For the third week in a row, strategy execution expert Jeroen De Flander sheds his light on how companies need to put more focus on strategy execution in order to exceed in the long run. This week, Jeroen explains what the impact of the current recession should be on strategy overall and, no doubt more importantly, strategy execution:
(by Jeroen De Flander)
Strategy execution in the aftermath of the financial crisis
Companies who haven’t prepared may survive the recession only to find themselves overtaken by their competitors as the economy gets back to normal. The question is: “How do I prepare my organization for recovery?”
The Performance Management Research Platform from Vlerick Leuven Gent Management School andthe performance factory joined forces to find an answer to that question. I will highlight the conclusions in three articles. You can download the complete research report for free.
A NEW WORLD
At some point in time, each crisis will come to an end. Forgotten strategic topics will pop up on the radar screen again. And you will probably agree that it won’t be business as usual as the world around us has changed dramatically in times of crisis.
YOUR STRATEGY REVIEW NEEDS A PUNCH
Your strategy review – the kick-start of every thorough budget process − needs an extra punch. You want − and probably need − that something extra that helps you and your company digest the changed environment and prepare for a strong recovery. The classical elements of a sound strategy review (like a sound analysis and scenario planning) remain the basis − but that’s not enough. You need to dig deeper into existing analysis areas and be creative by looking at others.
So, here’s a list of 8 dynamics you should integrate into your upcoming strategy review process. Some build on classical strategy analysis and will hold no surprises for you; others are probably new analysis areas and challenge you to look beyond the obvious.
1. Economic dynamics
This is the obvious one. The one you hear on the news every day. The one you most probably know best and have integrated already. This is all about macro indicators telling us what happened in the past, while economists (try to) predict what is going to happen and politicians try to stabilise the market. These dynamics should definitely be included, but only in your basis as you start. Don’t limit yourself to listening to what others write or say, but dig in. What does it really mean? How acute is the danger (think of the Mexican flu)? What does it mean for my sector, for my company?
2. People dynamics
It’s impossible to win without the right people. So ask yourself the following questions: Who’s still in your company? Are they going to stay, or are they just waiting for the right moment to leave? As you know, the job market follows a pattern different from that of the economy − so, when do you expect the job market to pick up again?
3. Budget dynamics
How fast can we make budget changes? An interesting question, when you know that the 2011 budget has been made in the midst of one of the largest economic crises of all time. Most probably, your – and your colleagues’ – current budget ideas are coloured strongly by the current crisis and are very cost-driven. But watch out for the boomerang! If the financial climate improves, you might be stuck with an inflexible budget. So, look at the budget dynamics in your company and evaluate the time needed to shift gears when necessary.
4. Industry dynamics
Some of your competitors won’t survive the crisis. Others will, but they will definitely look different. They might have had an extreme makeover. And there will be new players on the market − competitors, suppliers, and customers too. In order words, business won’t be as usual. You’ll need to find out how the crisis has affected − and will continue to affect − the dynamics in your industry with all the different players involved: from customers and private and public investors, to suppliers and partners, to existing and new competitors. KPMG research involving 852 companies in 29 countries indicates that about 50% of the companies are changing – or planning to change − their business model (reported in De Tijd, 3 June 2009). Find out why changes have occurred in your industry, predict what is going to change, and see how all this can be played to your advantage.
5. Customer dynamics
You were well aware of your customers’ needs before the crisis. But do you still know what they are today? Chances are that the difficult economic climate has altered your customers’ ‘needs’, or loyalty, dramatically. So, don’t rely on past research − do your homework. You might be very surprised by the results.
6. Decision dynamics
The crisis has scared many executives. They have become hyper-vigilant and avoid taking risks. Long-term decisions are postponed until things stabilise. Be bold and put this on the table. We are not saying that you need to take unnecessary risks. You might want to be more careful about certain decisions than you were before − but you don’t want to become paralyzed either. Entrepreneurship always goes hand in hand with a healthy dose of risk. Each executive team should put this (RSL: what is “this” referring to?) foremost on the agenda.
7. Execution dynamics
Take into account what you can do. Restructuring has a negative impact on morale and impacts your change capacity as well. Good people have left or may be leaving soon. The amount of stress your remaining managers are experiencing is very high. Proper supporting processes might be at risk. We will touch upon this in more detail in other articles. The key take-away is: a previously approved strategy could very well be less realistic today, due to reduced execution capacity in your organisation. It’s crucial to take this into account now!
8. Leadership dynamics
Last but not least, you should examine the captains on your ship. How well did they perform during this extreme crisis situation? Any signs of burn-out? Is their style suitable to guiding the company through the recovery period?
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