How can IBP help strategy execution?
A recent article in Harvard Business Review entitled Why Strategy Execution Unravels - and What to do About It revealed a number of common beliefs held by companies for tackling strategy execution are 'just plain wrong'. With a lack of coordination, communication and agility highlighted in the article as reasons organisations struggle when it comes to the execution of strategy, we address how Integrated Business Planning (IBP) can provide a solution to synchronising processes and behaviours for effective strategy execution.
The struggle - failure to coordinate across departments
The research cited in the HBR article revealed that only nine percent of managers say they can rely on colleagues in other functions and business units to deliver on promises all the time. HBR states this could lead to 'dysfunctional behaviours that undermine execution: they duplicate effort, let promises to customers slip, delay their deliverables, or pass up attractive opportunities'. In fact, being able to coordinate across departments came out as the second biggest challenge companies face when executing their strategy.
Integrated Business Planning (IBP) offers a solution to working multi-functionally within a company rather than in silos. A company cannot service customers in the most efficient, cost-effective and profitable way, unless its processes, people and tools are integrated and aligned. IBP focuses on people first as the key drivers for business success. Managing people and behaviours is vital to cultivate the environment for change. Once people are educated and work towards a common set of goals then the business can be fully integrated to execute strategy more effectively.
The struggle - lack of agility to adapt to changing markets
Every business should have a plan. But what happens if the market changes, should the business stick with the plan or adapt? According to HBR “nearly one-third of managers cite difficulties adapting to changing market circumstances”. This is backed up by 29 percent of companies revealing they react so slowly they can’t seize opportunities or mitigate threats and 24 percent admitting to reacting quickly but losing sight of the company strategy.
IBP enables companies to develop plans to the medium term horizon, typically 24-36 months into the future. This allows organisations to model alternative scenarios and determine the impact so that ‘best for company’ futures can be planned through alignment in the constituent functions or departments. By modelling potential scenarios in the future an organisation has time to prepare and communicate alternative plans - this creates agility.
The benefits continue; with IBP companies can control their costs, deliver customer satisfaction and reduce the impact of short-term changes. Overall the result is that the actual need for agility can be determined, effectively planned for and then offered as a cost-effective solution to customers who traditionally have demands that fluctuate.
The struggle - misunderstanding of objectives
A key finding in the HBR survey was that communicating strategy was vital to success, but only 55 percent of middle managers could name one of their company’s top five priorities. One reason discussed in the findings was that although top leaders are communicating the strategy, the problem lies with how well leaders understand what is being communicated, often diluting core messages. HBR states that “Top executives add to the confusion when they change their messages frequently - a problem flagged by nearly one-quarter of middle managers”.
IBP is a management process that provides a monthly ’check, correct and communicate’ mechanism for an organisation. By focusing each monthly planning cycle on what has changed since the last cycle and its impact on the different functional plans, integrated company plan, and delivery of annual and strategic objectives a leadership team can see where ’course correction’ is required. They can then make decisions and communicate those changes to the rest of the organisation. This creates a regular monthly rhythm of communication that makes clear the actions required to deliver the annual plan and strategy.
The struggle - lack of support
HBR stresses that strategy is best executed from middle management such as “distributed leaders” - they are the ones that handle day-to-day decisions, however they need to be guided from the top. Unfortunately, and as already discussed in this article, distributed leaders are at a disadvantage when top executives fail to ensure strategy is clearly understood across an organisation. Eight out of ten middle mangers in the survey revealed that they do their best to execute strategy but would like more clarity and support regarding the strategy.
Another problem raised by HBR is that “if top executives insist on making the important calls themselves, they diminish the middle manager’s decision-making skills, initiative, and ownership of results”. They recommend that executives can help improve execution and coordination by modelling teamwork and adding in structured processes and this is another area where IBP can help.
One defining element of IBP is the process of Integrated Reconciliation. This continuous process focuses on realigning the plans in the constituent parts of the organisation in reaction to internal or external changes. This enables identification and rectification of any gaps between the latest plans and the annual and strategic commitments of the organisation. It is middle management, which is responsible for identifying issues and opportunities as well as analysis and any recommendation for action at the appropriate level in the company. This effectively engages the middle management level and harnesses their talent, encouraging only the truly big issues to be elevated to the senior team for decision-making.
The solution - Start with the people
In order for businesses to be a success and execute their strategy effectively they need to start with the people and manage behaviour to create a best for company culture. Working in silos will lead to all sorts of problems, fire-fighting and lack of agility and coordination. Once a company is fully integrated and roles are defined they can then effectively plan the future, be clear on strategy and seize opportunities that will put them ahead of the game.
Stuart Harman is Partner at Oliver Wight Asia Pacific
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”