The Execution Premium

by Robert S. Kaplan and David P. Norton

The Execution Premium

Highlights by David Willden

I deeply respect the works of Kaplan and Norton.  In 1992 Robert and David published the book Balanced Scorecard.  "The Execution Premium" emphasizes on the “what” organizations should focus on. It introduced four organization perspectives that if focused on and measured  in a balanced manner, would lead to better organizational results. The perspectives are: financial, customer, internal process, and learning and growth.

The authors then spent years refining their ideas in the area of strategy management and published a book titled Strategy Focused Organization. The book concentrates on the “how.” The book introduced five key management principles:

  1. Mobilize change through executive leadership
  2. Translate strategy into operational terms
  3. Align the organization to the strategy
  4. Motivate to make strategy everyone’s job
  5. Govern to make strategy a continual process

The third book the authors published was Strategy Maps which focuses on the “how” of creating a strategy and a balanced, attentive organization. The book introduces a framework for translating a strategy into tightly aligned objectives.

Robert and David then published a fourth book called Alignment. In this book, the authors demonstrate how an organization would use scorecards and strategy maps to achieve alignment throughout the organization.

The Execution Premium is the latest book from the authors. It addresses what needs to be done on a day to day basis in striving to reach the goals of your organization.

Few organizations have organized systems in place to effectively manage the execution of strategy. Many organization look to the budget to track performance, and don’t conduct strategy reviews. A strategy review gets into how the strategy is being translated into the practical operational elements of the organization. Organizations that align their strategy with their operations do better than their competitors.

Many organizations focused on process improvement initiatives to help them, still have problems. The reason, the authors explain, is because they lack an overall plan and performance management system. There are six stages that an organization needs to go through to develop an effective plan:

Develop the Strategy

Strategic planning is vital in identifying a clear understanding of priorities. This process includes clarifying your mission, values and vision. It also involves looking at both internal and external factors. Tools such as PESTEL ( political, economic, social, technological, environmental and legal) can be used to identify issues. “Value Chain Analysis” is used to assess your internal processes. SWOT analysis is used to pinpoint your strengths, weaknesses, opportunities and threats. Scenario planning helps you to look at various situations that may occur, and to think through the best ways with others to identify the best strategy in moving forward.

It is important to document your strategy, objectives, and plans. The documentation process helps you to think, clarify, and to communicate.

The Execution Premium

Plan the Strategy

The next step is to develop plans to put the strategy into action. Steps include translating objectives into targets and initiatives. A strategy map is an excellent way to visualize and create tight alignment with the various strategy components to increase your chances of achieving your goals. Typically a strategy map is developed with a focus on the four areas emphasized in the Balanced Scorecard, namely, financial, customer, process and growth and learning. Prospective initiatives are identified in each of these areas, then rated basing their ability to contribute to the strategy, and then finally selected.The next step is to develop plans to put the strategy into action. Steps include translating objectives into targets and initiatives. A strategy map is an excellent way to visualize and create tight alignment with the various strategy components to increase your chances of achieving your goals. Typically a strategy map is developed with a focus on the four areas emphasized in the Balanced Scorecard, namely, financial, customer, process and growth and learning. Prospective initiatives are identified in each of these areas, then rated basing their ability to contribute to the strategy, and then finally selected.

Align the Organization with the Strategy

Higher level strategy maps and scorecards help here and are used to create lower level organizational maps and scorecards.

Plan Operations

Building the strategy into the operations is a key to success. There are various tools available to help here (e.g., six sigma, lean, time-driven activity based costing). Focus on operations or processes first that will have the highest impact in helping the organization’s ability to achieve the strategy.

Monitor and Learn

Continuously review the performance of your organization, to ensure you are meeting your objectives. Keys here are to hold regular review and problem solving meetings.

Test and Adapt the Strategy

Strategies and plans need to be tested and adjusted continuously. An executive strategy testing and adaptive meetings would be established to analyze, review and update the strategies and plans. The PESTEL tool, economic models, statistical models, input from front-line employees, are example of helpful instruments.

Managing Strategy from a Central Office

A CFO owns the budgeting process in an organization. An Office of Strategy and Management should be established that owns strategy execution. Their role should be to help plan and coordinate with all of the organization units to ensure maximum results. Moreover, they should set up execution feedback sessions.


The Execution Premium

The Execution Premium