Wednesday, April 24, 2013

The importance of communication in implementation

A survey done by the Harvard Business Review on Strategy resulted in a respondent stating the importance of communicating strategy almost perfectly “Failure to communicate strategy causes frontline workers to invent their own strategy”1.  

How can somebody who does not understand or participate in developing the strategy execute it?
This is something GE has understood. Their plant in Batesville, Miss., employs around 220 workers to make strong, lightweight composite parts for more fuel-efficient jet engines. One of the strategies that adopted at the Batesville plant has been to do away with hierarchy. There are no “managers” only “plant leaders”.
Every employee at the Batesville plant works in a team and is responsible for the success of the team and that of GE. This is a strategy that has been communicated to every employee at the plant. It is each employee’s responsibility to improve “cycle-time” in production, which has resulted in an 80% improvement2!

Another finding from the Harvard Business Review survey was with respect to the confidence in the strategy developed by their organizations. Only 48% of those involved in developing strategy believe that their organizations are good at it1. Why is it so low? Is it because the strategy was not communicated well enough and resulted in failure during implementation or is it that the strategy never saw the light of day, as it was never communicated to anyone?

So how does one communicate strategy effectively? In a large company with say, 100,000 employees, how does one implement strategy successfully? How can each of the 100,000 be included? The picture below probably summarizes the essence of effective communication from the strategy makers to the implementers. If the Strategy makers answer these questions effectively and communicate the same to the different functions of the organization, the strategy could be executed effectively.

A short summary of IBM’s strategy changes from SloanReview, MIT3:
Most of its R&D was spent on building a bigger mainframe computer than on developing a microcomputer
Shift in its relationship with customers, which resulted in losing touch with their interests and concerns.
1980’s and early 1990’s:
IBM annulled contracts with customers (customer service, up to date technology, renting equipment etc.) and employees (employment security). This hurt IBM and resulted in losses.
IBM split its businesses into different units and decided to shift its strategy towards the services business4.

In keeping with this strategy, it is well known that to rise through the ranks at IBM, one has to be part of the sales force. This has been communicated well within and outside the company and has resulted in improved results and a market capitalization of about $214B5.

How important is it to “market” your strategy within and outside a small organization? Could marketing your strategy outside the organization result in information or direction that you would not want competitors to know? Could the reason for unclear communication of organizational strategy be to prevent competition from knowing what you are up to?


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