9. Shape Your Value Chain
No company is an island. Every business relies on other companies in its network to help shepherd its products and services from one end of the value chain to the other. As you raise your game, you will raise the game of other operations you work with, including suppliers, distributors, retailers, brokers, and even regulators.
Since these partners are working with you on execution, they should also be actively involved in your strategy. That means selling your strategy to them, getting them excited about taking the partnership to a whole new level, and backing up your strategic commitment with financing, analytics, and operational prowess. For example, when the Brazilian cosmetics company Natura Cosméticos began sourcing ingredients from Amazon rain forest villages, its procurement staff discovered that the supply would be sustainable only if they built deeper relationships with their suppliers. Beyond paying suppliers, they needed to invest in the suppliers’ communities. The company has held to that commitment even during down periods.
Use leading-edge digital technology to align analytics and processes across your value chain. In the past, companies that linked operations to customer insight in innovative ways did it through vertical integration, by bringing all parts of the operation in-house. For example, Inditex created a robust in-house network that linked its Zara retail stores with its design and production teams. Real-time purchase data allowed designers to find out what was selling — and what wasn’t — more quickly than their competitors could. This approach has helped Zara introduce more items that would sell quickly while keeping costs down. And it has helped Inditex outpace its rivals in both profitability and growth.
At the time Inditex developed its system, vertical integration was a prerequisite for that kind of integration. But now the technology has changed, and in a cloud-based computer environment, you no longer need full vertical integration. You can achieve the same result through integrated business platforms (some managed by third-party logistics companies such as Genpact, and others being developed as joint ventures). By allowing several companies to share real-time data seamlessly, these platforms enable each participating company to set more ambitious strategic goals.
10. Cultivate Collective Mastery
The more bound your company is by internal rules and procedures for making and approving decisions, the slower it becomes. Hence the frustration leaders have with the pace of bureaucracy, in which people can’t make decisions because they don’t know what the strategic priorities are — or even what other stakeholders will think. In a world where disruption has become prevalent, your company can’t afford the time or expense of operating this way.
The alternative is what we call collective mastery. This is a cultural attribute, often found in companies where strategy through execution is prevalent. It is the state you reach when communication is fluid, open, and constant. Your strategists understand what will work or not work because they talk easily with functional specialists. Your functional specialists know not only what they’re supposed to do, but why it matters. Everyone moves quickly and decisively, because they have the ingrained judgment to know who to consult, and when. People trust one another to make decisions on behalf of the whole.
Many of the attributes of Silicon Valley companies owe a great deal to the high level of collective mastery in the area. The culture of these companies encourages risk taking, because it’s expected that people will make mistakes — not as a goal, of course, but in the process of learning. People expect their colleagues to be informal, quick-thinking, and unassuming. They rely on systems and processes only when they add value, and are willing to jettison them at other times. With this type of culture, people can focus on getting results.
Collective mastery builds over time when people have the support and encouragement they need to work easily and readily across organizational boundaries, with a high level of trust and frequent informal contact. Even when they hold different perspectives, they get to the point where they understand one another’s thinking.
To operate this way, you have to be flexible. That doesn’t mean giving up your strategy; you still should pursue only opportunities with which you have the capabilities to win. Indeed, knowing what you do best allows you to be closer to the customers who matter, and to give more autonomy to employees. Because you are less distracted by nonstrategic issues, you have the attention and resources to pursue worthwhile opportunities as soon as they arise. Collective mastery also makes it easier to conduct an experiment: to launch a project and learn from the response without making a huge commitment. This high level of fluidity and flexibility is essential for navigating in a volatile economic landscape.
In the end, the 10 principles of strategy through execution will do more than help you achieve your business goals. They will also help build a new kind of culture, one in which people are aware of where you’re going and how you’re going to get there. The capabilities you build, and the value you provide, are larger than any individual can make them. But by creating the right kind of atmosphere, you make it possible to not just stand in the weeds and look at the stars, but reach a higher level than you may ever have thought you would.
Credit: Strategy& || Strategy Consulting business of PwC