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The Execution Premium: Linking Strategy to Operations for Competitive Advantage
In a world of stiffening competition, business strategy is more crucial than ever. Yet most organizations struggle in this area--not with formulating strategy but with executing it, or putting their strategy into action. Owing to execution failures, companies realize just a fraction of the financial performance promised in their strategic plans.
It doesn't have to be that way, maintain Robert Kaplan and David Norton in The Execution Premium. Building on their breakthrough works on strategy-focused organizations, the authors describe a multistage system that enables you to gain measurable benefits from your carefully formulated business strategy. This book shows you how to:
Develop an effective strategy--with tools such as SWOT analysis, vision formulation, and strategic change agendas
Plan execution of the strategy--through portfolios of strategic initiatives linked to strategy maps and Balanced Scorecards
Put your strategy into action--by integrating operational tools such as process dashboards, rolling forecasts, and activity-based costing
Test and update your strategy--using carefully designed management meetings to review operational and strategic data
Drawing on extensive research and detailed case studies from a broad array of industries, The Execution Premium presents a systematic and proven framework for achieving the financial results promised by your strategy.
It doesn't have to be that way, maintain Robert Kaplan and David Norton in The Execution Premium. Building on their breakthrough works on strategy-focused organizations, the authors describe a multistage system that enables you to gain measurable benefits from your carefully formulated business strategy. This book shows you how to:
Develop an effective strategy--with tools such as SWOT analysis, vision formulation, and strategic change agendas
Plan execution of the strategy--through portfolios of strategic initiatives linked to strategy maps and Balanced Scorecards
Put your strategy into action--by integrating operational tools such as process dashboards, rolling forecasts, and activity-based costing
Test and update your strategy--using carefully designed management meetings to review operational and strategic data
Drawing on extensive research and detailed case studies from a broad array of industries, The Execution Premium presents a systematic and proven framework for achieving the financial results promised by your strategy.
431 pages, Kindle Edition
First published January 1, 2008
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July 30, 2015
With ''The Execution Premium'', Kaplan and Norton wrap up their 5 book series on the measurement and management of strategy. Most of the groundbreaking new concepts and ideas, most notably the Balanced Scorecard and Strategy Maps, have been presented in the previous 4 books. Also, several of the cases described in ''The Execution Premium'' I had already seen in the 2 books I had already read in this series (''The Balanced Scorecard'' and ''Strategy Maps'').
Nevertheless,''The Execution Premium'' is more than just a summary of Kaplan and Norton's previous books. It places their previous ideas in a broader contexts and shows how a strategy's development and planning can be better linked to its execution.
In order to guarantee that a strategy gets executed well, Kaplan and Norton propose a 6 step process to link strategy with execution:
1. DEVELOP THE STRATEGY
The purpose of the first stage is to formulate a strategy. In order to do so, Kaplan and Norton recommend first defining de Mission, Values and Vision of the company, to make explicit the purpose of the company, its internal compass that guides its actions, and its aspirations for the future.
Then, a strategic analysis should be done to determine the key issues the strategy is facing. Standard tools such as the PESTEL framework (for analysing the external environment: Political, Economic, Social, Technological, Environmental and Legal issues affecting the company) and the SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) can be helpful when doing this strategic analysis.
2. PLAN THE STRATEGY
Once the strategy is formulated, it should be made clear how it is described and how its progress is going to be measured. Here come into play Kaplan and Norton's signature contributions, Strategy Maps and the Balanced Scorecard.
The Strategy Map allows you to express the strategy via objectives in 4 perspectives: Financial, Customer, Internal Business Processes and Learning and Growth. The objectives in these 4 perspectives should be linked via cause-and-effect relationships that reflect a value creation process: We will enable our people (Learning and Growth) to deliver the strategic processes (Internal Business Processes) that provide a satisfying customer experience (Customer) that meet our shareholders and stakeholders expectations (Financial).
The Balanced Scorecard, with indicators (which Kaplan and Norton call measures) and targets (a.k.a goals), allows you to measure and check if the objectives in the Strategy Map are being achieved.
In this stage, Kaplan and Norton put more emphasis on the Strategic Themes they tentatively introduced in one of their previous books, ''Strategy Maps''.
They introduce the Strategic Initiative Portfolio for determining the specific action plan of initiatives and budgets that is to bring about the desired improvements of the indicators of the Balanced Scorecard.
Also, they argue that in order to make sure that the strategic initiatives receive adequate funding, a dedicated line item, called STRATEX (Strategic Expenditures) should be included in the budget.
3. ALIGN THE ORGANIZATION
After the creation of the Strategy Map and Balanced Scorecard, the various levels of the organization should be aligned to the strategy: Business units, support units, and employees.
In the first book of the series, ''The Balanced Scorecard'', it was noted that the Balanced Scorecard is most useful for the Business Unit, and less so for the Corporate Entity. Now they seem to have somewhat reversed this opinion, and argue that a Corporate Balanced Scorecard can be cascaded down to the business and support units. The main purpose of this is to enhance the benefits a diversified company may reap from synergies.
As for support unit alignments, Kaplan and Norton recommend the standard Service Level Agreements (SLA).
In order to align employees, 3 steps must be taken:
- Communicate the strategy to employees.
- Link employee performance review to the objectives of the strategy.
- Provide training and competency development to employees so that they can implement the strategy.
4. PLAN OPERATIONS
In this stage, it should be determined which processes should be improved, and how the strategy can be linked to the operating plans and budgets.
I liked the case of the Low Cost Airline (pages 160 to 164), where the strategy map objective of ''fast ground turnaround'' is decomposed in 3 parallel processes (1. Plane unloading, cleaning and reboarding, 2. Luggage unloading and reloading 3. Ground maintenance and refueling), which in turn each are divided in subprocesses. This case clearly shows how strategic objectives can be traced to day-to-day processes.
As for linking the strategy to operating plans: Kaplan and Norton are persuaded by the ''Beyond Budgeting'' movement and propose to replace the traditional budget by a combination of 4 management control processes: Rolling Financial Forecasts, The Balanced Scorecard, Controlling Fixed Costs and Investment Management.
For the controlling of fixed costs, and for the automatic generation of budgets once sales targets have been established, they propose Time Driven Activity Based Costing. I appreciated the description of TDABC in the appendix to chapter 7:
A. For each function, determine the cost per hour
B. and the time per activity.
C. Then determine the amount of activities per product (or service).
D. Combining B and C gives you the time per product for each function
E. Combining A and D gives you the cost per product for each function.
F. Include E in the P&L statement.
5. MONITOR AND LEARN
In this stage, separate meetings for operational and strategy review meetings should be organized. Kaplan and Norton's main concern is that strategy review meetings often have to take a backseat because operational review meetings take up so much time that they don't leave time for reviewing the strategy. To overcome this, time management and meeting scheduling is essential. In general, meetings should be facts-based, short, oriented at learning and resulting in actions.
6. TEST AND ADAPT
Whereas the operational and strategy review meetings check if day-to-day operations and the strategy are executed well, a separate kind of meeting should be held to check if the strategy itself is still valid. External circumstances, from new technologies and new competitors to new regulations and economic conditions may make it necessary to adapt or even completely change the strategy. At least once a year a company should make sure if it is still working with the appropriate strategy. If not, than the cycle starts again at 1.
In order to monitor and manage this 6 step management system for linking strategy to operations, Kaplan and Norton propose the Office of Strategy Management. The OSM can especially add value by making sure all cross-departmental and cross-business unit initiatives get executed properly.
''The Execution Premium'' is perhaps not Kaplan and Norton's most innovative book. Most of the concepts and several cases have appeared in their previous books. Even so, it is a worthwhile read, which allows their previous ideas to be seen in a wider context.
Nevertheless,''The Execution Premium'' is more than just a summary of Kaplan and Norton's previous books. It places their previous ideas in a broader contexts and shows how a strategy's development and planning can be better linked to its execution.
In order to guarantee that a strategy gets executed well, Kaplan and Norton propose a 6 step process to link strategy with execution:
1. DEVELOP THE STRATEGY
The purpose of the first stage is to formulate a strategy. In order to do so, Kaplan and Norton recommend first defining de Mission, Values and Vision of the company, to make explicit the purpose of the company, its internal compass that guides its actions, and its aspirations for the future.
Then, a strategic analysis should be done to determine the key issues the strategy is facing. Standard tools such as the PESTEL framework (for analysing the external environment: Political, Economic, Social, Technological, Environmental and Legal issues affecting the company) and the SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) can be helpful when doing this strategic analysis.
2. PLAN THE STRATEGY
Once the strategy is formulated, it should be made clear how it is described and how its progress is going to be measured. Here come into play Kaplan and Norton's signature contributions, Strategy Maps and the Balanced Scorecard.
The Strategy Map allows you to express the strategy via objectives in 4 perspectives: Financial, Customer, Internal Business Processes and Learning and Growth. The objectives in these 4 perspectives should be linked via cause-and-effect relationships that reflect a value creation process: We will enable our people (Learning and Growth) to deliver the strategic processes (Internal Business Processes) that provide a satisfying customer experience (Customer) that meet our shareholders and stakeholders expectations (Financial).
The Balanced Scorecard, with indicators (which Kaplan and Norton call measures) and targets (a.k.a goals), allows you to measure and check if the objectives in the Strategy Map are being achieved.
In this stage, Kaplan and Norton put more emphasis on the Strategic Themes they tentatively introduced in one of their previous books, ''Strategy Maps''.
They introduce the Strategic Initiative Portfolio for determining the specific action plan of initiatives and budgets that is to bring about the desired improvements of the indicators of the Balanced Scorecard.
Also, they argue that in order to make sure that the strategic initiatives receive adequate funding, a dedicated line item, called STRATEX (Strategic Expenditures) should be included in the budget.
3. ALIGN THE ORGANIZATION
After the creation of the Strategy Map and Balanced Scorecard, the various levels of the organization should be aligned to the strategy: Business units, support units, and employees.
In the first book of the series, ''The Balanced Scorecard'', it was noted that the Balanced Scorecard is most useful for the Business Unit, and less so for the Corporate Entity. Now they seem to have somewhat reversed this opinion, and argue that a Corporate Balanced Scorecard can be cascaded down to the business and support units. The main purpose of this is to enhance the benefits a diversified company may reap from synergies.
As for support unit alignments, Kaplan and Norton recommend the standard Service Level Agreements (SLA).
In order to align employees, 3 steps must be taken:
- Communicate the strategy to employees.
- Link employee performance review to the objectives of the strategy.
- Provide training and competency development to employees so that they can implement the strategy.
4. PLAN OPERATIONS
In this stage, it should be determined which processes should be improved, and how the strategy can be linked to the operating plans and budgets.
I liked the case of the Low Cost Airline (pages 160 to 164), where the strategy map objective of ''fast ground turnaround'' is decomposed in 3 parallel processes (1. Plane unloading, cleaning and reboarding, 2. Luggage unloading and reloading 3. Ground maintenance and refueling), which in turn each are divided in subprocesses. This case clearly shows how strategic objectives can be traced to day-to-day processes.
As for linking the strategy to operating plans: Kaplan and Norton are persuaded by the ''Beyond Budgeting'' movement and propose to replace the traditional budget by a combination of 4 management control processes: Rolling Financial Forecasts, The Balanced Scorecard, Controlling Fixed Costs and Investment Management.
For the controlling of fixed costs, and for the automatic generation of budgets once sales targets have been established, they propose Time Driven Activity Based Costing. I appreciated the description of TDABC in the appendix to chapter 7:
A. For each function, determine the cost per hour
B. and the time per activity.
C. Then determine the amount of activities per product (or service).
D. Combining B and C gives you the time per product for each function
E. Combining A and D gives you the cost per product for each function.
F. Include E in the P&L statement.
5. MONITOR AND LEARN
In this stage, separate meetings for operational and strategy review meetings should be organized. Kaplan and Norton's main concern is that strategy review meetings often have to take a backseat because operational review meetings take up so much time that they don't leave time for reviewing the strategy. To overcome this, time management and meeting scheduling is essential. In general, meetings should be facts-based, short, oriented at learning and resulting in actions.
6. TEST AND ADAPT
Whereas the operational and strategy review meetings check if day-to-day operations and the strategy are executed well, a separate kind of meeting should be held to check if the strategy itself is still valid. External circumstances, from new technologies and new competitors to new regulations and economic conditions may make it necessary to adapt or even completely change the strategy. At least once a year a company should make sure if it is still working with the appropriate strategy. If not, than the cycle starts again at 1.
In order to monitor and manage this 6 step management system for linking strategy to operations, Kaplan and Norton propose the Office of Strategy Management. The OSM can especially add value by making sure all cross-departmental and cross-business unit initiatives get executed properly.
''The Execution Premium'' is perhaps not Kaplan and Norton's most innovative book. Most of the concepts and several cases have appeared in their previous books. Even so, it is a worthwhile read, which allows their previous ideas to be seen in a wider context.
January 16, 2012
I very much enjoyed the comprehensiveness of this book on strategy management, end-to-end. It gives a great overview of the full cycle and, in my opinion, the book is a great first read although it came the last of a series of five books on the subject.
I have written a detailed review in my blog, if you're interested:
http://learningpassionate.net/2012/02...
I have written a detailed review in my blog, if you're interested:
http://learningpassionate.net/2012/02...
May 19, 2013
While it is exactly as dry as you expect most graduate level business reading to be, the concepts and information are invaluable. The authors propose some profound ideas and back it with some great detail, research, and process planning for your future needs. A tiring, but worthwhile read.
September 12, 2011
Pretty good book considering the business-schooly, super serious title. Have an org that doesn't seem to know what it's doing and why? Read this book.
June 25, 2017
Very useful
Practical guide to actually putting the theory to practice. Case studies are good. Quite liked the idea of Office of Strategy Management.
Practical guide to actually putting the theory to practice. Case studies are good. Quite liked the idea of Office of Strategy Management.
June 1, 2021
I think there's a lot of great stuff in The Execution Premium in terms oif concepts and case studies. However I found it quite repetitive (and like wading through treacle) and this made it difficult to stay engaged. All that being said, I have flagged a lot of case study snippets to revisit and The Execution Premium will go back on my bookshelf as a reference resource. Reduced to 3-stars for repetitiveness!
February 23, 2018
En definitiva la creación, elaboración y seguimiento de la Estrategia es un arte en donde es necesario focalizar esfuerzos y responsabilidades claras en cada una de las areas de negocio.!!
Excelente Libro, muy buenos conocimientos.
Excelente Libro, muy buenos conocimientos.
October 10, 2020
Very practical book on how to execute the implementation of the BSC in your organization.
April 28, 2023
This is definitely a book that should be reread as a tangible book. Numerous connections to Execution and 4DX. Need to insure that I find and read Strat Maps and BSC.
This entire review has been hidden because of spoilers.
June 29, 2023
đọc sặc gạch lấy ý tưởng để rồi chợt nhận ra phải quay lại đọc BSC và bản đồ chiến lược đã huhu
August 8, 2023
A must have book for any person involved in or wants to get involved in strategic management. This is a handbook that needs to be revisited and applied practically. Great read.
August 19, 2013
In their previous books, Professors Kaplan and Norton developped the theme of implementating the strategy, with the concepts of Balanced Scorecard and Strategy Maps. Now, with The Execution Premium, they get a broader perspective from the conception of strategy to the operational day to day. Great book.
March 15, 2009
Takes a lot of the tools Kaplan has been writing about for years (balanced scorecard, strategy maps ...) and strings them into a coherent framework. Well thought out, but probably twice as long as it needed to be (but isn't that true for all business books).
May 17, 2020
I enjoy Dr Kaplan's books and found this book a great guide. In Operations, it is strategic to combine strategy with operational outputs, however obvious not always done. Dr Kaplan's book is insightful and informative. All business people need a copy on their shelves.
May 5, 2015
Incredible, insightful, super-useful book (if you work at or with large corporations).
Read
May 29, 2015Location: PTI IRC
Accession No: DL027169
Accession No: DL027169
Want to Read
March 28, 2016Execution Premium by Robert S.Kaplan
Read
February 4, 2017good
November 17, 2020
Great compliment and further enhancement to "The Balanced Scorecard". It's a must for anybody in managing a business, regardless if one is employed by a company, owner of it or an entrepreneur.
July 17, 2014
Strategy map book
Displaying 1 - 20 of 20 reviews