs to avoid, excerpted from their HBR article:
- Failing to diagnose the execution weaknesses of their businesses. New CEOs might also fail to understand the extent to which their new organization’s culture can absorb needed changes, which often implies letting go of yesterday’s values and beliefs that keep the company stuck in the past. As a result, they build a strategy that is not grounded in the competitive, customer, and cultural realities.
- Making decisions about their teams too quickly. New CEOs naturally look for people like themselves, and when they don’t see sufficient strategic thinking ability or openness to change, they rush to judgment. They can also underestimate the importance of having a team with strong execution skills, especially early on.
- Neglecting relationships with the execution side of the business. There is a tendency to delegate responsibility for ongoing operations and focus on “the real work” of developing the future. In doing so, new CEOs can miss out on enlisting key drivers of execution, e.g., sales managers, customers, suppliers, and country managers, who may dismiss the new leader as being out of touch with work at the front lines.
- Failing to develop a coherent, efficient strategy deployment process while maintaining execution excellence. Many organizations have some sort of strategy implementation process. But it doesn’t work because it’s complex, time-consuming, and lacks buy-in from lower-level leaders who believe it’s not built to help them do their jobs. As a result, the strategy remains conceptual not operational.
Balancing Strategy and Execution Through the Transition
The authors go on to outline a framework that provides a clear view of key phases of transition activity and the associated imperatives for new CEOs to develop strategy and drive execution. The approach is intended to be rolled out in three phases over the first year of a leader’s tenure, roughly corresponding to the first 90 days, following 90 days, and final six months (excerpted below).
Phase 1. Defend the Core
In the first 90 days, the focus should mostly be on understanding and defending the company’s existing core businesses. On the strategy side, this often means resetting priorities for core units and aligning with the board on short-term goals. On the execution side, the new CEO should focus the team on stopping non-value-add activities, implementing a strong operating model, and securing some early wins to maximize short-term profit and cash flow. This phase is also an opportunity for the CEO to model the right behaviors, such as being decisive but judicious and focused but flexible, and so shape the company culture to support change and growth.
Phase 2. Extend the Core
In the next 90 days, the new CEO’s strategy/execution priorities should shift to identifying ways to extend the core business by expanding the portfolio and/or entering promising adjacent markets. On the strategy side, this typically means refining or replacing the corporate vision, mission, goals, and strategic priorities and securing buy-in from the board for supporting investments. On the execution side, the leader should work with the team to develop an effective strategy deployment plan that drives execution, for example, by adopting a process such as the OKR (Objectives and Key Results) pioneered at Google.
Phase 3. Transcend the Core
In the final six months of the first year, the new CEO should lay the groundwork for transcending the core business to support sustainable growth. On the strategy side, this means adopting the best methodologies to define the company’s main bets and experiments, including new research projects, pilot programs, and minority stakes in new businesses. On the execution side, the goal is to stimulate innovation and strengthen a high-performance organization internally principally by selecting the right people to lead key initiatives and, if necessary, transforming the culture to be more open to experimentation and have a bias to action.
At the end of phase three, the corporate strategy should be well defined, communicated, and in the process of being deployed, and the core business under control and growing.
Follow this link to read the full article on HBR.org.