They Draft Plans for Bridges, Don't They?
By Bernard Gagnon and Pierre Hadaya
Despite all that has been learned since strategy was introduced to the corporate world in the 1950s, most organizations still struggle to formulate and implement their own strategy (see sidebar). An extensive literature review and our experience working with organizations and executives in a number of industries have allowed us to identify the key issues organizations face when trying to formulate and implement a strategy. These include selecting a strategy that the organization does not have the means to implement; forgoing transformations that are essential to the execution of the strategy; succumbing to the temptation of executing transformations that are financially advantageous in the short term but have little to do with really implementing the strategy; performing transformations that do not fit correctly together and thus cannot generate their full benefits; executing transformations in the wrong order; incurring the costs and delays of reworking transformations that were improperly executed; and not adequately adapting the strategy and its implementation to account for the internal and external events (e.g., transformation project delays, competitor moves and the advent of disruptive technologies) that occur over the lifetime of a strategy.
Sidebar: Most organizations still face key issues in their strategic endeavors
- Between 50% and 90% of strategic initiatives fail (Cândido and Santos, 2015)
- Only 45% of organizations are satisfied with their strategy formulation process (McKinsey & Company, 2007)
- 61% of organizations have major difficulties implementing their strategy (Economist Intelligence Unit, 2013)
Organizations have adopted a number of best practices to alleviate these key issues (e.g., creation of the chief strategy officer role, elaboration of a strategic plan, change management, continuous adaptation of the strategy and its implementation, and use of a balanced scorecard) (Kaplan and Norton, 2008; Kotter, 1996, 2002; Zagotta and Robinson, 2002). However, as the statistics in the sidebar show, despite their importance, these best practices do not suffice to resolve the issues entirely. There is still a missing link.
The metaphor of the construction of a bridge makes it possible to clearly identify the nature of this missing link. Indeed, formulating and implementing a strategy is similar to building a bridge because it is a major project that aims to “reconstruct,” or transform, the organization to give it a competitive edge. Depending on the size of the organization and the number and extent of the transformations required, this may cost tens, hundreds or even thousands of millions of dollars and take anywhere from a few years to more than a decade.
The first thing needed when building a bridge is an overall plan that describes what kind of bridge must be built to meet the requirements set for it. This plan is a high-level description, not a detailed one, of the bridge to be built. It is very useful in identifying the different components of the bridge (e.g., pillars, deck, cables) together with their key attributes (e.g., position, size, strength, constituent materials) and the relationships that these components will have with one another (e.g., deck segment X is fastened to pillar Y). The second thing needed in constructing a bridge is a master schedule that subdivides the construction of the bridge into a number of sub-projects and schedules their execution in a efficient manner.
The overall plan and master schedule determine what needs to be done and when. In addition, these two plans make it possible to estimate the overall cost of building the bridge and how long it will take. They also make it possible for the different sub-project teams to design the components of the bridge in detail and build them in such a way that they meet the requirements and can be assembled into a sturdy bridge with minimum effort and no wasted time.
Finally, the overall plan and the master schedule make it possible to quickly assess the impacts of the unforeseen events that will inevitably occur during the construction of the bridge and to make the best possible decisions to resolve the issues they raise. ASATE Group is based in the Montreal area, where a new three-kilometer bridge is under construction over the St. Lawrence River. The “New Champlain” bridge is expected to cost over a billion dollars and will replace the old Champlain bridge, which has arrived at the end of its useful life. A few months ago, the newspapers announced that unforeseen events had forced the engineers to modify their plans somewhat. Because they had an overall plan and master schedule, the lead engineers were able to rapidly identify what needed to be changed and what the additional costs and delays generated by these changes would be.
In the particular context of the formulation and implementation of a strategy, the equivalent of the overall plan and master schedule are the target business architecture and the transformation plan, respectively. These plans must be aligned to the strategy, which is the equivalent of the requirements for a bridge. As mentioned above, formulating and implementing a strategy can be as daunting for an organization as a major construction project such as building the New Champlain bridge. Yet the vast majority of organizations attempt to do it without having a target business architecture and a transformation plan.
The target business architecture describes, at a high level, how the organization must function to be able to execute its strategy in full. To do this, the target business architecture first identifies and defines the desired key features of the following building blocks [1] that will be needed: business capabilities, business functions, business processes, organizational units, know-how assets, information assets and brands. Second, the target business architecture identifies the most important technology assets, and when applicable, the natural resource deposits that will be needed. However, the target business architecture does not define the key features of these additional building blocks nor the functioning of the technology assets. That is the role of other more detailed plans. Third, the target business architecture identifies how all these building blocks must work together.
The transformation plan, in turn, identifies and sequences the transformation projects that must be executed during the next three to five years in order to make the organization comply, in whole or in part, with its target business architecture [2]. The elaboration of the transformation plan should account for the need to continuously improve the organization’s financial performance; the extended organization’s capacity and readiness to transform itself; the need to build and maintain momentum throughout the implementation of the strategy; and the strategic importance, dependencies, benefits, costs, elapsed time to completion, assumptions and risks associated with each transformation.
Some people claim that it is useless to draft a target business architecture and a transformation plan. The two most important reasons raised are the following. First, things change quickly in the business world and, as a result, these plans would have to be reworked too often. Second, drafting these plans takes a long time and would therefore slow down the transformation of the organization. Our experience tells us that the opposite is true. When things are done properly, these plans give the organization agility while allowing it to implement its strategy more effectively and efficiently. The reasons for this are threefold.
First, organizations that do take the time to create these two plans and involve the right stakeholders in the process are more likely to discover potential issues and find the right solutions for them well in advance, and thus have far fewer surprises during the implementation of their strategy.
Second, organizations that create and maintain these two plans are more likely to execute the right transformations and execute them correctly and in the right order. As a result, they transform themselves faster, get greater benefits from their transformations, reduce transformation risks, and avoid the costs and delays of reworking transformations they previously got wrong.
Third, as mentioned previously, organizations that have these two plans can more quickly assess the impacts of the inevitable unforeseen events that will arise during the implementation of the strategy and make better and faster decisions to resolve the issues related to these events.
To make the organization more agile while allowing it to implement its strategy more effectively and efficiently, the target business architecture and the transformation plan must start to be created while the strategy is being formulated. In addition, these two plans must be designed in increments, each of which focuses on one or a few slices of the organization at a time (e.g., a process or an organizational unit). The order in which the slices are designed must be based on their importance to the implementation of the strategy. This enables the organization to launch important transformation projects as soon as the strategy is formulated without having to wait for the target business architecture and transformation plan to be 100% complete.
In essence, creating and maintaining a target business architecture and a transformation plan means embracing the age-old adage Festina lente (“make haste slowly”). Indeed, these two plans enable organizations to strike the balance between urgency and diligence that is essential to the successful formulation, implementation and execution of a winning strategy.
For more information on the importance of the target business architecture and the transformation plan and how they can be created, see our book Business Architecture – The Missing Link in Strategy Formulation, Implementation and Execution.
Notes
1: A building block is any resource of which an organization is made up and which can be transformed (e.g., business process, organizational unit, IT system, production facility).
2: We say “in part” because it may take more than 3 to 5 years to make the organization fully compliant.
References
Cândido, C.J., and Santos, S.P. (2015) Strategy Implementation: What Is the Failure Rate? Journal of Management & Organization, 21(2), 237-262.
Economist Intelligence Unit Limited (2013) Why Good Strategies Fail: Lessons for the C-Suite.
Kaplan, R.S., and Norton, D.P. (2008) The Execution Premium: Linking Strategy to Operations for Competitive Advantage. Harvard Business Publishing, Boston.
Kotter, J.P. (1996) Leading Change. Harvard Business Publishing, Boston.
Kotter, J.P. (2002) The Heart of Change: Real-Life Stories of How People Change Their Organizations. Harvard Business Publishing, Boston.
McKinsey & Company (2007) How to Improve Strategic Planning. McKinsey Quarterly, August.
Zagotta, R., and Robinson, D. (2002) Keys to Successful Strategy Execution. Journal of Business Strategy, 23(1), 30-34.
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