Adaptive Processes to Link Strategy with Execution

By describing the three fundamental strategic positions, we have provided the mechanism to define the vision of a business—that elusive but indispensable requirement in successful management. The first challenge is to construct distinct business options that respond to the new realities of the current environment.

The next challenge is to link strategy with execution. More strategies fail because of ineffective execution than poor design. More often than not, a company's basic business processes are not aligned with the strategy. During the past few years, a proliferation of the so-called best business practices, including total quality management, business re-engineering, continuous improvement, benchmarking, timebased competition, and lean production, have been primarily directed at improving a firm's operational effectiveness. In theory and in application, these practices are decoupled from strategy. As a result, they contribute to creating a pattern of commoditization as companies imitate each other, thus preventing a truly differentiated strategic position.

The Delta model starts with the selection of a distinctive strategic position and then calls for the integration of the collective processes, not of one individual business process such as operational effectiveness. It is the balance of the fundamental processes that creates a unique and sustainable competitive position.

Complexity and uncertainty in the market create a problem in implementing any plan. The only assumption that remains valid over time is that the other assumptions will change. Strategy needs to adapt continuously, and therefore implementation itself needs to respond to market changes and to an improved understanding of the market. That understanding becomes apparent only during implementation.

In the Delta model, adaptive processes link strategy with execution by:

1. defining the key business processes that are the repository of the primary operational tasks,

2. aligning their role with the desired strategic position,

3. seeking a coherent integration across these processes to produce unifying action, and

4. incorporating responsive mechanisms as a core part of each process to ensure flexibility and change in an uncertain market.

Three Adaptive Processes

In the early 1990s, a powerfully simple idea developed: Businesses should be viewed not just in terms of functions, divisions, or products, but also as processes.^[4] Processes should be the central focus when companies want to link strategy and execution. We have identified three fundamental processes that are always present and are the repository of key strategic tasks:

1. Operational effectiveness—the delivery of products and services to the customer. Conceived in its broadest sense, this process includes all the supply chain elements. Its primary focus is to produce the most effective cost and asset infrastructure to support the business's desired strategic position. It is the heart of the productive engine and the source of capacity and efficiency. Although it is relevant for all businesses, it becomes most important when a company chooses a strategic position of best product.

2. Customer targeting—the activities that attract, satisfy, and retain the customer. This process ensures that the customer relationships are managed most effectively. It identifies and selects attractive customers and enhances customer performance, either by reducing the customer's cost base or by increasing its revenue stream. At its heart, this process establishes the best revenue infrastructure for the business. While customer targeting is critical to all businesses, it is most important when the strategic position is that of total customer solutions.

3. Innovation—a continuous stream of new products and services to maintain the business's future viability. This process mobilizes all the firm's creative resources including technical, production, and marketing capabilities to develop an innovative infrastructure. The center of this process is the renewal of the business in order to sustain its competitive advantage and its superior financial performance. While preserving the innovative capabilities is critical to all businesses, it becomes central when the strategic position is that of system lock-in.

^[4]The chief proponents of this thinking were Hammer and Champy; see Hammer and Champy (1993).