Introduction

“The Execution Premium,” written by Robert S. Kaplan and David P. Norton, is a seminal work in the realm of strategic leadership. The authors delve into the intricacies of achieving an execution premium, which is the additional value that organizations garner from successfully implementing their strategies. Kaplan and Norton introduce an integrated, six-stage management system and leverage the Balanced Scorecard framework, which they pioneered, to bridge the gap between strategy formulation and execution.

Major Point: Developing a clear and coherent strategy is crucial. Kaplan and Norton emphasize that organizations must begin with a solid strategic foundation that articulates choices around target markets, value propositions, and key capabilities.

Concrete Example: A financial services company clarifies its strategy. Instead of offering all types of financial products, it decides to focus solely on wealth management for high-net-worth individuals. This clear focus allows the company to develop specialized services and deeper relationships with its targeted clientele.

Action: Utilize strategy maps to visually lay out the logic behind the strategy. Begin by clearly defining the mission, vision, and core values, and ensure alignment with the desired market positioning and competitive edge.

Major Point: Strategy translation involves converting the broad strategy into specific objectives and metrics via the Balanced Scorecard. This ensures all organizational levels comprehend the strategy.

Concrete Example: A retail chain uses the Balanced Scorecard to break down its strategy into strategic objectives across four perspectives: financial, customer, internal processes, and learning and growth. One objective is improving customer satisfaction, measured by customer loyalty scores and complaint resolution times.

Action: Develop a Balanced Scorecard that includes strategic objectives, measures, targets, and initiatives for your organization. Ensure these elements cover the financial perspective, customer perspective, internal business processes, and learning & growth.

Major Point: It’s essential to align organizational structures, resources, and initiatives with the strategy. This includes not only aligning departments and business units but also aligning individual performance goals.

Concrete Example: An electronics manufacturer aligns its R&D, marketing, and customer service units to support a strategy focusing on innovative product development. R&D sets goals for new product features, while marketing prepares campaigns that highlight innovation. Customer service trains staff to handle queries about new technology.

Action: Conduct strategic alignment workshops with various departments to ensure that their goals and activities match up with strategic objectives. Align individual performance appraisals and incentives with broader strategic goals.

Major Point: Effective strategy execution requires meticulous operational planning, which includes budgeting, resource allocation, and detailed action plans.

Concrete Example: A healthcare provider, aiming to improve patient care quality, develops detailed plans for hiring additional medical staff, upgrading its IT systems, and implementing new patient management protocols.

Action: Develop integrated planning processes that ensure operational activities align with strategic goals. Use rolling forecasts and scenario planning to adapt to changes and ensure resources are appropriately allocated to strategic priorities.

Major Point: Continuous monitoring and learning from performance is vital to stay on track with strategic execution. The use of strategic reviews and learning platforms is encouraged.

Concrete Example: A software company holds monthly strategy review meetings. These sessions analyze performance data, review progress on strategic initiatives, and identify any deviations from the plan. This process helps swiftly address issues and adapt the strategy if necessary.

Action: Establish a regular cadence for strategic review meetings. Use performance data and Balanced Scorecard metrics to evaluate progress, and foster a culture of learning and agility where feedback is integral.

Major Point: Strategy must be flexible to remain relevant in changing environments. Kaplan and Norton advocate for adapting and testing strategy periodically, based on new insights and external changes.

Concrete Example: A logistics company uses scenario planning to test its strategy against various future events like economic downturns, shifts in regulatory policies, or technological disruptions. This allows them to adapt their strategy and stay resilient.

Action: Implement a process for regular strategic reviews, including scenario planning, to test the robustness of your strategy. Be prepared to pivot or tweak the strategy based on new information or shifts in the business environment.

FMC Corporation: This global chemical company used the Balanced Scorecard to reorient its business units towards a unified strategy, resulting in significant performance improvements. They identified key strategic themes such as operational excellence and customer intimacy, aligning their business units to these themes.

Action: Identify key strategic themes within your organization and ensure that all business units and departments understand and align their activities towards these overarching goals.

Mobil North America’s Marketing and Refining: By implementing the Balanced Scorecard, Mobil aligned its employees’ performance measures with their strategic aims of becoming customer-centric and improving operational efficiency. This led to improved customer satisfaction and profitability.

Action: Engage employees at all levels through clear communication of strategic goals and alignment of personal objectives with corporate strategy. Use performance metrics that reflect strategic priorities.

Kaplan and Norton’s “The Execution Premium” offers a comprehensive framework for transforming strategy from a conceptual blueprint into actionable steps that deliver tangible results. By following the six-stage management system—developing, translating, aligning, planning, monitoring, learning, and adapting the strategy—organizations can achieve an execution premium. Concrete examples such as FMC Corporation and Mobil underscore the practical application and benefits of this approach.

By adhering to these practices, organizations can enhance their strategic execution and secure a competitive advantage, achieving the “execution premium” Kaplan and Norton describe.