When it comes to executing
strategy, it is important to understand the difference between executing a
strategy and achieving operating objectives. Too often these two are thought of as one and the same, and
they are not.
The best way to understand
the difference is to think of your organization as a simple manufacturing
production line. A production line
is set up to produce a certain product and is optimized to produce that product
in the most efficient way possible.
When it is time to produce a different product, the production line is
stopped and retooled for the new product.
Your company, like a
production line, has been fine tuned to produce the goods and services for the
customers you serve. Every aspect
of your company from engineering to finance, from operations to sales has
evolved over time to make the production of the goods and services you produce
as optimal as possible. You have
developed certain norms, rules, metrics and even a culture that has created
your success. Achieving your
operating objectives is akin to meeting production goals in the “production
If your plans call for
little or no change to the basic way you are operating, then your existing
“production line” may be incrementally improved. You may add a new tool such as implementing an ERP system,
or improve the training of the people in various departments, but your basic production
line, the fundamental way you operate, is not going to change. Strategy planning in this scenario is
an incremental strategy, strategies to improve on the existing way we do
But lets now look at a
different type of strategy, an innovation strategy. Examples of an innovation strategic direction would be
moving up the value chain, offering a higher value-added set of products and
services, or moving from a product-oriented business to a service-dominated
business (or vice versa).
These changes in strategic
direction require a shift in how you will do business in the future. You will, for example be moving from
selling a technical product to engineers, to selling a solution to corporate
executives. You will likely be
dealing with longer sales cycles, different approaches to determining the
product roadmap and different methods for reaching the market. You might even be facing a different
revenue model. In essence the
norms, rules, structures and business models that you have used to create
success will all likely have to change.
In terms of our metaphor
you will be fundamentally retooling the organizational “production line”. But unlike a manufacturing
operation you cannot shut down the existing production line to retool it. Executing an innovation strategy
requires retooling the organization production line while the existing
production line is still operating. In my next blog, I will offer “hidden
forces” that you need to consider in either.
Does your company strategy
fall into the innovative or incremental category? What are your experiences
with an innovative strategy?
Quantum Leaders, Inc.