Statista labels Best Buy as “the world’s largest multi-channel consumer electronics retailer.” But in 2012, their performance was described as “unsatisfactory in a number of areas.” And with many investors worried that Best Buy would fail to compete with Amazon, their stock price dropped more than 50% from February to December. That same year, Hubert Joly was appointed CEO. With a strong strategic vision, Joly quickly introduced a five-step strategy to bring Best Buy back to the top.
Joly’s Renew Blue strategy focuses on these five methods for adding value: reinvigorate the customer experience, attract “transformational leaders” and energize employees, work with vendors to innovate and drive value, increase the company’s return on invested capital, and make the world a better place. This strategy by itself, however, wasn’t what made Best Buy’s stock price triple in 2013. That was done through Joly’s ability to effectively execute his plan. He established a company-wide price match initiative and updated the online experience for customers; enhanced employee training, benefits, and child care; invited specific brands to create in-store kiosks; exited certain geographic regions and cut non-product costs; and introduced the largest consumer electronics recycling program in the U.S.
Having a great strategy is important; but without proper execution, almost 40% of the strategy’s potential value can be lost. And proper execution isn’t easy. Keep reading to explore three secrets that will help global business leaders efficiently and effectively execute their winning strategies.
A global consumer-durables company was organized into 16 product divisions across the globe. Each group was assigned specific performance goals, but corporate was in control of spending targets. As months passed, the division directors would develop a plan to add strategic value in their area and meet their performance goals, just to have it overridden by the functional leaders at HQ. Disputes arose and decisions stalled, leading to increased costs and poor execution of established goals.
Eventually, the problems were addressed and resolved. A healthier organizational structure was created so that the division leaders had more control over their strategy implementation. They were given more discretion over their budgets and were unambiguously held responsible for their division’s profitability. Had this company not recognized how their corporate structure inhibited their strategy execution, and made appropriate changes, costs would have continued to rise, and performance goals would have continued to be missed.
Gartner, the world’s leading research and advisory company, suggests focusing on “vertical alignment between the corporate center and business units (BUs), and horizontal alignment across BUs.” The roles of every individual, as it relates to company strategy, should be clear. Company structure must be compatible with the desired strategy in order for the strategy to reach its full potential.
Focus on Momentum First, Then Direction
Ford Motor Company reached a turning point in 2006. After posting a record loss of $12.7 billion, the new CEO, Alan Mulally, knew changes had to be made. He called together the brightest minds in the company and created a strategy to “[make] every new vehicle from then on the best in its class.” Proper execution of that strategy allowed Ford to be the only U.S. auto manufacturer to get through the great recession without a government bailout.
Mulally attributes the success of Ford’s new strategy to making sure everyone knew the plan and knew that interacting respectfully with people inside and outside of the company mattered. To help spread the word, Mulally made the plan public; informing every stakeholder, including the press. And then, once everyone knew the goal, he established business plan reviews where key stakeholders around the world met together frequently to exchange ideas and solidify the strategy.
Building momentum starts by ensuring that everyone knows about the company’s strategy, just like Mulally did at Ford. Then, effective and continued company communication will ensure proper direction and application of the company strategy.
General Electric (GE) CEO Jack Welch was known for being able to train management teams to effectively execute company strategy. Because of their ability to execute, GE grew massively from 1985 to 2005. Since then, however, the company has lost luster, even to the point of falling out of the Dow Jones Industrial Average in 2018. James E. Schrager, professor of strategy at the Chicago Booth School of Business, blames the company’s deterioration on three things: failure to plan for the next big thing, not adapting their strategy to defeat competitors, and straight jacketing themselves with long-term holding plans.
All three of Schrager’s points indicate a lack of flexibility and adaptability within GE’s execution plans. In his words, “Change always happens, and this means that strategies must be renewed and revised.” One way that GE executed its strategy was through acquisitions. Many of the acquisitions GE made were initiated with a very long-term perspective. Because of this buy and hold mentality, GE wrongly held onto many assets that ended up being a burden for the company.
To avoid the struggles GE and others have experienced, Gartner suggests regularly measuring performance and establishing contingency plans. Addressing changes in the political, technological, and competitive environments will be key to successful strategy execution.
Having an achievable strategy is important to company success; but without proper execution, potential value will be wasted. To help companies properly execute their strategies, global leaders should learn from other companies’ successes and failures—as well as their own. Matching organizational structure with strategy implementation will create efficiency. Open and accountable communication will unify a company, leading to clear direction. And frequently measuring performance and quickly adapting plans keeps strategies properly aligned with unexpected changes. After all, strategies don’t need to be secret—just executable.