Strategy execution is the result of thousands of decisions – made by hundreds of managers every day who act both on the information provided and their own self interests. Many a new strategy is poorly implemented as managers default for self preservation.
Remember Polaroid, the world leader in instant photography? One could assume that they just missed the switch to digital photography. In reality, Polaroid was one of the first companies to see the opportunity and start investing heavily into digital imaging. The strategy to leverage their image processing technology and be an early mover in digital photography was very insightful but unfortunately the execution left much to be desired. Rather than creating a financial success, the potential new blockbuster led the company to bankruptcy.
Polaroid had always developed and manufactured everything in house and engineers had gotten used to 20 year patent protection and long R&D development cycles. In order to enter the digital market Polaroid engineers would need to adapt to the fast pace, rapid fire, short life cycles typical of the digital market place. Instead of adapting they did everything in house as usual causing long development delays and burning through boat loads of cash. When Polaroid did finally launch their first digital camera in 1996 they were five years behind the competition and way too expensive.
To reduce development time and keep costs down Polaroid would have been wise to outsource components and processes where they had little or no expertise and invest heavily into areas where they held a technological advantage such as image processing. Instead, in hopes of recovering development costs Polaroid set an unrealistic retail price almost double that of competitors’ similar offerings. Sales, of course, failed to materialize and by 1998, now low on cash and desperate to get into the market, they outsourced their digital camera to a company in Taiwan. The camera enjoyed some initial success but faded quickly as the margins were poor. Competitors soon passed them by and a cash strapped Polaroid filled for bankruptcy in 2001.
A brilliant technology, an awesome new product or a great business strategy can take your company far but without a sound execution plan you will be spinning your wheels. When the new strategy isn’t properly executed things can go off the rails. What can companies do better?
Five Imperatives of Strategy Execution:
- Create a sense of Urgency: No sense of urgency no change – it was business as usual at Polaroid resulting in the product being five years late to market.
- Develop the competencies: Different markets often require different skills – Polaroid engineers were ill prepared to compete in the fast paced digital market.
- Link performance and incentives: Performance and rewards need to be linked – with no linkage Polaroid managers had no incentive to change.
- Focus your Resources where they can create the most value: Polaroid could have leveraged their world leadership position in image processing. Instead they invested in non core processes burning up needed cash reserves.
- Determine and communicate the key drivers of business success: Managers need to see the bottom line impact of their decisions otherwise change won’t take place.
Developing a brilliant strategy is tough enough but executing one presents even greater challenges. When developing your strategy in ’09 focus on these “five gold rings” and implement your strategy.
For the full Story on Polaroid see: Innovating for Cash, J Andrew and H Sirkin HBR Sept 2003 pp80