May 25, 2016

Insights from Robert S Kaplan at the World Business Forum

Robert S Kaplan, Harvard Professor, shares what he’s learned at the World Business Forum.

Robert S Kaplan’s six-stage process for strategy execution

Robert S Kaplan suggests a six-stage process for organisations interested in developing a successful strategy.

The senior fellow at Harvard Business School is best known for co-developing the Time-Driven Activity-Based Costing and Balanced Scorecard with David Norton.

“We need a vision that we can do better and get transformational results but vision by itself is not enough; strategy by itself is not enough. We still need to put strategy into action,” he says.

After examining hundreds of organisations around the world through their applications to the Balanced Scorecard Hall of Fame and speaking at events, he has come up with what he calls “the science of strategy execution”.

The six-stage process was first presented in a 2008 article in the Harvard Business Review called Mastering the Management System.   And they have been expanded in the book, The Execution Premium.

The six steps are:

Stage 1: Develop the Strategy

Before formulating a strategy, managers need to agree on their company’s purpose (mission), its aspiration for future results (vision), and the internal compass that will guide its actions (values). He says that every one of our organisations that developed a good approach to strategy had terrific leadership who challenged the organisation to be much better than it has been.

Stage 2: Translate the strategy into action

The leader identifies the long terms goals for the team and the short-term steps the organisation needs to take to achieve these goals. For example, for Southwest Airlines in the US their thirty-word mission statement was to be the most profitable US-based online by offering the speed of airline travel at the price, frequency and reliability of cars, buses and trains to price sensitive travellers with value and convenient flights. How they executed this was by reducing the time spent on the ground in between flights.

Stage 3: Align the organisation

This stage involves aligning everyone across the organisation – the business units, employees and management with the strategy. By lining the strategy up with the performance management system, companies are better able to line up the personal incentives of employees with the company’s overall strategy.

Stage 4: Plan Operations

The operational plan outlines the actions that will accomplish its strategic objectives. This stage involves setting priorities for process improvement projects, followed by preparing a detailed sales plan, a resource capacity plan, and operating and capital budgets.

Stage 5: Monitor and Learn

As companies implement their strategic and operational plans, they need to hold regular reviews of the key initiatives of their strategy and look at the data to analyse what’s working and what isn’t. For example, measuring the profitability levels of each customer will help determine which are providing the best value.

Stage 6: Test and Adapt the Strategy

Run a strategic risk assessment to update the strategy on a regular basis. Kaplan suggests using gamification to test different scenarios. After all, we live in a volatile changing world and having a flexible strategy will help organisations adapt and thrive.