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Eighty-five percent of strategy failures happen because of an organization's inability to implement and execute a plan. But great CEOs know how to keep the organization focused. Bain partners James Allen, Nicolas Bloch, Rob Markey, Steve Berez, Tracy Thurkow and Mark Gottfredson share the top ways that CEOs can master the inner game of strategy and drive sustainable growth.
Read the transcript below.
JAMES ALLEN: All the great CEOs get this, that the organization just gets exhausted by the complexity that's created by growth. Every organization is subject to the growth paradox. Growth creates complexity, and complexity is the silent killer of growth. You understand that, but it's tiring.
What we found is that the really great CEOs are actually masters of the inner game of strategy. They understand that almost 85% of strategy failures happen because of the organization's inability to actually implement and execute what you designed. And so everything they think about is, how do I get results at the front line? How do I bring the energy down? I've got to get it myself, and then how do I drive that down to the people that matter, the talent that matters?
When I look back at some of the great CEOs, they're always thinking [that] the job for everyone is a battle of energy. I've got to make sure not simply that I have a great strategy and a great operating model, but I've got to land that in the front line. I've got to keep the energy going till I get results in the front line.
NICHOLAS BLOCH: What's important when you've set the strategy is that you translate the strategy into a repeatable model. And the repeatable model is the sets of values, behaviors, routines that will help the organization deliver on your strategy. It's important because otherwise it becomes loose in the organization. And what I've seen the most precise CEOs do is they are very keen to get those values and represent those behaviors. They champion those behaviors and make sure that everybody follows those behaviors.
And it's important when you do that that you embody those values, and that you celebrate the heroes in your organization that really are transforming those values into real behaviors and really winning in the marketplace.
ROB MARKEY: One of the most important decisions a CEO makes is, which set of customers the organization should really be focused on. It's crucially important that you choose a target set of customers, and focus the entire organization in a laser-like way on meeting their needs better than competitors meet [those needs] so that you attract more of those customers at lower cost, you earn more of their loyalty, you grow the business faster than competitors can grow it.
To drive growth of an organization over a long period of time, it's crucially important to continue to focus the organization on developing the best products, the best pricing, the best features and benefits, services, for that target set of customers. And then seek feedback in a continuous way so that you can continually improve and raise the bar on what you offer to those customers, staying ahead of competition.
STEVE BEREZ: Information technology has become one of the most important sources of competitive advantage across most industries. Winning CEOs don't just delegate technology to their CIOs, but they stay personally involved in building IT capabilities. The best CEOs recognize that technology is going through rapid innovation across nearly every industry, and they take full advantage of it. They use technology to connect more effectively and efficiently with customers. They use technology to automate processes, even those that have historically really required a fair amount of human judgment. And they create better insights and information through technology that they use for improved strategic and operational decision making.
TRACY THURKOW: I think the most important thing to understand is that any time you make a bold move with strategy, you are inevitably going to cause some pain points for people. And in those pain points, you expect behavior change to happen.
One CEO I know is facing an enormous challenge, a major shift to strategy, and at the same time a very difficult cultural environment. What we talked about was how important it is to set an inspiring destination for people. They have to be going someplace that they want to go, not just living with a place that they don't want to be in.
One thing that's really important is that you recognize that it's going to take time to get there, and really importantly, that you recognize that you can't do it alone. While you are able to describe the future and to set the standards of excellence that you want people to perform to, you can't be the only one who helps people get there. So creating the team of people who share that vision with you and who are committed to helping to create the behavior change throughout the organization is the most important thing you can do.
MARK GOTTFREDSON: When I've worked with CEOs that have done a great job of building their companies or turning around a situation, one of the things that they've had to focus on is operational excellence. The reason is that all things being considered, if a company can provide a product or a service at a lower cost or a higher level of quality, they're going to end up winning in the marketplace. And everything gets measured relative to the competition.
On the other hand, there're so many things to focus on, and really being differentiated on all of them is actually quite difficult. So you've got to figure out what's that critical element that the customer wants to buy? What is his source of value?
Once you've identified that source of value, then you've got to get your costs lower or your quality up, and the way that you do that is you're going to start with benchmarks. Getting to a benchmark is very important, but it's not the end of the story. The idea here is to become better than the competition. And so what you want to do is first achieve the benchmark. And then second, you want to be driving down an experience curve to be able to open a gap relative to the competition.
One of the challenges that any CEO faces is increasing complexity in the organization. And actually, increasing complexity is a natural outgrowth of success. Let's assume that you start with a single product that you're selling into a single market, and you're successful at that. What do you naturally do? You think, well, let's add some SKUs. Let's go after a little bit different market segment. You start thinking about, maybe we should sell this into another geography. Pretty soon you have your engineers working on new products that are related.
Now you have a portfolio of products. Soon you have a portfolio of geographies. You're now targeting different customer segments. And then you start asking the question, should I be organizing around the product? Should I be organizing around geographies? Should I be maybe even organizing around my largest customers?
Each time you make one of these changes, it increases the number of interfaces in the organization. Those interfaces require work for each other. That starts to build in some bureaucracy and some complexity in the overall organization.
A chief executive has to be the person who is cutting through the clutter and keeping the organization focused. For example, Steve Jobs once said that he was more proud of the things that he said no to than the things that he said yes to, that that was his job—to sort through the things that really mattered and really drive that complexity down. Generally speaking, the company that is most focused is going to be the one that's going to win in the marketplace.
First published in September 2016