Strategy, Structure and Execution: The Essential Leadership Trilogy

Leadership is all about delivering results. It could be through capital assets and human resources; it could be through business for profit or service for non-profit. Leader may have qualities that fit exactly the requirements of an entity; he or she could possess generic leadership capabilities applicable for diverse entities. Much research has focused on what makes a leader deliver superior performance; there is an even greater level of research and hypotheses on generic and specific leadership qualities. There is thus a surfeit of pronouncements on what makes leaders performers and what makes leadership tick. As with everything else in management, leadership is about a process; a process that makes ideas take shape as plans and get executed to deliver results.

This blog post considers the trilogy of leadership in terms of strategy, structure and execution. These are probably sequential steps in startups but in most other cases, they are continuously iterative and mutually adaptive. There is research that establishes that structure follows strategy, and also that results are more about execution than about strategy or structure. While this may be true, a perfectly optimized leadership process requires that strategy, structure and execution are well aligned. This blog post addresses a few issues: (i) achieving alignment between strategy, structure and execution, (ii) adaptive adjustment amongst the three components and (iii) leader influencers on the leadership process trilogy, and vice versa. This theory is important because no leadership challenge or no leader is akin to each other, and it would be helpful to have a process that is both personality and context neutral.

Crafting a strategy

Strategy, simply put, is defined as a plan that is intended to achieve a specific purpose. In management jargon, strategy has assumed a larger connotation of a process or an outcome that involves an overall corporate plan, duly supported by functional plans, to achieve a long term goal over a period, usually of three to five year duration. Strategy formulation is considered as a process that brings all key personnel of an entity aligned on to certain objectives. Strategy is also considered to incorporate several methodologies such as integration, diversification, merger, acquisition, cost leadership, differentiation, niche, all at the corporate level, backed by functional level strategies such as market share building, product portfolio development, operational excellence and so on.

Strategy, whether seen as a plan or a comprehensive process, is the foundation of all developmental actions for a firm. A leader has the opportunity and responsibility to put his stamp on the strategy or strategy development process. The Tata Group under the previous chairman, Ratan Tata, had a strategy of development in industrial sectors such as automobiles, steel, telecommunications, beverages, power and airlines, backed by a strategy of globalization. The same group under the current chairman, Cyrus Mistry, has a new strategy of operating in several infrastructure sectors. Many times, strategy formulation has a context based on the growth or profit position of the company. Although the process itself is complex, strategy becomes referred to in simple phrases of turnaround, revival, expansion or diversification. The leader must continuously evaluate the best strategic options while ensuring change with continuity.

Establishing a structure

Structure is one of the fundamental means available for leaders to deliver the results. Structure means the organizational structure encompassing the processes of coordination and talent management as well. There are different organizational structures that are available for a leader but structure must follow the strategy. A focused mono-product startup would require a simple functional structure while a global multisite network would call for a complex organization structure. No single organization structure has the capability to provide complete solutions, particularly if business is constantly evolving. There exist many choices in designing an organizational structure, several of which also present paradoxes. Concepts such as centralization and decentralization, empowerment and accountability, formal and informal reporting on one hand and flat or multilayered, functional or product, project or matrix, and regional or global engage the attention of organization leaders. The main concern, however, should be on another important factor.

An organization structure is an important aid not only for execution of strategy but also for developing leaders. There tends to be an alignment between these two purposes on the face of it; good talent leads to good execution while good executors qualify themselves to be good leaders. The real alignment, however, comes only when a profit and loss (P&L) responsibility is integrated into the organization structure. For example, it is easy for a business leader to splurge resources on projects when he has no responsibility for the revenues and profits accruing out of the projects (in a functional organization these are largely driven by marketing and finance departments). Similarly, a business leader may not ever get to understand the total nuances of organizational management if he or she has no linkage with profit and loss management. The apex leader’s biggest challenge lies in designing an organizational structure and establishing management processes that ensure functional efficiency as well as business effectiveness.

Ensuring execution

The third part of the leadership trilogy relates to execution. Strategy can be spoken about, structure can be seen around but it is execution that institutionalizes a business. Execution is often seen as undertaking a set of activities within budgeted resources and timelines. Effective execution, however, is more than that; it involves continuous calibration against strategy, being aware of developments in the competitive landscape and developing leaders who have execution doggedness and environmental resilience. The leader has the primal responsibility to ensure end-to-end execution. A well executed factory, a well designed product and a well executed launch may not necessarily get translated into a well executed business. Tata Nano car is a striking example of the well executed functional parts failing to make for effective business execution.

The leader’s responsibility lies in calibrating functional execution against a backdrop of business execution. That is where a well developed strategic plan which is extended into functional strategic and execution plans counts. In most organizations, however, strategy is seen as an annual mechanism independent of execution while budgets (that flow out of strategy) and execution (that is authorized by budgets) are seen as more aligned. In some organizations, strategic investments are considered as sunk costs rather than as investments that can be repurposed. Viewing execution in a strategic perspective is a leadership skill larger than evaluating execution against budgets. Wise leaders ensure that execution provides for flexibility for strategic flexibility or course changes even while executing. Reliance Communications has, for example, ensured that its strategy and execution of CDMA based plans have not prevented them from moving on to GSM bandwagon at a later stage.

Effective trilogy

The foregoing establishes that strategy, structure and execution are equally and simultaneously important for effective leadership. An effective leader is one who, for each objective he or she chooses, visualizes an end-to-end picture of strategy, structure and execution. The Malaysian low cost airliner AirAsia’s decision to enter Indian domestic airline sector reflects such leadership trilogy approach. Way back in October 2012, the firm decided to enter the Indian domestic airspace with a truly low cost (not promotional fare) model, stimulating traffic in virgin routes on the planks of both cost and quality. The strategy was followed up with a new hub in Chennai, and a scaling-up business model, including hedging of fuel costs for three years. The strategy involved tying up a joint venture with the reputed Tata Group which had an interest in civil aviation historically.

Even as AirAsia awaited various government approvals from February 2013 onwards, the  parent company started establishing a structure in India. An Indian subsidiary was set up, and a board was constituted. A chief executive officer and a chief commercial officer were promptly recruited who in turn started setting up the operating organization. The firm took on board Ratan Tata, who has a passion for flying and civil aviation, as the Chief Advisor and S Ramadorai, former Chief of TCS as the Chairman. Tony Fernandes, the founder-CEO of AirAsia himself joined the Indian board as the Chairman reflecting the importance attached to the Indian operation. The firm also started executing by signing up travel agents and booking agents for the network, and ordering the aircraft, having applied for and received in-principle approval to import 10 A320-200 aircraft. AirAsia, as a brand, has also started becoming visible in India by extending and advertising its international routes to India.  

Coping with surprises

If the crux of leadership is the strategy-structure-execution trilogy, the essence of success lies in how well aligned and integrated these three components are. The above brief account of AirAsia India, a case study in the making, demonstrates how these three are to be aligned and integrated from a forward thinking. It involves proactive risk-taking, and also a belief in the model to overcome all competitive opposition. Despite the well laid plans, there could always be surprises; for example, AirAsia did not imagine that the Tata Group would form its own joint venture with Singapore Airlines for the Indian civil aviation market. Only when strategy, structure and execution are aligned with due flexibility and continuous calibration, firms can cope successfully with surprises. 

The ability to cope with surprises comes with flexibility in trilogy components rather than making them risk-proof. There will always be internal and external variables that cannot be forecast which could impact the starting assumptions of any venture, organic or inorganic. Depending on the nature of the surprise, one or more of the three elements of strategy, structure and execution would need to be differentially emphasized to manage the surprises. Rather than an elaborate organizational bureaucracy, a small leadership group often provides the drive for a successful trilogy. Tata Motors’ success in achieving a successful bid and an even more successful turnaround of the JLR infrastructure is a case study in itself of strategy-structure-execution operating in impactful alignment.

Posted by Dr CB Rao on April 19, 2014