Companies that operate with clarity and focus consistently outperform their peers across many metrics, such as gross margins and working capital. For some executives, however, understanding what gets their company to that point of clarity can be difficult.
Many companies have a formal strategy development process but find that the strategy commonly breaks down just beyond the boardroom when certain elements are put into action.
Bridging the gap from stagnant to high performing is more than simply setting up a formal strategy process, and understanding the right first step can be difficult.
Key Areas to Help Move from Stagnant to High Performing
The following are key areas that differentiate stagnant organizations that simply have a strategy from high-performing organizations that effectively develop and execute their strategy.
An Understanding of Customer Value
Customers are always sharing their experience, but not all companies are tuned into the right channel and know what to do with the feedback. There are many opportunities to interact with customers and there’s a temptation to turn every customer interaction into a high priority initiative. Only a handful of those interactions will provide insight that drive real customer value.
Companies that take the time to deep-dive into what truly addresses customer pain points will find themselves more prepared to react the next time they get customer feedback. Putting customer understanding at the center of strategy development is key to developing a sustainable business with the right areas of focus.
Process and Capability Alignment
Internal process and capability are key areas that make the gears of a business turn. But there is a potential for the momentum of business processes to throw off the alignment to the customer centric strategy.
Processes are refined over time to fit the people and the capabilities internally, but short-term adjustments may be out of step with what the long-term strategy truly requires. Those that find themselves out of step with strategy will devote too many resources to a low-value area or process, while ignoring a high-impact opportunity.
Companies that evaluate and determine where they need to be best in class, and where a strategic partner would serve them better, will see results from their efforts in developing capabilities internally.
The next industry or global challenge is always around the corner. High-performing organizations that keep their strategic plans front-of-mind and continuously synthesize market information as well as assess and adjust their operations aren’t taken aback by turbulent market conditions. They know what’s important to the customer, challenge their strategic assumptions, and make the right level of adjustments in the right areas.
Those that succeed through changing tides demonstrate greater agility, creativity, patience, and accountability to the core strategy.
Unlocking High Performance
A high-performing organization requires a deep understanding of the customer, a carefully formulated strategy, a full accounting of capability and process within the organization, and the people to support the strategy. It requires a deep and wide review of the entire organization, and its engagement with the strategy and the customer.
Companies that understand these challenge areas are better primed to set and evaluate their strategy for success. The most successful companies are high performing in key areas.
Engaged and Empowered Employees
Indicators of a disengaged team include ineffective communication and a lack of awareness of company metrics and their personal impact to the strategy.
Empowerment Is on the Same Spectrum as Engagement
The most effective companies not only trust and engage their employees but also empower them to make decisions and adapt to the needs of the organization.
- Engaged employees listen to and are involved in the dialogue of strategy
- Empowered employees take the strategy into their own hands
Knowing where breakdowns occur with a disengaged team enables leadership to bring strategy discussions to the right level and focus on the employees that need the biggest boost.
Additionally, incorporating employee feedback into strategy development as well as the process of identifying customer pain points further engages employees with the strategic process.
Collaboration with a Focus on Interdependency and Accountability
There are many grey spaces that exist between departments in the handoff of data, order process, and customer service.
Many companies that rapidly pursue a new business model face operational challenges in the short term and create ad hoc processes to support the strategy. While useful in the short term, these have the potential to become entrenched and distract from the overall needs of the customer.
Each Business Function Needs a Strategy
The critical factor that defines success is not only the alignment to the customer but also the alignment of responsibilities between business functions where interdependencies exist.
Leading companies adopt multi-functional process ownership to align business functions. They make a deliberate effort to define the role of each department in these processes so the entire organization knows how each role contributes to the ultimate outcome.
High-performing organizations adopt process accountability and build understanding of strategic capabilities throughout the organization. This empowers and aligns employees around the strategy so they can keep the long term in view.
Interdependency and accountability help break down silos to create a more collaborative environment where teams can improve capabilities in support of the customer strategy.
Measure What Matters
All companies struggle with making sense of seas of data and potential KPIs.
Having only the right metrics for the individual, department, and company and directing attention to the performance, and the activities that drive performance, will establish the strategy linkage from top to bottom.
Successful Companies Create a Strategy Engine
Most successful companies have a formal system to manage their strategy. Developing and managing a strategy isn’t just an annual event though; it’s a strategy engine that is regularly redeveloped, refined, and evaluated.
These companies constantly challenge the assumptions of their strategy with carefully curated metrics that are tied to customer centric performance measures.
Metrics You May Want to Monitor
- Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Gross margins
- Working capital
- Top line revenue growth
- Return on investment (ROI) for strategic initiatives
We’re Here to Help
For guidance on assessing the strength and agility of a strategy and evaluating whether your portfolio company has the capabilities to adapt to change, contact your Moss Adams professional. You can also visit our Transactions Services for additional resources.