No one should ever talk about strategy and execution as though they are two separate concepts.

That’s the concluding theme of Bain’s Five Beliefs on Strategy. Our own company was founded on the concept that what matters for companies are results. Our clients aren’t interested in intellectually elegant strategies that cannot be executed, and neither are we.

So what do CEOs worry about when it comes to turning their breakthrough strategies into real results? That’s a big, multifaceted topic, and one can either zoom out or zoom in. Here, we zoom way in and focus on the atomic unit of strategy execution: the initiative.

It is the design, launch, monitoring, management, and eventual completion of initiatives that capture the value of strategy. All too often, though, companies don’t give initiative design the same level of energy, creativity, and care that they put into designing their strategy in the first place.

Here’s how to change that.

Two Types of Initiatives Defined: Delivery and Development

Successful companies operate in two modes simultaneously: delivery and development.

• Delivery mode is when the customer most benefits from the company flawlessly executing known routines.
• Development mode is when the customer most benefits from the company testing and learning its way to new solutions.

The bad news for CEOs is that most businesses are built for delivery, not for development. It falls to the CEO to divide the motions of the organization into the two modes and to establish the conditions in which development can take place.

Kalyan Krishnamurthy, the CEO of leading India-based e-commerce business Flipkart, puts it this way: “We believe in this industry we need to do a complete turnaround of the company every four or five years … the way this plays out internally is that at any one time about one-third of our teams are in turnaround mode, responding to either an opportunity or a crisis, and two-thirds are in business-as-usual execution mode. That’s how we make sure that we are live, we are current, we are operating in a dynamic environment.” 

Given this, it stands to reason that an effective strategy will spawn a whole raft of initiatives—some focused on delivery and others on development. We have learned that these two types of initiative need to be managed in very different ways.

Key to the success of delivery initiatives is creating good jobs and joyful routines around the activities that create the most value in the business.

"We believe in this industry we need to do a complete turnaround of the company every four or five years."

Macquarie Technology Group, a leading Australia-based IT services provider, set out to transform its business, with a particular focus on providing a superior customer experience. Central to this effort was an initiative to deploy the Net Promoter System^SM as a way of monitoring and managing how well it was delivering for customers.

Not only did Macquarie Technology Group ask customers for feedback in a systematic way, it also made tracking the Net Promoter Score^SM (NPS) an obsession: Everywhere you go in the company’s offices, data centers, and call centers the real-time NPS is displayed on screens for every employee to see. By creating that kind of visibility, the company turned the journey toward higher customer satisfaction into a joyful routine—teams compete with each other to see who can delight their customer more.

Over a relatively short period of time, Macquarie Technology Group drove its NPS from 14 to 30. Then it reached 40. Then 50, then 60, then 70. Where is it now? 86. How do we know? The company posts the live tracker on its homepage.

Tracking metrics is important, but to be truly inspired human beings need stories: Great companies live their values and tell stories that celebrate their heroes.

Getting a development initiative right is about defining the first point of failure and having a plan to scale once you overcome that failure point.

Too many of what companies call “initiatives” are really just “chapter headings,” placeholders for where a more specific and actionable idea should be. The archetypal example of this might be something like “Win in China.”

Well, yeah, sure, sounds good, by all means let’s win in China. But what’s the definition of winning? Win at what? How?

"We got much better at ‘cutting the elephant into pieces,’ fixing each problem, and moving on."

Companies can bring strategic imperatives like that down to street level by designing what we call “micro-battles.” Micro-battles are a bit like pilots, except pilots are often designed and resourced to declare a superficial victory quickly and move on, whereas micro-battles are set up to race toward the first point of failure and learn whether it can be overcome and, if so, how.

Why Learning Systems Matter in Strategy

Capturing the lessons from micro-battles is a critical element of successful execution.

Micro-battles were one of the four pillars of the transformation at Barilla in 2018 to 2019. Mariapaola Vetrucci, Barilla’s general manager and chief strategy officer at the time, led the micro-battles program and had this to say on the topic:

“Being agile is not just about being fast. As an organization, we got better at taking risk and accepting that we could fail fast and learn, and we significantly improved the way we did new product development, moving through stage-gates 50x faster. We got much better at ‘cutting the elephant into pieces,’ fixing each problem, and moving on. 

“But most of all, we discovered new ways to develop the upcoming stars of our businesses and give them opportunities to shine. We did not want this to be a top-down push; to be successful, it had to be embraced with enthusiasm by our best young talent in each of their markets. We wanted them to be presenting in front of our CEO and group leadership team, learning from them, and helping them learn. 

“We went from two to a portfolio of 10 micro-battles across Barilla—all on the biggest strategic priorities, run by our best young talent across all regions, and acting as microcosms of the company we wanted to be.

“We realized that the best way to scale this was to codify what these teams had done—including their business and cultural learning—and convert it into a reference tool: a learning site that other micro-battle teams, and all leaders in the organization, could access and contribute to.

“This became an interactive site, which hosted videos, Q&A, interviews, trainings, foundational stories, best practices, stories of success, and lessons learned from failure … all from Barilla micro-battle teams, cocreated with them, for them.” 

The site encouraged and supported young talent who wanted to be a part of the micro-battle system to learn from each other. By doing so, Barilla created a community of practitioners who could sustain the program.

How Strategies Turn into Action

Strategies are turned into action one initiative at a time; capturing the value of a strategy typically requires the successful orchestration and execution of a portfolio of initiatives.

It’s important to have a single page that shows the status of all your initiatives as measured against a simple stoplight framework: Green is on track, yellow is at risk, and red is off track.

Painful experience has taught us to be extremely suspicious of a dashboard where every initiative is green; life just isn’t that simple.

"An efficient team has the trust to work well in full harmony 80% of the time, work 15% of the time in tension and maybe 5% in conflict."

At all times, any initiative worth doing is up against a tremendous amount of either organizational inertia or outright resistance. Any initiative that seeks to have an impact on the external world—one that launches a new product or leads to share gain, for example—is going to encounter resistance from competitors, customers, suppliers, regulators, and anybody else whose stable equilibrium that initiative is trying to disrupt.

It is simply not plausible that an ambitious agenda of strategic initiatives will proceed from conception to execution without anything going wrong along the way. But many organizations, explicitly or implicitly, discourage the sharing of bad news. When you combine a reality that is constantly throwing up obstacles with a culture that refuses to acknowledge them, you have a recipe for obfuscation, excuse-making, and blame-gaming—a recipe for failure, in other words.

As a leader, you must create the environment in which yellow and even red flags are welcome.

Mercado Libre is an e-commerce company focused on Latin America; it has a market cap of $115 billion and its stock has generated more than a 7,800% return since its IPO in 2007.

The company’s COO, Daniel Rabinovich, gives a fascinating insight into the culture that has helped generate such staggering returns with this analogy:

“When you go out for a sailing cruise, the whole objective is to enjoy yourself. It doesn't matter if you get there fast, slow.

“[But] when you race a regatta the concept changes radically. The concept is that I don't care if in a regatta I must spend seven hours hanging [on], holding the sail with my hand because something broke. Because the goal is to win and if you don’t like it, don’t race a regatta. 

“So, an efficient team is one that has the trust to work well in full harmony 80% of the time, work 15% of the time in tension and maybe 5% in conflict.” 

A successful initiative requires a leadership team with courage and candor, with the willingness to challenge and be challenged. If there are no red or yellow initiatives, then you’re probably not spending enough time in tension and conflict—you’re sailing a cruise when you should be racing a regatta.

Encourage your initiative leaders to mark their initiatives yellow at the first sign of trouble; encourage them to mark things red even before they are completely stuck. It’s better to hear the phrase, “I’m worried that this will go off track if we don’t do XYZ,” than it is to hear, “We didn’t do XYZ, so this went off track.”

To recap: Instead of spending months on “strategy” and weeks on “execution,” develop strategies with execution in mind from day one. Avoid living in a lofty world of chapter headings; get down at street level and push initiatives to the first point of failure and beyond. Be wary of meetings filled with happy talk and green lights as far as the eye can see; ask people to cut the congratulatory chest-beating and focus on what problems need to be averted or addressed in order to achieve results.

Why? Because strategy is about making things happen.