Turner’s research has shown that leaders and managers regard strategy execution as their No. 1 priority, but have difficulty grasping the concept. They consider it too broad a term, too “holistic” even. To clarify matters, we need to make a distinction between the going concern and innovation efforts. Making a distinction between Running the Business and Changing the Business is crucial because it simplifies and expedites matters. Failure to make this distinction leads to suboptimal performance on both fronts. In my years as a consultant I have seen plenty of organizations that opted to have their line organization deal with every execution challenge, even though it’s clear that most execution issues require a special focus and approach. The net result was an indistinguishable mess. By separating your change objectives from the going concern, you ensure you can properly manage and control both Running and Changing the Business, as figure 1 shows. In my study, many leaders admitted to having realized too late how important this distinction is.
Not only should we disentangle Running and Changing the Business, we must also distinguish between different Types of Change: Improvement, Renewal and Innovation (figure 2). Failing to make this distinction will once again create an indistinguishable mess. Obviously, every organization needs all three types of change, but also needs to find a way to offer a unique proposition. Every sexy startup that makes it big eventually becomes an established company. Even then, it needs to continue to innovate in order to remain successful. It must keep improving basic processes (Type 1 Change) and renewing its existing models (Type 2 Change).
Figure 1: The distinction between Running and Changing the Business and the Three Types of Change: Improvement, Renewal and Innovation.
Type 1: Improvement
Type 1 Change is about continuous improvement and development of existing revenue and business models, aka “operational excellence” Doing things better every day. That’s how one senior manager described Type 1 Change to me. Although we enjoy a high standard of living in the Western world, it is practically impossible to schedule a repair or a delivery when it suits you best, for instance evenings or weekends. So, there is ample room for improvement. Excelling in Type 1 Change builds credibility with customers and fosters an execution culture within the organization: “change begets change”! That, in turn, fuels Types 2 and 3 Strategy Execution.
Type 2: Renewal
Type 2 Change refers to an overhaul of existing revenue and business models. It’s the kind of change needed when the existing revenue and business model needs to be transformed in order to keep running the business. This may entail drastic measures to cut costs or raise productivity, or leveraging the synergy attained through takeovers, or a rigorous revision of your customer value propositions and service concepts. This type of change nearly always requires a fundamental breakthrough in one of your company’s key performance indicators, a real jump in performance.
Type 3: Innovation
Type 3 Change is all about radical digital innovation, totally new revenue and business models. Aka game changers. That is your best bet to secure the continuity of your organization. Because if you don’t disrupt the market, some other organization will. Thanks to digitalization we live in disruptive times, as I wrote in my previous blog post about my book Strategy = Execution. After all, how do you secure your earnings in a shrinking market when your existing business strongly depends on the commodity effect and profitability is shrinking year after year? No one can survive without innovation, but innovation can only be successful if it is manageable. Lee Iacocca once said, “The most successful leaders hold onto the old for as long as necessary and make the leap to the new as soon as this is the better move.”
Figure 2: Three types of strategy execution: Improvement, Renewal and Innovation.
Amazon once started as a hungry young startup with an innovative business model (Type 3 Change). But now it rigorously improves and renews itself every day (Types 1 and 2 Change). Google and Apple do the same; they make headlines with their new ideas (Type 3 Change), but maintain the stability of their existing product lines and revenue and business models by continually improving and renewing their existing business models (Types 1 and 2 Change). Every organization needs all three types of change. Figure 3 shows the differences in purpose and nature of these types of change.
Figure 3: The three types of strategy execution are fundamentally different in purpose and nature.
Strategy = Execution. Improve, Renew and Innovate Faster
How can organizations make strategy execution their number one priority? And improve, renew and innovate faster? This I describe in my book Strategy = Execution. Strategy = execution is based on the research that Turner started years ago into the success factors of strategy execution and innovation. We interviewed 60 directors and professionals and analyzed more than 75 cases, 300 relevant books and articles.
- More about Jacques Pijl (author) and Turner Consultancy
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