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SIX DISCIPLINES EXECUTION REVOLUTION

Six Disciplines Publishing

Contents

Introduction.................................................................1Chapter 1 Business Excellence...............................................5Chapter 2 The Biggest Problem in Business...................................23Chapter 3 Why Is It So Difficult?...........................................33Chapter 4 The Leapfrog Opportunity..........................................43Chapter 5 Requirements for a Next-Generation Program........................63Chapter 6 The First Complete Strategy Execution Program.....................77Chapter 7 A Repeatable Methodology..........................................91Chapter 8 Accountability Coaching...........................................103Chapter 9 An Execution System...............................................121Chapter 10 Community Learning................................................141Chapter 11 Make Solving All Other Problems Easier............................157Chapter 12 An Enduring Pursuit...............................................165Final Thoughts...............................................................179Notes........................................................................181Resources....................................................................185Index........................................................................189Acknowledgements.............................................................192About the Author.............................................................193Ready to Join The Revolution?................................................196

Chapter One

"After many years, I've finally come to view excellence as the enduring pursuit of balanced strategy and execution."

Before tackling the biggest problem in business, we need to drop back to a more foundational topic. We need to define strategy, execution, and their relationship to business excellence.

In my experience, most leaders of small and midsized organizations do not have a clear understanding of the relationship between strategy, execution, and excellence. This is easy for me to believe because, as a CEO of a successful company for twenty years, I didn't understand these principles myself. Most business leaders are so consumed by their businesses they don't take the time to develop such perspectives.

The purpose of this chapter is to weave strategy and execution into a single model for understanding enduring business excellence. We'll provide a common framework for a meaningful dialogue about where you are in terms of your business, how you got there, and how to develop a vision of where you'd like to go.

What Is Excellence?

Whenever I meet business leaders, I take the opportunity to ask them two questions: (1) What does excellence mean to you? and (2) Do you think you've achieved it? Two truths emerge. First, no two people define excellence exactly the same way. Their definition evolves as they learn and as circumstances change. Second, nearly everyone agrees that excellence is a journey, not a destination. As a result, no one who's serious about excellence believes he or she is "there" yet.

The conclusion is that excellence is an enduring pursuit and, therefore, requires an enduring approach. According to Samuel Johnson, excellence is a "lifelong pursuit for most who attain it. Nothing less will do."

After many years, I've finally come to see that excellence requires on-going balance between strategy and execution. Strategy requires choosing what promises to make to all stakeholders and a roadmap for delivering on those promises. Execution requires getting there while overcoming an unending number of surprises. Of the two, execution is far more difficult to achieve, but it is impossible without solid strategy. Learning how to continually balance these two is the key to excellence. This is why excellence is a journey that never ends. Everyone, however, doesn't see it that way. To illustrate, let me relate one story. I was speaking to a large Chamber of Commerce recently, and, after I posed these two questions ("what is excellence?" and "have you achieved it?") to the assembly, one woman said she thought she had achieved excellence. This response was highly unusual.

I tried not to show surprise during my speech, but quickly made a note to myself to speak to her after the event. When I finally did talk to "Jan," I asked what business she was in and how she had turned it into an excellent one. Her answer was not what I expected.

I learned that she ran a fairly small business that provided portable storage units, and she was ecstatic because sales had almost doubled in the last thirty days. I asked if she knew why, but she didn't.

It turned out this spike in sales occurred three weeks after a flood in the area. So I probed a little to find out whether she thought this unfortunate situation might have driven demand temporarily. She didn't believe this was the reason, thinking her good fortune was a mark of excellence.

I walked away wondering about her notion of excellence, and whether she'd think her organization was excellent in twelve months. I recognized this short-term mindset only because I'd been where she was many times in my life as an entrepreneur and business owner-before I began to see this pattern in my own thinking.

Introducing the Business Excellence Model

Simply put, the focus and capability of an organization can be understood in two dimensions: strategy (deciding what to do) and execution (getting it done). Figure 1.0 shows a model of these dimensions using four quadrants of performance. Quadrant I is strong strategy with weak execution, Quadrant II is strong strategy with strong execution, and so forth.

Leaders who build organizations with the ability to balance strong strategy with strong execution over long periods of time achieve enduring excellence. In this chapter, we'll explore the topic of excellence more completely. And, in the remainder of the book, we'll explore how you can go about pursuing it.

Before moving on, I want to acknowledge Michael Porter for his profound and comprehensive views on strategy. In particular, I recommend his well-known article, "What is Strategy?" which is available from Harvard Business Review.

In the article, Porter summarizes strategy as choosing a set of activities, a different and unique set of activities that sets one apart from the competition. Porter summarizes, "the essence of strategy is choosing what not to do." In other words, creating a distinctive strategy is all about making good choices, as well as good trade-off s. Southwest Airlines illustrated the power of such choice years ago when it set out to specialize in short, direct-connect flights and chose not to be a global airline.

Now, let's consider the execution dimension (horizontal axis) of the business excellence model. This dimension is characterized by a relentless drive for improvement: seeking to perform a chosen set of activities better than the competition. While strategy is about combining best choices and similar activities, execution is all about continual improvement in those chosen activities.

This combination of strategy (the choices of what to do versus what not to do) and execution (how well the choices are carried out) becomes the field upon which the Execution Revolution occurs in any given company.

How well an organization performs both strategy and execution determines its capability and capacity to sustain business excellence over time. Most organizations cycle through all four quadrants in this model-and do so repeatedly. The world we live in is too unpredictable for this not to be true. The adoption of a strategy execution program, as discussed in Chapter 6, however, helps an organization maximize the time spent in Quadrant II.

Let's look more closely at how businesses operate and focus their activities while they are in each of the four quadrants of business excellence.

Quadrant I: Strong Strategy/Weak Execution

We begin our exploration of the business excellence model in Quadrant I (Figure 1.1). In this quadrant, a business has a strong strategy, which typically means a competitive advantage. This advantage can come from offering premium products or services, availability, or price. It can be rooted in technology, distribution channels, manufacturing expertise, or current customer base. Some start-ups enter the market with a "better mousetrap" than those of long-standing companies.

Regardless of whether a company is a start-up or a seasoned business, strong strategy usually leads to a growth in sales. This kind of company has something people want, with some advantage over the competition. Maybe this advantage is easy to copy or maybe it's not. But one thing is certain: if it works, the competition will follow.

A good illustration of a Quadrant I situation is Sharn Veterinary of Tampa, Florida, in its very early days of operation. Sharn founder Andy Schultz, a retiree from a medical supply company, had noticed over the years that there was a demand for human-quality medical monitoring equipment, such as blood pressure devices, to serve the veterinary market.

In 2001, Sharn was a perfect example of the start-up that begins in Quadrant I with a big competitive advantage and a long-term focus on an underserved niche market. The result was that Sharn quickly became the leader in that market. In fact, Schultz's business grew to the point where he could no longer handle it by himself and began adding people. This is exactly what happens in Quadrant I-a tremendous increase in sales, leading to growth throughout the organization.

Other successful start-up companies, whose stories are now familiar, and who also began with a strong strategy, include Red Bull (energy drink), Netflix (movie rentals), Dell (computers direct), and Google (internet search). For these companies, the basis of success in Quadrant I was making clear choices about what they would and would not provide to customers. And their choices reflected what they believed would provide a competitive advantage. The resulting success has proven that their choices were good ones.

Now consider a few runaway successes from several established market leaders. Apple's iPod (portable entertainment) or iPhone (internet-driven phone) and Nintendo's Wii (active participation video games) are examples of how new products and services from existing organizations can drive growth.

In fact, these runaway successes are growing so rapidly that it's putting pressure on the ability of those companies to execute-to deliver enough quality product to meet demand. This is a key point to understand. Success and the results of growth start the journey-but this oft en leads an organization (and its leadership) into Quadrant IV.

Quadrant IV: Strong Execution/Weak Strategy

Before we discuss the details of Quadrant IV (Figure 1.2), this is a good point to emphasize that the business excellence model offered here is a simple one, designed to promote understanding in a very complex business world. Because of its simplicity, it's also easy to come up with scenarios this model does not explain. But we've found this tool to be very useful in helping companies understand what's happening to them and why.

In the real world, there's no clear line between these quadrants. Also, businesses don't usually stay in one quadrant, as illustrated in Figure 1.3, where the focus of the organization and its priorities gradually change, and the company drift s between quadrants.

Let's continue with the Sharn Veterinary example. For some time, Sharn devoted its time and energy (focus) to creating-a breakthrough product. The company wasn't as focused on supporting this product as it was creating it and getting it established. Once established, Sharn's focus rightfully changed to meeting the demand for the product, servicing it, and eventually harvesting increasing profits from it.

Especially for smaller organizations, as each of these phases occur, it's very difficult to maintain focus on thinking about and building the next growth driver while everyone's clamoring for more of the current offering.

Therefore, a company in Quadrant IV usually gets there because it's experiencing the pains of growth. Quite oft en, sales have outpaced capacity, so leadership becomes focused on strengthening internal operations, to address quality, scheduling, hiring, training, customer service, order processing, and other issues. In other words, the movement into Quadrant IV is a natural reaction to success in Quadrant I.

If an organization can manage the current growth wave efficiently and at the same time continues to invest effectively on the next growth wave, then it enters Quadrant II, characterized by balanced growth and profitability and more predictable business.

This isn't the case for most companies, where growing pains push them into Quadrant IV instead of Quadrant II. Problems such as customer complaints and inadequate supply redirect the focus of the leadership team to operation and execution issues.

Here lies the challenge of staying in Quadrant II (I speak from experience). Strong strategy and strong execution are individually so demanding that the earlier stages of each oft en require more than 100 percent of leadership and management's attention. There were times when Solomon Soft ware sustained a 30- to 50-percent growth rate for several years in a row, and it was all we could do to service our clients. Since operational issues were more urgent, they got the attention of leadership.

Interestingly, this singular focus usually causes another problem to sneak up unannounced: the loss of the original competitive advantage, gained while operating in Quadrant I. Sometimes the focus on execution becomes so intense that a company doesn't make the investments required to protect and sustain its strategy advantages. Sales slow down, profits decline, and the company turns its focus to such issues as efficiency and cost savings. If this focus is pursued too hard and a company remains in this rut too long, it will slip into the weak state of Quadrant III, where it has neither strong growth nor good profitability.

Quadrant III: Weak Strategy/Weak Execution

It's easy for a company to flounder in Quadrant III for quite a while before leadership really accepts that they are there. At first, declining growth rates are excused as an aberration or some short-term cause. The shift into this state of weakness results from a gradual decline in growth and profitability, caused by decisions made (or not made) a year or two earlier. With slowing sales growth management is oft en pressured to increase profitability through efficiency gains that may cut muscle and not fat. This makes the company weaker, confidence declines, and even the little problems become big ones. In my experience, a company in Quadrant III is very reactive and frequently in chaos, operating daily in firefighting mode without a clear path out of their circumstances.

I recall coaching a small IT organization whose founder/ CEO operated the company by doing nearly everything himself. This man worked more than eighty hours per week, seven days a week. In a planning meeting I conducted with his leadership team, it became evident how overwhelmed he was from these activities.

It was also evident that he was unwilling to delegate anything. All the ideas for improving the business were added to his plate, and yet he wouldn't drop anything. Ultimately we couldn't help this client because its CEO was unwilling to make the tough decisions necessary to get out of Quadrant III. It was obvious to his leaders what was going on, and they were preparing to leave the organization because of his inability to change.

This is how Quadrant III (Figure 1.4) businesses operate. Overworked, confused and eventually a feeling of hopelessness if not addressed. Interestingly, by the time we recognize we're in Quadrant III, we're probably at least two years away from fixing the problem. Why? Because we have to start the growth cycle all over again and that usually takes significant time.

Clearly, having an organization operate in this quadrant is not where a CEO wants his company to be for any length of time. Unfortunately, some business leaders never figure out how to escape it and the company becomes what one of my former board members, David Johnston, calls the "living dead."

The picture does not have to be so grim. Business leaders who recognize what has happened can learn to change the behaviors that got them into this undesirable growth-profitability cycle in the first place. I doubt any organization or leadership team is so good that it will never spend any time in Quadrant III. But I do believe that leaders can minimize the time spent here if they're proactive in learning how to balance execution with strategy.

Typically, the best exit plan for moving out of Quadrant III is to aggressively reallocate resources from low-profitability areas to the growth areas. This sounds easy, but most organizations don't have the framework, the will, or the persistence to make the hard choices it requires.

Quadrant II: Strong Strategy/Strong Execution

Quadrant II (Figure 1.5) is all about balancing growth with profitability and performing predictably. This requires a disciplined organization, one that's able to execute well enough to address the needs of today and build for tomorrow at the same time. Poor execution and poor operations usually drain so much resource and leadership attention that preparations for future growth are sacrificed.

Sustainable excellence isn't possible unless an organization learns to systematically increase its capability to execute, and to do so faster than the rate at which its challenges are growing. It's ironic that the better an organization executes today, the bigger its challenges will be tomorrow. This is why it's so difficult to balance strategy and execution over the long-term. Without an aggressive, proactive approach, organizations cannot identify or address their challenges in sufficient time, to avoid drifting into another quadrant. Remember that growth or efficiency issues can take years to address. The sooner they are caught and addressed, the lower variability (risk) a business undergoes.

(Continues...)

Excerpted from SIX DISCIPLINES EXECUTION REVOLUTIONby GARY HARPST Copyright © 2008 by Gary Harpst. Excerpted by permission.
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