7.3 Executing growth strategies Copy
The three Customer-Focused Growth Strategies described above require a supporting infrastructure to increase the chances of successful implementation. Lack of an adequate infrastructure is the second reason cited for not achieving growth objectives.
A supportive infrastructure includes:
(a) organization capabilities that are valued by customers,
(b) a management-performance system and scorecard which focuses on leading indicators and the drivers of growth and
(c) strong leadership practices at every level of the organization.
1. Organization capabilities are processes that are strategic and deliver a high level of value to customers. For example, a firm may have the capability to:
- Successfully entering new markets,
- Create excellent new products or services which appeal to customers, or
- Provide an outstanding level of customer service.
Note that the three organization capabilities selected are vital to the success of specific Customer-Focused Growth Strategies.
Each of these capabilities is rooted in processes that move across the organization and require the expertise and commitment of various individuals and departments.
It’s widely accepted that an organization’s success is rooted in its competitive-edge, organizational capabilities. Therefore, a major challenge that senior managers face is to clarify, assess and continually strengthen their organization’s strategic capabilities.
An important aspect of the clarifying and assessing process requires that senior managers step outside their organization and evaluate both their firm and their competitors’ through the eyes, mind and heart of the customer. The following guidelines will help with such an assessment. The capability should be:
- Highly visible to key individuals within the customer organization, and acknowledged as providing exceptional value.
- Difficult for present and potential competitors to replicate.
As an example, let’s examine the capability to provide an outstanding level of customer service in a manner that would make it difficult for competitors to replicate. In order to provide such a high level of customer service, employees from different departments (not only the Customer Service Department) must be involved in service delivery. Employees throughout the organization should connect quickly and collaborate willingly. Collectively, relevant information and insights about customers and product or service delivery must be shared.
The high level of cross-departmental collaboration required can prove challenging for some organizations, particularly those with rigid vertical structures. Such structures make it difficult for employees to adapt and respond to special customer service requirements. Note that under these conditions, an employee’s loyalty often shifts from the firm to their department or profession.
Delivering a superior level of customer value requires uninterrupted flow across the organization. Eliminating barriers to flow – breaking down departmental silos- is a necessary first step to building an organization’s strategic capabilities, regardless of the specific capability.
Let’s return to the question of how difficult will it be for a competitor to replicate a key organizational capability. It should be very difficult! A number of senior leaders view organization capabilities as the key element of their business strategy. These leaders focus on continually building and leveraging the organizations’ capabilities to drive new business growth.
2. A second key element of infrastructure necessary for successful execution is the Performance Management system and scorecard. (Note: Performance Management systems are rooted in the widely held belief that “what gets measured gets done”.)
The process starts by answering the question, what should be measured and why?
The following guidelines help answer this question.
- Scorecards depict key strategic relationships, particularly between the desired performance outcomes such as revenue and profit growth and the drivers of performance (e.g. new market entry, service quality, customer loyalty, and employee engagement).
- Performance of both individuals and departments (or regions) is directly linked to the growth strategy and successful execution.
- Company scorecards should provide a balanced perspective based on the needs of key stakeholders groups and/or major organizational processes – internal operations, value provided to customers and employee development.
Let’s assume that the overall strategy of a firm is to grow the core business and that growth will be achieved through increased market penetration of existing products. What are the drivers of growth that must be measured, monitored and managed?
This question is best answered by those directly involved. Precise measurements are not always possible but proxy indicators established in a thoughtful and open manner are. Let’s assume that increased market penetration will be driven by the strength of the company’s brand and customer loyalty. But what drives customer loyalty and brand strength? Is it the quality of service provided, the reputation of the sales staff or the depth of knowledge of the customers’ business and requirements?
When there is a reasonable level of confidence that the above questions have been answered, the process shifts to (1) how and when will performance be measured, (2) how will those directly responsible access the performance measurement and (3) what follow-up action, if any, is necessary?
Performance management systems based on the processes described are becoming more evident in successful organizations. A brief description of the approach RBC Banking uses follows.
Leaders in the Banking Group have utilized performance scorecards to link execution with overall business strategy for a number of years. The scorecard has been aligned with four major stakeholder groups – customers, employees, shareholders and the communities in which the bank resides.
The focus is on measuring and monitoring leading indicators – for example, the drivers of customer loyalty, employee engagement and financial results. Considerable input from many sources is solicited before these measures are set and appropriate action undertaken to continually improve performance.7
3. The third key ingredient of a supportive infrastructure is Leadership.
Who are leaders and what do they do? Leaders are people throughout the organization who influence the attitudes and actions of colleagues. As such, they help colleagues understand the many why’s of organizational life. For example:
- Why the organization must perform at a high level in the increasingly competitive and global business environment.
- Why barriers to cross-departmental collaboration are harmful and weaken the organization’s ability to adapt.
- Why, when a colleague’s performance appears to fall short, it may be preferable to view this as an opportunity for learning and professional development rather than expulsion from the organization.
- Why the ultimate success of the organization is rooted in its ability to continually be innovative in delivering value to customers.
Leaders are found at all levels in organizations, including, non-titled, non-managerial positions. They are best identified by their behaviours and influence rather than the hierarchical position. Together, such leaders create a network that reflects the very essence of their organization – ‘who we are, where we’re going and how we’ll get there’.
Such a perspective on leadership significantly differs from the more traditional ‘leader as hero’- the person who fires-up the troops, leads the charge and performs ‘heroic’ feats.
Can leadership skills be developed? The answer is clearly “Yes”. Some organizations owe their success to being able to recognize that the organization is a lab for leadership development. The process of leadership development can start with an assessment of an individual’s emotional intelligence, a key predictive attribute of successful leaders at all levels. Hands-on learning experiences with one-on-one coaching and mentoring are also vital elements of the process.
The relationship between senior leaders and other leaders throughout the organization merits special consideration. Senior leaders ultimately set the overall direction and create conditions that encourage others to join in and lead – particularly with respect to executing the strategy. A condition that has proven effective is the continual reinforcement by senior leaders of the expectation that all employees should exhibit leadership behaviours.
With persistence, the growing network of leaders will tip the scales as other members of the organization from every level and in every role join in and commit. Two organizations, Southwest Airlines and KI (formerly Krueger International), a mid- sized furniture manufacturer, have taken different approaches to the challenge of building leadership at all level and in all roles.
Since its founding, Southwest Airlines has focused on the hiring process. The organization created a unique candidate screening process that has been highly effective in selecting individuals whose values and abilities embody unique and imaginative approaches to dealing with challenges. Such individuals are a good fit with the highly disruptive and innovative low-cost strategy of the airline. When employees share identical values with the values of the company founder and connect at a very basic level with the organization’s core business strategy, it can be expected that each employee will step forward and lead. Over the last 5 years, Southwest’s sales have grown at an average annual rate of 11 percent. The airline has been profitable for the last 34 years.
In contrast, the president of KI (formerly Krueger International) a Green Bay Wisconsin business furniture manufacturer started the process of expanding the organization’s leadership mind set and behaviours more than 40 years after the company was founded. The president’s approach was based on the belief that (1) teaching employees how to think like a business person and (2) providing all employees access to whatever information is required is an absolute necessity. These beliefs have been continuously demonstrated at well-attended regular scheduled monthly meeting organized by the president. Employees at all levels and in every role receive performance-related information from the president and discuss how to solve problems and capitalize on opportunities. (Note: As a result of the diligent efforts of the president, all employees are company owners.)
The company’s growth strategy has drawn on the approaches described in this article – redefining and growing the core (expanding the product line), entering adjacent businesses (European expansion) and focusing on new market segments and sub-segments (universities, leading high tech firms). During the president’s tenure, sales increased from $45 Million to $630 million, an annual growth rate of 14%. The annual growth in ROI exceeded 30%. In summation, we can say that the probability of achieving profitable growth is heightened whenever an organization has a clear growth strategy and strong execution infrastructure. One without the other impairs the probability of success.