Tracking the most important elements of strategy and measuring activities critical to competitive success is what enables organizations to excel

Top performing organizations typically share two very important characteristics: they’re strategy driven and results oriented. These are interrelated characteristics that chart the course for an organization’s strategy and monitor that the course is being followed and producing the desired results. 

Arguably, both strategy formulation and implementation are important. A poor strategy can’t be expected to produce good results. But is a good strategy enough to make an organization successful, both today and in the future? Increasingly, we’re seeing that the ability to implement strategy is more important than the quality of the strategy itself, suggesting that more time and effort must be devoted to making a strategic decision work than to making the perfect strategic decision.

Harvard University professors David Collins and Michael Rukstad have noted that many executives couldn’t articulate their organization’s strategy in a simple statement. If executives couldn’t do this, it’s unlikely that anybody else in the organization could either. Their research shows that organizations lacking simple and clear statements of strategy have more difficulty implementing their strategy—or, worse, they didn’t have a strategy at all. 

A clearly defined strategy accomplishes many things, but first and foremost it aligns decisions and behaviours within an organization. It promotes a shared understanding of an organization’s environment, encourages all of its parts to work together, and permits scarce resources such as money and time to be allocated as efficiently as possible. Working from a broad statement of mission that answers the question “Why do we exist?” and a vision that answers the question “What do we want to be?,” a statement of strategy reflects an organization’s unique approach to how it competes for business. Consider the following important elements.

Objectives. Most organizations have clear strategic objectives that drive business activity now and into the future. Rather than make broad claims about wanting to maximize shareholder value or be a good corporate citizen, think about what objective will do either or both of those things (they’re the two factors that matter to most organizations one way or another). A strategic objective articulates an organization’s “ends”—where it wants to be in a specific and measurable sense.

Scope. What boundaries an organization sets on its activities are often less clearly specified than its overall objectives. The risk of failing to define boundaries comes from the inability to make obvious to employees which activities they should concentrate on and, most importantly, which they shouldn’t be doing. Generic dimensions of scope include the customer segment or product offering, geographic location, and vertical integration (what is made versus bought). Choices in these areas say as much about what an organization wants to do as what it doesn’t want to do, and it’s central to the trade-offs all organizations must make. A definition of scope specifies the domain in which an organization operates but not what should be done within it.

Advantage. All successful organizations have an advantage of some kind, which is the most important aspect of strategy. To properly understand advantage, organizations must be keenly aware of two things: a value proposition that explains why customers should buy their particular product, and unique activities that allow the organization to deliver on that value proposition. These two factors combine to create the means that allow the organization to achieve its ends and guide decisions on what and how things are done internally to create a competitive advantage that will allow for above-average performance.

An organization’s strategy—consisting of its objective, scope, and advantage—represents its competitive game plan. A solid strategy must be paired with a performance-management system like the balanced scorecard in order for the long- and short-term goals vital to its success to be defined and achieved. Such a system enables strategic plans to be monitored and implemented, allowing for superior performance. 

Being able to track the important elements of an organization’s strategy and measuring the activities critical to competitive success is what will allow it to excel. By putting strategy at the centre of the performance-management system, like the balanced scorecard does, thinking shifts away from financial measures and strict controls toward measurable goals and the encouragement of behaviours, processes, and structures that will allow them to be accomplished. 

The balanced scorecard is an invaluable tool for allowing managers to get a comprehensive view of their organization. It’s also a useful way for Progress to examine Atlantic Canadian organizations to help identify which organizations are doing the things today that will position themselves favourably in the future. A balanced scorecard recognizes the importance of different stakeholders, each of whom sees a unique aspect of performance as fundamentally important. Our balanced scorecard consists of four core areas, any of which can be the basis for superior value creation and strong financial performance.

Customers. How do customers view the organization, and how well does the organization understand its customers? Many organizations say they put their customers first, but a much smaller number truly understand the complexity of consumer behaviour.

Innovation. What does an organization do to continue to improve and create value? The ability to change is what allows an organization to maintain a competitive advantage, but it involves taking risks and abandoning some practices that have been successful in the past.

Human resources. How well-prepared are employees to achieve organizational goals? People perform the most complex and unpredictable tasks in organizations, and in that sense they’re indispensable. How human resources are managed—from recruiting/selection to training/development and incentives—often separates the good from the excellent organizations.

Sustainability and governance. What measures are in place to ensure that organizations do the right things? Good governance can act as the social conscience of an organization and present a fresh perspective on an organization’s behaviour and performance.

The famous adage “What gets measured, gets done” lies at the heart of performance management. In other words, don’t underestimate the impact of a formal strategy statement. Words lead to action by focusing the entire organization on what’s important through clearly defined performance objectives, human resource management practices, investments in technology, good governance, environmental awareness—and, most importantly, a shared understanding of a competitive game plan. 

The TOP 101 companies display many leading practices that position them well for the future. This year many new companies appear in our Top 10 lists—they’re the most progressive in creating a performance-management system tied to their strategy.

David Wicks is the dean of the Sobey School of Business at Saint Mary’s University in Halifax. He can be reached at david.wicks@smu.ca.