I was talking to the three senior executives of a fairly large business. They were very happy with the business situation. Their business was operating in a comfortable oligopoly, with comfortable competitive pressures. The business strategy was noted to be very sound.
But, they lamented, that the comfortable position never translated into equivalent profits. Every year, for the past 3-4 years, the year-end profits would fall just a bit short of the budget. It was not as if the budget was too ‘stretchy’ either.
Bad Execution Kills Many Good Strategies
These gentlemen were very disappointed in their own ‘execution team’ – somehow they always seemed to lose the plot in the last quarter.
Almost everyone who was not among the three top people of the company were counted as the ‘execution team’.
I agreed with them that execution was the key to the results. I also questioned the artificial divide between ‘strategy’ and ‘execution’ because to me thinking and action are really two sides of the same coin called life.
I have noted elsewhere that thinking people sometimes have a low regard for working people, and vice versa. In a ship a captain can plan a voyage in a few hours – that will take his navigators weeks to execute.
A good captain has been a good navigator in an earlier life. Being dismissive towards the day-to-day execution concerns will never get you to the destination.
Execution Is Hard
Even when the strategies are sound, the difficulty in execution is grossly underestimated. This is particularly true if the strategists are not invovled in execution of thier own strategies.
Over the past 25 years I must have seen dozens of project reports from highly branded strategy firms, costing hundreds of thousands of dollars each, which had fundamental execution related errors. I have written many times about this phenomenon.
Because Strategy Consultants Do Not Have To Execute, They Can Pass Off Anything That Sounds Good As A Sound Strategy
From the lofty heights of board rooms the waves on the surface of the sea look far more calm and easy to navigate, than they actually are. It is also quite easy to miss hidden dangers and path markers from the distance.
People who lack visceral experience in day-to-day execution can trivialize the struggle, the complexity and the trade-offs involved.
Does that mean that it is impossible to get past the struggle, complexity and trade-offs?
Quite the contrary!
Every ship does manage to arrive at its destination. The ships where the route planners work with the route trudgers as a single team are the happiest and most efficient.
Good Planning Is The Key To Good Execution
In my experience, execution shortfall results from either, or both of, two reasons:
- bad strategy
- bad planning of execution
Sometimes the strategy itself is unsound. You just did not know that at the time strategy was formulated. It is best to acknowledge when this is the case and move on. Why waste good money after bad?
At other times, strategy was sound, but the planning of execution was inadequate. Dismissive attitude towards execution might have been a problem. Saying that they will figure it out as they along is not enough.
Or, as in the case at the start of this article, over the years the business itself had gradually become much more complex than at the beginning. As a result, to cope with the complexity, the additional fulfilement costs had increased exponentially.
Most Strategists Do Not Understand Complexity For A Curious Reason
Streategists build a simplified models of the world in order to understand how the relationships work in real life. Simplified models of causes and effects help them understand the key drivers of an event, and their impact.
By necessity, these models are based on reduced complexity. As a result, one driver that the strategists least understand is complexity.
In fact, it will be fair to say that the true impact of complexity on cost can be modeled only with a great deal of difficulty, and only be an extremely experienced practitioner who also has a good handle on all other drivers of costs.
Do NOT Underestimate Cost Of Complexity
Just because the effects of complexity are difficult to model, does not mean that they are trivial.
That is the reason why complexity and its impact on costs of a business are least understood subject. That is why most CEOs and their teams struggle to understand the need for supply chain software, and SaaS companies struggle to sell their value proposition to senior management.
Senior executives are reluctant to buy services that will just make the life of their staff a little bit easier. They do not understand the full financial impact of complexity till someone shows it to them after modeling it.
A Simple Solution
This business, like many others, just needed a much better supply chain planning and scheduling system than they used in the past when the business was a relatively simpler affair.
Senior executives never realised this difficult truth until they were shown the cause and effect in a step by step demonstration.
A small investment in a systematic approach to fulfilment paid off handsomely within months of investment.