Data on Strategic Change
The “Successful Strategy Execution” article was derived from years of research (into what the authors and their colleagues call the “organizational DNA” project) on the experience of implementing strategy. Previously, most good strategists had data about markets, costs, and competitors, and heaven knows most managers collect and monitor operating data. But the Neilson-Martin-Powers data is unique: Using an online survey that culled both observations and conclusions from managers, they could track what went wrong, and what went right, between strategic intent and the realities of performance.
This had been a mystery. In many companies, an approach that might be called “faith-based strategy” has often been adopted by default. The leadership team announces a new corporate direction. They fund it. They change the company’s org chart structure. They realign incentives. And then, “a miracle occurs” — or, more likely, it doesn’t. The Neilson-Martin-Powers research empirically supports what many have long suspected: that a strategy cannot succeed with only conventional measures supporting the necessary changes.
The gathering of this data began in 2002, with a question: How does a company design its organization to generate results and successfully adapt when circumstances change? Neilson and his coauthors articulated four “building blocks” that mattered most in the execution of any kind of strategy: decision rights, information flow (including metrics), motivators, and of course the “lines and boxes” structure of an organization chart.
Curious about how different people in different types of companies applied these four aspects of organizational design, they set up an online public survey through which people could create a profile of their own companies. The link went viral. Within 14 months they had gathered 45,000 profiles — 15,000 from their own clients, and 30,000 from people who visited their website. By the time the HBR article was published, 125,000 people had filled out this profile; respondents represented more than 1,000 companies, government agencies, and not-for-profits in more than 50 countries.
Here’s what the data showed, when combined with in-depth studies of 31 client companies: Decision rights and information flows had twice as much impact on the success of a strategy as did changes in structure or motivators. Not only that: Executives introducing strategic change should address the questions of decision rights and information flow first. Once a company makes the structural change and fills the boxes of the org chart with names, the opportunity to make changes in the more critical areas vanishes. Any plans to “get to that later” evaporate. Says Gary Neilson, “We have not seen any exceptions to this pattern in our client work.”
Connecting Intent with Capability
In real life, executives all too often reach first to moving the lines and boxes on their organization charts — perhaps because this instrument of change is readiest to hand. Given a chance to reflect, however, they show a more sophisticated understanding of what really works. Thus, the article includes preliminary results from an online diagnostic simulation, in which visitors can preview some potential approaches to implementing strategy and gauge their impact on performance.
In this simulation, users choose among 28 possible actions they can take to change a company’s direction. The one they pick most often — “Clarifying and Streamlining Decision Making” — is indeed one of the best ways to ensure successful strategy execution.
As someone who helped bring this article to life, I find it gratifying indeed to celebrate its selection as a strategic “must-read.” In itself, “The Secrets of Successful Strategy Execution” reveals the leverage points — information flows and clear decision rights — that enable a company to put a new strategy into practice with confidence. But the greatest contribution of this body of work (and others like it) is perhaps yet to come, as a platform for future insights into the optimal relationship between strategy and execution, particularly in high-performance companies.