During the boom, many managers assumed their companies excelled at execution. In fact, much of their success arose from strong economic tailwinds. Now that the winds have shifted, executives discover to their chagrin that their company’s execution engine is less powerful than they imagined. This post lists five of the top obstacles to execution in volatile markets.
5) Rely exclusively on process to execute. Many managers equate execution with standardized processes. They re-engineer key procedures and employ process disciplines, including six sigma, or total quality management to ensure continuous improvement. These approaches work well for activities–such as processing transactions or manufacturing cars–that can be laid out in advance and repeated thousands or millions of times per year with minimal variation. Process tools work less well for activities that consume much of the typical knowledge workers time, including coordinatinating work across a matrix or generating innovative solutions to unique problems. A study by Professors Mary Benner of Wharton and Michael Tushman of Harvard Business School found greater investment in process disciplines decreased innovation (beyond incremental improvements in their existing processes). Managers need a broader range of tools to manage non-routine work.
In the recent boom, many managers mistook macroeconomic tailwind for organizational horsepower. Now that the winds have shifted, they recognize that their organization is not as good at executing as they believed. The top imperative for many businesses right now is this–to rebuild their company’s execution engine, while sailing into strong headwinds.
This task is neither easy nor impossible. The economic crisis opens a window of opportunity to drive fundamental change through an organization. Over the past decade, I have studied how leaders transform organizations to execute effectively in volatile markets. Below are five of the ten obstacles that executives must overcome to build a powerful execution engine (obstacles 1-5 follow in my next post).
In June 2006, an investment bank invited me to give a keynote speech at a management meeting held in a posh manor hall outside London. The speaker before me recounted the bank’s string of record earnings and congratulated the bankers on transforming the company into a global leader. During the question and answer portion of my speech, a delegate asked me to assess the bank’s progress. I didn’t want to puncture the festive mood, but did speculate that they might be mistaking market tailwind for organizational horsepower.
Much has been written about enhancing co-ordination across organisational silos, a topic that sits near the top of most executives’ to-do list. A search of business and investing books on amazon.com for the keyword “collaboration” turns up nearly 37,000 books. Do we really need another one?
Companies often respond to market shifts by accelerating activities that worked in the past, a tendency I call active inertia. Like a driver whose car has its back wheels stuck in a rut, managers press on the gas hoping to pull out, but instead dig themselves deeper. Hardened commitments mark the well-worn grooves that channel behavior into historical patterns.
Companies fall prey to active inertia when their hardened commitments channel their response to market changes into existing grooves. Below are some warning signals that indicate executives at your organisation may be locked into their historical commitments and susceptible to active inertia, should the environment shift.
In today’s paper, I have written about why good companies decline.
Many people tell a simple story of corporate failure. Success breeds hubris which leads to overreach and triggers decline. After studying the causes of corporate failure and helping companies avoid it for two decades I have discovered a more profound dynamic that drives corporate decline. The commitments required to succeed harden over time and prevent companies from adapting effectively when circumstances shift. Organisastions often succumb to active inertia – they respond to disruptive changes in the environment by accelerating activities that worked in the past. This post describes the dynamic in finer detail.