It is a story repeated many times: “Our transformation strategy is perfectly clear. But we have a big execution problem” as the member of the executive committee of a large multinational was telling me a few weeks ago. He added: “Now, disruptions are coming from everywhere, we spend millions on transformation plans, we put ‘digital’ and ‘startup’ everywhere, and nothing – nothing! – happens.” Implicitly, of course, and soon very explicitly, the explanation fuses: it is down below that people are incapable! Managers ‘down below’ are not ‘aligned’, so goes the explanation. They do not know how to execute. Or worse: they are resisting change. We must identify the culprits, the traitors! The plan must be executed!
This reaction reflects a poor understanding of strategy and explains why many transformation projects are stalled in large companies, leading to a sometime desperate push from top management and strong tensions within middle management, all that to end up running into the wall: the world is transformed, but the organization is on a treadmill with an engine running at full speed, making no progress and leaving managers exhausted.
One of the worst mistakes with strategy is that of distinguishing between design and execution. This distinction is based on a Platonic or Cartesian model of reality that distinguishes the design, on the one hand, from the implementation on the other. Design is the noble domain of course. This is the area of men in black suits located on the 32nd floor of a tower in the business district, close to the people who count and surrounded by highly paid consultants. Implementation is a mere after-thought, usually delegated to a second-tier consulting firm, and relegated to an appendix in the strategy report, which nobody reads of course. The strategy thus devised is the triumph of the will, a romantic and mechanistic conception of man as “master and possessor of nature”, according to the famous word of Descartes. As long as we want something, and that we have the means to achieve it, we will indeed achieve it.
But nature avenges itself quickly, and other men too. If the strategy is not executed, it is because it was conceived without taking into account the capacity of the organization to execute it, which therefore makes it a bad strategy. The first quality of a strategy is to reflect the capabilities of the organization. This is especially true for transformation programs. If the strategy has an execution problem, then execution is a strategic issue that strategic thinking has wrongfully ignored.
Moreover, to distinguish design from execution is to exempt top management from its responsibility in this matter. This responsibility is fundamental. To understand why, one must look at the real reason why the transformation strategy is not “executed”.
Conflict of Commitments
If the transformation strategy is not executed it is because it does not resolve the fundamental conflict between the performance of the current organization (today) and the creation of the future organization (tomorrow). Each one, in fact, necessarily succeeds at the expense of the other.
From the top of Olympus, the gods of strategy throw lightning after lightning: “innovate! “, “Transform yourself”, “reach your goals”, but also “be emphatic”, “develop an entrepreneurial spirit”, “Be digital”, “Be a corporate citizen”, … each more ‘strategic’ than the others. On paper, the plan is beautiful: 23 priorities, 4 pillars, one slogan, and forward and onwards!
“Downwards”, the mere mortals, that is to say the managers, are thus crumbling under a growing number of ‘priorities’ all of which are more important than the others. I recently spoke with the head of innovation of a large company who asserted that she had solved the problem of innovation once and for all: She had simply added “Innovation” to the priorities of the managers! Voilà!
Obviously, if there is more than one priority, they are no longer priorities but objectives. A priority is what takes place before anything else; Deciding on a priority also means deciding what we are not going to do. This choice is the very essence of strategy, as noted by researcher Richard Rumelt. According to him, strategy is “the coherent mixture of policy and action designed to solve a fundamental challenge of the organization.” The fundamental challenge must therefore be identified and strategy must be devoted to it. This is far from obvious. This requires a diagnosis and, above all, the choice of the challenge to address among all those facing the organization. This de facto means that other challenges will receive less attention. Strategy is therefore about deciding what is the priority for the company at a given moment.
But unfortunately, top management rarely chooses among these “priorities”. Instead, it stacks them high up. It is unable to understand that these “priorities” not only cannot be attained at the same time, but are often contradictory. Top management is the specialist in paradoxical injunctions.
As top management does not resolve these conflicts between contradictory objectives, it is up to the managers ‘down below’ to do so because they are the last ones standing. Unlike top management, they cannot pass the hot potato on to the lower level…
Let us therefore consider the manager in charge of “executing” the beautiful strategy designed in the upper floors. On the one hand, she has a very clear mandate to transform the organization at her level. For example, making better use of “big data”, working with startups, becoming digital, or deploying its services on mobile devices. But on the other hand, she still has to achieve her performance targets. The deployment of the services on mobile, a complex task if any, will consume a very important part of her time and energy, without tangible result in the short term. This time and energy will no longer be available for her current activity, which will very quickly have an impact on her performance. Hence, there is a conflict of commitment at play: a commitment to transformation, that is, the creation of the organization of “tomorrow”, on the one hand, and commitment to her performance, the performance of the organization “of today”, on the other hand.
How will the manager resolve this conflict? Necessarily to the benefit of today’s organization. Achieving her targets has an immediate and measurable impact. The figure is here, or it is not here, and the end-of-year discussion at the annual performance review rests on it. Falling behind on transformation, on the other hand, has a very vague, and hardly measurable impact. A missed opportunity to improve customer service is difficult to quantify in the short term. In other words, the risk of doing (missing her performance targets) is far greater than the risk of not doing (missing the opportunity of mobile services). In organizations totally hooked to the measurement of visible and quantifiable indicators, and blind to the hidden opportunity costs, the choice is quickly made for a manager who, while supportive of the digital-innovative-entrepreneurial-3.0 transformation, legitimately wishes to protect her career.
Such a choice is all the more evident when the delay in the transformation begins to seriously worry the top management. The results begin to reflect this delay: competitors are advancing faster in new markets; the legacy market is slowing down and becoming less profitable; and accountants on the 31st floor are finding it increasingly difficult to present flattering figures despite their creativity and their new Excel version. The boat takes water from all sides and the top management is therefore led to reinforce its performance requirements to save its skin at the next annual general meeting. This requirement makes the resolution of the conflict even more evident in favor of immediate results, and at the expense of transformation.
To summarize, posing the problem of transformation in terms of execution is to use the wrong model of action within an organization, a model based on a distinction between design and execution, design being the purview of top management, execution being relegated to the managers. On the contrary, it is necessary to pose the problem in terms of the allocation of resources (money, time, managerial attention) and to uncover the inevitable conflicts between today and tomorrow. The more we invest in tomorrow, the more resources we take from today, degrading short-term results; But the more we protect today, the more we compromise tomorrow. It is the way this conflict will be managed which will determine the success of the transformation. There are no good or bad choices, only painful ones, but the absence of choice will mechanically bring the organization back to the protection of today at the expense of tomorrow with catastrophic consequences. The management of these conflicts is the responsibility of the top management. Hence, top management does not have a problem of execution, it has a problem of conflict of commitment which it must assume and resolve.
See Richard Rumelt’s excellent book: Good strategy, bad strategy. On the conflict of commitments, read my article: “Immunity to change: these rational commitments that prevent innovation“.