execution as a critical value driver and the implications...

Execution as a critical value driver and the implications for strategy

Niels Peder Nielsen, Bain & Company

Berlingske Tidende

September 25 2013

2130925_Berl_Exe_vf_externalGXC

Three messages today

1. Great execution drives very significant value, yet many strategies don’t reflect that

2. The best strategies are deeply rooted in the organization’s ability to execute

3. The risk of poor execution is measurable and can be mitigated


EFFECTIVE EXECUTION DRIVES SHAREHOLDER RETURNS

EFFECTIVE EXECUTION DRIVES GROWTH

Companies that execute effectively grow faster and create more value

Effectiveness of execution* Effectiveness of execution*

6x >2x

*Bain decision and org effectiveness database (Feb 2011); Question: Which of the following most accurately describes the EFFECTIVENESS OF EXECUTION as it relates to the most critical decisions in your business over the past three years? (1-4)


1%

8%

28%

49%

14%

0%

10%

20%

30%

40%

50%

60%

<20% 20%-40% 40%-60% 60%-80% >80%

Frequency (% Responses)

Realized Performance vs. Potential Performance of Strategy

Average Realized Performance = 63%

of Potential Performance

Source: Turning Great Strategy into Great Performance, HBR July-Aug 2005, Michael Mankins and Richard Steele

Companies realize less than 60% of the performance promised in strategy


Poor execution accounts for about half of that – wrong strategies don’t help either

0

20

40

60

80

100%

% respondents

Most important factorin client's failure to

reach full potential (N=126)

High cost base

Wrong strategy

Poorstrategy

execution/timing


Repeatable models

A repeatable model is the way an organization replicates its biggest

successes again and again…

adapts them constantly to new markets and to the changing

business landscape…

… and defines its strategy as simply as possible.


*

Design principles of Great Repeatable Models®

• Continuous improvement as competitive advantage, and strategic adaptation to anticipate change

FOCUS

• Centered on core markets and customers, and differentiated on a few key capabilities

ADAPT

• Transmitted through guiding principles, culture and operating model

EMBED

*

1

2 3


Focus: Strategy is about what you do, everyday, to support your target customers

Man

ag

em

en

t cap

ab

ilit

ies

Op

era

tin

g

cap

ab

ilit

ies

Pro

pri

eta

ry

assets

Supply chainand logistics

Production and operations Go-to-market

Developmentand innovation

Customer relationship

Technology and IPScale Brand

Tied customers network

Portfolio mgmtand finance

M&A, JVs and partnering

BU strategy and driving priorities

Regulatory management

HR management and culture

Tangibleassets

Back-office Customer facing


Focus: IKEA-Furnishing the world Swedish style


1. We believe that we are on the face of the earth to make great products

2. We believe in the simple, not the complex

3. We believe that we need to own and control the primary technologies behind the products that we make

4. We participate only in markets where we can make a significant contribution

5. We believe in saying no to thousands of projects so that we can really focus on the few that are truly important and meaningful to us

6. We believe in deep collaboration and cross pollination of our groups, which allow us to innovate in a way that others cannot

7. We don’t settle for anything less than excellence

8. We have the self-honesty to admit when we’re wrong and the courage to change

Embed: Repeatable models are transmitted through ‘non-negotiable’ principles that govern the business


Adapt: Closed-loop learning works at different levels

Continuous evolution(“Type 2”)

Strategic revolution (“Type 1”)


Typical strategy processes focus on getting to recommendation more than preparing execution

Time

Focus of effort

Recom

mendation

Action P

lannin

g

ExecutionFactbase


The better approach is geared to executionthrough starting mobilisation early

Phase 1 Phase 2 Phase 3

Time

ExecutionMobili-sation

ChoicesFocusof effort

Strategic and capability foundation


Five areas to risk monitor and mitigate to drive superior execution of strategy

BRING THE FUTURE TO LIFE

INSPIRE DEEPCOMMITMENT

BUILD TO SUSTAIN

DELIVER THE VALUE

• Compelling intent

• Credible solutions

• Aligned top team

• Impactful leaders

• Engaged sponsors

• Influential supporters

• Decisive governance

• Achievable plan

• Leading indicators

• Effective organization

• Enabling technology

• Continuous improvement

COACH INDIVIDUALS FOR SUCCESS

• Personal motivation

• Critical capabilities

• Desired behaviors

ANTICIPATE AND MITIGATE RISKS

CLEARLY DEFINE RESULTS


In conclusion

• Execution is more than “big hairy goals” and “arms and legs”

• Many of the best executing organizations build on Repeatable Models leveraging the organization innate execution capabilities

• Execution risk can be measured and mitigated

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