The Execution Mantra

We hear the cliché all the time: companies need to execute. In startup firms, for instance, venture capitalists often go overboard with their faith in recruiting experienced management teams or bringing in new management teams to implement a business plan. If executing a plan was all it takes to be successful, then why are over 95% of the venture funded startups in deep trouble?  Looking back it seems that execution is not as simple in the new economy as it appears.

What does execution mean? At the 50,000 ft level, execution is fairly well understood --the meeting of milestones laid out in a plan of action. The result of hitting these milestones is either a better valuation for the next round of financing or increased stock price. But, at the more detailed day-to-day level, execution still pretty much remains a black box. Inputs go in, output comes out. Few know or understand the decision or actions that were taken to facilitate this transformation from input to output.

After almost hundred years of scientific management, execution is still an art rather than precise science. That is probably one of the reasons why we revere those who have mastered this difficult and challenging practice. Managers like Jack Welsh, John Malone, Bob Pittman, Andy Grove, Michael Dell, Bill Gates, John Chambers and Scott McNealy are bestowed with accolades as they, year after year, are able to take their corporations into new areas, deliver better results and buy more companies. But, for the rest of the mortals, who are struggling with execution issues in a larger organization or a startup, what lessons can we learn from the masters? Are these lessons transferable? Does watching a basketball game make you a better basketball player? It depends.

But, getting the fundamentals right early often makes sports players better.  It gives them a foundation on which to build on and improve.  So, we want to be like budding sports players. We want to learn the basic patterns of execution. The simple dribbling, passing and shooting skills.

Execution in the New Economy
The six million dollar question is: How can we improve the state of execution in the new economy?   The question in our minds is whether the new economy failed because of poor business models or is it due to poor execution.  It is probably a mixture of both. For executing a poor business model well will lead to the same dead-end – failure. Taking a good business model and executing it poorly also gets you to the same dead-end.

On the flip side of this, taking an “okay” business model and executing the heck out of it seems to work. This is probably the case in 90% of companies. Most companies have business models that we would consider to be average.

Take for instance, Amazon.com. There is nothing magical about their business.   Everyone in retail industry probably follows either the same model or some variant of it. How they executed it seems to be the point that set Amazon.com apart. Managers, however, like to pretend that their business model is more unique or better than everyone else.  They are not fooling anyone.  The ingredients of most business models are pretty well known. Take for instance, Wal-Mart’s business model, which is not unique either. It was probably unique for a couple of years when Sam Walton experimented with self-service in some remote towns.  But, as he expanded, pretty much everyone could have copied the model. So why didn’t they?  Well a lot of them like K-Mart tried but never could get the economies of scale or efficiencies like Wal-Mart. 

Like cooking, the skill of operational management is in putting the ingredients together well and providing a consistent output. Simply assembling all the ingredients together and dumping them into a pot is not enough. You have to have a method and follow the method as you “integrate” the various ingredients.

In the new economy, what are the fundamentals of execution? What are the fundamentals of execution in a technology company? What are the building blocks that make for great execution foundation? What is the blocking and tackling equivalent of execution? These are the questions that guided this research study.

Fundamentals of a Successful Execution
There are three things that standout when we examined the question of what makes a successful execution. These are: Moving Target Management, Triage Management and Performance Measurement.

Moving Target Management
Changing the tires while your car is moving is very difficult. Business model changes in companies driving 80 mph is extremely difficult to execute. This unfortunately is quite common in the e-commerce world. We call this problem “Moving Target Execution”. Moving target management is the ability to steadily operate in a rapidly changing environment.  In this environment the balance between structure, speed and change is difficult to accomplish and fascinating to watch.  Take for instance, the B2B exchange space. Initially in 1997 everyone thought that transaction fee models will prevail. In 1999, companies realized that no one – customers or suppliers – wanted to pay transaction fees.  So, companies abandoned the transaction model and moved to become virtual distributors.  Ventro, which was Chemdex, an early leader is a prime example of this.  However, in 2000, companies discovered that the virtual distributor model doesn’t work unless there is a huge amount of transactions taking place (liquidity). So many companies, like Ventro, moved from being virtual distributors into becoming B2B software companies.  But by then it was too late. Ventro had exhausted the goodwill of the customers and the market.

Triage Management
Triage management is the ability to do a portfolio review of all the projects, then take poorly performing projects and prune them. Every corporation has many projects. It is often the case that many of them could be under performing. How do you assess which ones are poor performers and what is your review process for getting rid of them? Intel does this rather well. In consulting, Mckinsey is prime example of an organization where human triage is practiced -- you either move up or out.   Even universities follow the triage model with tenure and promotion decisions.

Performance Measurement
Performance Measurement is the ability to measure the right things and take corrective action. Most companies measure a lot of things and gather a lot of data. But, they often tend to measure the wrong indicators. 

How many companies measure customer satisfaction? Lots! But how many companies measure the right indicators and feed it back to the sales reps, customer service reps and all of the front line people so that the information is truly useful. Performance measurement encompasses the whole feedback loop and does not end in measurement but focuses the closed loop action that is initiated through measurement. Feedback control is an established practice in mechanical and chemical engineering. The idea is rather simple, take a lot of measurements and adjust actions accordingly. The same principle holds for complex organizations.

Finally, managers in the new economy, need to recognize that although their industry is moving at light speed, they must be disciplined enough to maintain focus. Companies can’t do everything, but what is done must be done correctly otherwise valuable resources – people, money and attention – are wasted.  The bottom line is never to get ahead of their capabilities.

A Final Thought
Only a few companies have successfully navigated the bridge from strategy to execution. This article raises issues that make the strategy to execution journey difficult in the new economy. Companies that succeed in crossing this bridge frequently will win their competitive battles, not by inches but by miles. But once they win, they will be very tough to displace. However, there is no rest for weary. The changing business environment creates challenges that are going to keep management busy for a long time.  

So, how do we get better at execution? It is sort of like asking the question: does studying Picasso make you a better artist? It depends. Similarly, studying the execution mistakes of others should give you a better perspective. There is great value in learning from the past - companies that have succeeded and failed, the evolution of technology, the tremendous reengineering phenomenon and the quality craze. All of these give us clues that highlight the right canvas to work on, the brush strokes we should take and the landscapes we should paint.