- The failure to balance the tensions between strategy and operations is pervasive.
- Breakdowns in a company’s management system, not managers’ lack of ability or effort, are what cause a company’s underperformance.
- By management system, they're referring to the integrated set of processes and tools that a company uses to develop its strategy, translate it into operational actions, and monitor and improve the effectiveness of both.
- By creating a closed-loop management system, companies can avoid such shortfalls.
Interestingly, Kaplan and Norton's description of such a closed-loop management system closely parallels the detailed steps of the Six Disciplines Methodology, (which are revealed in the award-winning business improvement book "Six Disciplines for Excellence," as indicated below:
- The loop comprises five stages, beginning with strategy development, which involves applying tools, processes, and concepts such as mission, vision, and value statements; SWOT analysis; shareholder value management; competitive positioning; and core competencies to formulate a strategy statement. (Discipline I)
- That statement is then translated into specific objectives and initiatives, using other tools and processes, including strategy maps and balanced scorecards. (Disciplines II and III)
- Strategy implementation, in turn, links strategy to operations with a third set of tools and processes, including quality and process management, reengineering, process dashboards, rolling forecasts, activity-based costing, resource capacity planning, and dynamic budgeting. (Discipline IV)
- As implementation progresses, managers continually review internal operational data and external data on competitors and the business environment. Finally, managers periodically assess the strategy, updating it when they learn that the assumptions underlying it are obsolete or faulty. (Discipline VI)
BOTTOMLINE: While Kaplan and Norton's observations and recommendations specifically target much larger enterprises, Six Disciplines is the first complete strategy execution coaching program that is optimized for small and midsized businesses.