Sunday, December 11, 2011

What matters most to strategy execution in a startup?

Neilson, Martin and Powers in “The secrets to successful strategy execution” say that information and decision propagation are key you successful strategy execution but the conclusion is derived from a biased data set. This can be applicable to large organizations but start-ups and small companies give exactly opposite observations in this context. The paper emphasizes on information, decision rights, motivators and structure as the four major strengths of a company and discusses their relative importance. The article explains how motivators and structure are more importance for small companies and start-ups.

Usually, it is easier for small companies to propagate the decision making through the organizational hierarchy because of small size. The common problems faced by large organizations like middle managers, deep hierarchy, complex informal networks, indirect performance measurement and appraisals are very uncommon for small companies. This makes information flow much easier and flexible to manage. Small companies have lesser levels in their hierarchy and thus the strategy makers work closer to executers and workers. Decision making process becomes transparent and even if decisions are not transparent, they are propagated very quickly. Strategy requires the same level of transparency and hence, small companies are better able to execute their strategies.

On the contrary, what small companies lack is a structure for decision making and information management. Information is a major strength for any organization and there lies the opportunity for most small companies. If small companies achieve a concrete structure for operations from the beginning, they can leverage this strength in long run for competitive advantage. Assigning right employees to right roles, performance based promotions, internal competition are some of the areas where structure can bring motivation and strength to the company. Thus, motivators and structure can help the small company to execute their strategy in a better way.

The blog presents one of the reasons why many large companies try to implement flat hierarchies so that they can get advantage of “startup-like” information flows and decision propagation efficiency. On the other hand, almost all the start-ups strive for a structure like large organizations. Both kinds of firms try to come closer to a balance where strategy execution is most efficient. Summarizing, the key factors for strategy execution remains the same, it’s just the relative importance that changes.

Reference: “The Secrets of Successful Strategy Execution” by Gary L. Neilson, Karla L. Martin, Elizabeth Powers

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