In today’s dynamic business environment, just managing finances is not sufficient.  Leaders must define a solid strategy and then collaborate across their organization to align and execute that strategy.  For most organizations, it’s the execution that falls short. 

Art Kleiner, the Editor-in-Chief of Booz Allen Hamilton’s magazine, Strategy+Business summarized it well in the Fall 2007 issue: “In both the public and private sectors, the ability to put disparate pieces together has been undervalued in the past, but henceforth it will probably be one of the most important skills for executive leaders to have.”

Success in aligning those disparate pieces-both inside and organization and in the broader partner and customer ecosystems-will be most successful when the leaders are equipped with the right tools for the task.  Strategy execution is about crafting the future, not about analyzing past performance or monitoring present operations.  The tools used by most organizations-budgets, historical reporting, data analysis, and operational dashboards-each fall short of providing the capabilities needed by leaders striving to apply the state-of-the-art strategic management practices.

Managing Strategy is Different from Managing Operations

Michael Porter, Harvard’s highly-respected strategy guru, notes: “Operational effectiveness and strategy are both essential for superior performance. but they work in very different ways.”   Dr. Robert Kaplan and David Norton, co-creators of the Balanced Scorecard methodology, start their fifth book, The Execution Premium, with the pronouncement: “Managing strategy differs from managing operations.” (pg.1)  Because of these differences, it should not be a surprise then that the optimal performance tools for operations management are different than those ideally-suited for strategic management.

Operational performance management is generally characterized by monitoring key metrics, detecting exceptions and analyzing data to gain insights for improvement.  The common metaphor of a “dashboard” is well-suited to operational management.  A dashboard in a vehicle tells you things like how fast you are going, how much fuel you have in the tank, engine temperature, and the speed at which your engine is running.  Operational management systems are often tied into large quantities of data generated by the operations of the organization.  Tools to easily query and analyze this data can enable leaders to better understand the past, but relying on operational analysis and monitoring as the only lens for viewing performance is like trying to drive while looking only through a rear-view mirror.

In contrast, strategic management puts the emphasis on making choices about the future and aligning changes to achieve the desired objectives.  To continue the automotive analogy, strategic management tools are like a GPS navigational system and the steering wheel.  You enter your desired destination into the navigation system, and it helps map out the journey to get you there.  The steering wheel then allows the driver (the executive) to implement the strategy by guiding the direction of the vehicle (or organization) to follow the strategy.  If the organization accidentally “takes a wrong turn,” the system enables the driver to quickly adjust and bring the vehicle back on course.
 
The most established and recognized framework for strategy execution and alignment is found in the 15 years of work by Harvard profession Robert Kaplan and David Norton.  Their series of books, starting with The Balanced Scorecard, and then The Strategy Focused Organization, Strategy Maps, Alignment, and the latest, The Execution Premium, defines a robust framework that has stood the test of time.  

The questions at the heart of strategic management are usually not calculated from historical data, nor are they answered by real-time operational monitoring.  Instead, they focus on the future, asking “Where are we going?” and “What changes will we need to make to get there?”  The major challenge in strategic management is not data integration and presentation, but the alignment of people, decisions, innovations and process improvements that allow obstacles to be overcome and dependencies to be addressed so that the organization can transition smoothly from its current state to the desired state.  C. K. Prahalad and MS Krishnan in their recent book, The New Age of Innovation, remark that in this dynamic environment, “foresight, not hindsight, is of value.” (p. 84)   The foresight of an individual is valuable.  But, even more valuable is the collective foresight can emerge when an eclectic mix of people understand and refine a roadmap for the future.

The capabilities needed to support strategic management are not primarily technical.  Instead, they are softer skills and processes for engaging employees at all levels to collaborate, identify obstacles and opportunities, and collectively map out the myriad of changes that will result in achieving the desired outcomes.  A leader’s ability to orchestrate these changes will become a critical factor in the long-term success of the organization.  Art Kleiner, the Editor-in-Chief of Booz Allen Hamilton’s magazine, Strategy+Business summarized it well in the Fall 2007 issue: “In both the public and private sectors, the ability to put disparate pieces together has been undervalued in the past, but henceforth it will probably be one of the most important skills for executive leaders to have.”  The role of technology should be to support that process and provide an efficient way to share and refine the information. 

In this blog, I will be sharing (and inviting other veteran BSC experts to also share) on ideas, concepts, and tools for strategic performance management.  Through our content, readers will learn how to avoid the pitfalls that often lead to frustration rather than benefits when attempting to deploy a strategic performance management system.