Implementing a business strategy requires a specific framework for action that mobilizes the entire company to achieve the objectives aligned with its mission and vision.
The choice of the appropriate framework will depend on several factors, the strategic objectives and the specific characteristics of the company, such as size, organizational complexity and culture, the sector in which it operates and the resources available.
Some of the main benchmarking frameworks used to guide this process are as follows
Balanced Scorecard
A performance management system that links strategy with measurable objectives, developed by Kaplan and Norton. This framework links an organization's vision and strategy with specific objectives and indicators in four perspectives. It helps translate strategy into operational objectives and performance measures, allowing for continuous monitoring and adjustment.
Characteristics
Perspectives: The Balance Scorecard is based on four key perspectives; financial, customer, internal processes, and learning and growth.
Objectives and indicators: each perspective has specific objectives and indicators or metrics are used to monitor the extent to which the objectives are achieved.
Linking strategies and results: allows linking key strategies and objectives with performance and results.
How it works
Determination of parameters: the process of creating a Balance Scorecard begins with the determination of the objectives to be achieved by the organization, the most appropriate indicators to monitor the degree of achievement of the objectives, the specific goals in relation to the specific results of these measurements and the actions, initiatives, projects or programs to be implemented to achieve these actions.
Monitoring: once all these factors are set, all these measurements, goals and objectives are placed in a panel or chart, using specific software to monitor the progress of each one of them.
Strengths
Holistic approach, alignment between strategy and operations, progress tracking.
Helps align the organization's activities with its overall vision and strategy by coordinating individual and departmental actions.
Facilitates communication of strategic objectives and progress at all levels of the organization.
Provides a framework for measuring and monitoring performance in different key areas.
Provides a balanced view of financial, customer, internal process, learning and growth perspectives.
Weaknesses
Can be complex to implement and maintain, especially in large organizations, requires significant commitment and resources.
Lack of commitment from top management can hinder its effectiveness.
Can focus too much on indicators, generating too many metrics and neglecting the primary focus on the actions and behaviors that drive them.
It can be inflexible in the face of sudden changes in the environment.
It is a powerful tool that enables organizations to assess their performance in a holistic and excellence-oriented manner.
2. Strategy Map
From the same authors of the Balanced Scorecard and is a complementary technique that serves as a tool, providing a visual representation that articulates the strategy of an organization in terms of interrelated objectives in different perspectives. It shows the cause-effect relationships between the different strategic objectives and makes it possible to identify the key initiatives to achieve them.
Characteristics
Perspectives: A strategy map is divided into four perspectives: financial, customer, internal processes, and learning and growth. Each perspective contains specific objectives that contribute to the overall strategy.
Objectives: Objectives are the specific results that an organization expects to achieve. they are articulated in each of the four perspectives.
Interrelationships: the objectives in a strategy map are interrelated, meaning that the achievement of one objective can influence the achievement of others. These relationships are often represented as arrows connecting the objectives.
How it works
Define the strategy: the organization defines its strategy and breaks it down into specific objectives within each perspective.
Draw the map: the objectives are plotted on the strategy map, showing how each contributes to the overall strategy.
Interconnect the objectives: arrows are drawn between the objectives to show how they are interrelated.
Implement and monitor: The organization implements its strategy and uses the strategy map to monitor progress toward each objective.
Strengths
Visualization of strategy: strategy maps allow visualization of an organization's strategy in a clear and concise manner, which facilitates understanding and communication of the strategy.
Focus on key objectives: they help organizations focus on key objectives and understand how they are interrelated.
Organizational alignment: they foster alignment between the different levels of the organization, ensuring that everyone is working towards the same objectives.
Basis for performance measures: they form the appropriate basis for balanced scorecard performance measures.
Weaknesses
Complexity: creating a strategy map can be a complex process that requires a clear understanding of the organization's strategy.
Requires commitment: for a strategy map to be effective, it requires the commitment and participation of the entire team, from leadership to employees.
Regular updating: strategy maps need to be reviewed and updated regularly to reflect changes in strategy or the business environment.
Risk of oversimplification: there is a risk that simplifying the strategy in a strategy map may omit important details or nuances of the strategy.
A strategy map is a powerful tool for visualizing and communicating an organization's strategy. It allows organizations to see how their objectives interrelate and how each contributes to the overall strategy. It also provides a framework for monitoring progress and making adjustments as needed.
3. Value chain
A business analysis model, developed by Michael Porter, used to identify and break down the key activities that a company performs to create value for its customers, improving efficiency, reducing costs and creating a sustainable competitive advantage.
Characteristics
Primary and support activities: the value chain is divided into two main categories: primary activities and support activities. Primary activities are those that are directly related to the production and delivery of the product or service, such as logistics, production, marketing and sales. Support activities are those that are not directly related to production, but are necessary for the primary activities to be carried out effectively, such as human resource management, information technology and infrastructure.
Value creation: this model identifies a company's key activities and how they add value to the final product or service.
Process and activity optimization: this tool is used to understand how a company can improve its efficiency and profitability by optimizing its processes and activities.
How it works
Identification of key activities: the organization identifies its key activities that it performs to create value for its customers.
Value chain analysis: a value chain analysis is performed to identify the activities that add value and those that do not, and to identify opportunities for improvement in each of the activities.
Improving efficiency and profitability: by understanding how value is created at each stage of the value chain, companies can make informed decisions on how to improve the efficiency and profitability of their operations.
Strengths
Identification of key processes: allows the identification and analysis of a company's key processes.
Efficiency and effectiveness improvement: helps to improve the efficiency and effectiveness of processes.
Identification of improvement opportunities: facilitates the identification of opportunities for improvement and cost optimization.
Improved coordination and collaboration: enables better coordination and collaboration between the different departments of the company.
Creation or strengthening of competitive advantage: the main objective and advantage of a value chain is to create or strengthen a competitive advantage.
Weaknesses
Complexity: Value chain implementation can be a complex process that requires a clear understanding of the organization's strategy.
Requires commitment: for a value chain to be effective, it requires the commitment and participation of the entire team, from leadership to employees.
Regular updating: value chains need to be reviewed and updated regularly to reflect changes in strategy or the business environment.
Risk of oversimplification: there is a risk that simplifying the strategy into a value chain may omit important details or nuances of the strategy.
By breaking down key activities in the production and delivery of a product or service, companies can identify opportunities for improvement and optimize their processes to create more value for their customers.
4. VRIO Matrix (Value, Rarity, Inimitability, Organization)
It is a strategic analysis tool used to evaluate an organization's resources and capabilities in terms of their value, rarity, imitability and organization. It was developed by Jay B. Barney as a way of assessing a company's competitive advantages. It allows the identification of key internal strengths and weaknesses to implement a successful strategy.
Characteristics
Value: evaluates whether a company's resource or capability adds value to the organization and allows it to take advantage of opportunities or neutralize threats.
Rarity: considers whether a resource or capability is rare among current and potential competitors.
Imitability: determines whether a resource or capability can be easily imitated or difficult to imitate by competitors. Resources that are costly to imitate may provide a sustainable competitive advantage.
Organization: assesses whether a company is organized to exploit the value of resources and capabilities.
How it works
Identify resources and capabilities: the organization identifies its key resources and capabilities.
Evaluate with VRIO: each resource and capability is assessed in terms of value, rarity, imitability and organization.
Determine competitive advantages: resources and capabilities that are valuable, rare, costly to imitate and exploited by the organization can provide a sustainable competitive advantage.
Formulate strategy: the organization uses the results of the VRIO analysis to formulate its strategy.
Strengths
Competitive advantage identification: allows companies to assess their competitive advantage by defining how strong a company's competitive advantage is based on 4 questions.
Internal analysis: is an internal analysis that helps companies identify the advantages and resources that give them a competitive advantage.
Identification of unique resources: helps companies understand their unique value and what they can do to maximize their potential.
Success strategies: allows any business to know the points of competitive advantage it has in its market.
Weaknesses
Complexity: implementing the VRIO matrix can be a complex process that requires a clear understanding of the organization's strategy.
Requires commitment: for a VRIO matrix to be effective, it requires the commitment and participation of the entire team, from leadership to employees.
Regular updating: VRIO matrices need to be reviewed and updated regularly to reflect changes in strategy or the business environment.
Risk of oversimplification: there is a risk that simplifying the strategy in a VRIO matrix may omit important details or nuances of the strategy.
It is a useful tool for assessing an organization's resources and capabilities and determining its potential competitive advantages. It enables organizations to identify their strengths and weaknesses and formulate strategies that exploit their unique resources and capabilities.
5. EFQM Excellence Model (European Foundation for Quality Management)
It is a business management tool that focuses on excellence and continuous improvement of an organization. It provides a framework for total quality management and organizational excellence considering aspects such as leadership, strategy, processes, resources and key results to implement and evaluate the strategy.
Characteristics
Results orientation: the model focuses on achieving outstanding results in line with the organization's strategy.
Customer orientation: focuses on satisfying customer needs and expectations.
Leadership and consistency: the organization's leaders must establish a clear vision, inspire their team and foster a culture of excellence.
Management by processes and facts: the effectiveness of internal processes and data-driven decision making are valued.
People development and involvement: employee development and empowerment are valued, as well as the creation of a favorable working environment.
Continuous process of learning, innovation and improvement: the model fosters a culture of learning and continuous improvement.
Partnership development: emphasizes the importance of building strong relationships with partners, suppliers and other key stakeholders.
How it works
Self-assessment: it is primarily a system of self-assessment by organizations.
Training and assessment tools: provides networks, training, assessment tools and recognition to support the application of the model.
Recognition: with a completed assessment, an organization can participate in the three-stage “Levels of Excellence” awards program.
Strengths
Focus on excellence: promotes the development of a culture of continuous improvement and seeks excellence in all aspects of the organization.
Process integration: this model encourages the integration of all company processes, which contributes to improving the efficiency and effectiveness of the organization as a whole.
Results orientation: helps companies establish performance indicators and measure the results obtained, which facilitates evidence-based decision making.
Employee involvement: this model promotes the active participation of employees in improving the organization, which can enhance their commitment and motivation.
Weaknesses
Difficult to implement: adoption of the model can be challenging for some organizations, as it involves changes in culture and internal processes.
Exclusive focus on quality: some critics argue that its focus is mainly on quality, leaving aside other important dimensions such as social responsibility or sustainability.
Complexity in measuring impact: measuring the actual impact of the model can be complicated, as many factors can influence the results obtained by a company.
Lack of adaptability: it can be rigid and not fully adaptable to the particularities of all organizations.
It is a powerful tool that allows organizations to evaluate their performance in a holistic manner and oriented towards excellence and continuous improvement, however it requires careful analysis prior to implementation to ensure its suitability to the specific context and needs of each company.
6. OKR (Objectives and Key Results)
Flexible and agile methodology that establishes and aligns ambitious strategic objectives (Objectives) with key metrics and specific actions to measure progress (Key Results). Promotes alignment, focus and accountability in strategy implementation throughout the organization.
Characteristics
Objectives and key results: consist of two basic elements: an objective and 2-5 key results needed to achieve it. Objectives are qualitative, specific, time-bound and measurable goals. Key results are quantifiable parameters that allow progress towards the objective to be tracked.
Alignment and measurement: are a practical goal-setting framework that helps organizations and teams align and measure progress toward strategic objectives.
Applicability at all levels: they are effective throughout the organization, from the C-Suite to the team level and ultimately at the individual level.
How it works
Setting objectives and key results: involves defining an objective and setting 2 to 5 key results needed to achieve it.
Progress tracking: provide a clear indication of progress and performance, enabling organizations to track progress towards their objectives.
Regular review: usually once a quarter or month, to assess progress and make adjustments as needed.
Strengths: focus on results, transparency, ease of adapting to change.
Weaknesses: risk of strategic misalignment, requires appropriate organizational culture.
Strengths
Setting ambitious goals: OKRs allow setting ambitious and measurable goals.
Regular review: OKRs are reviewed regularly, generally once a quarter or month.
Quantitative approach: OKRs provide a quantitative approach to goal setting, allowing progress towards a goal to be objectively measured.
Goal alignment: OKRs help align everyone around a shared goal.
Simplicity: uses a set of objectives (O) and key results (KR) that are easy to understand and communicate.
Transparency: promotes transparency and visibility of progress toward objectives.
Results focus: focuses on achieving concrete and measurable results.
Flexibility: allows for rapid adjustments to the strategy in response to changes in the environment.
Weaknesses
Lack of structure: lack the structure and rigor required for complex projects.
Short-term focus: focus too much on short-term results and neglect long-term vision.
Dependence on leadership: requires strong leadership and commitment for success.
True alignment challenge: although OKRs are designed to align everyone around a shared goal, achieving true alignment can be challenging.
Prescriptive key results: key results in OKRs can be prescriptive, which can limit flexibility.
Too many OKRs: some organizations set too many OKRs, which can dilute focus and make it difficult to track progress.
This framework is used for goal setting and alignment of objectives, tracking their results. OKRs help organizations align their efforts and ensure that everyone is working toward the same goals.
7. Hoshin Kanri Methodology
It is a methodology to align the business strategies coming from the company's leaders, the tactics deployed by the management and the activities of the employees.
Characteristics
Strategy alignment: used to align business strategies coming from company leaders, tactics deployed by management and employee activities.
Monitoring matrix: uses a monitoring matrix with annual objectives, indicators under observation, priorities and long-term goals.
Effective communication: this method prioritizes unity and the achievement of common annual objectives, as well as the communication of a long-term goal to all members.
How it works
Define the strategic vision: according to the Quality Function Deployment Institute, one of the objectives of the Hoshin Kanri method is to establish the corporate vision and mission.
Identify the most pressing opportunities and threats: this model also allows for an analysis of opportunities and threats.
Generate annual objectives: after identifying the first areas to be resolved, it is time for the leadership or board of directors, together with the management or area directors, to start developing the company's annual objectives based on this methodology.
Develop the necessary steps to achieve them: once the annual objectives have been generated, both levels of the organization, especially management and area directors, must develop, with the help of the model, the tactics that will lead to the achievement of the objectives.
Strengths
Focus on action: focuses on the implementation and monitoring of specific and measurable objectives.
Strategic alignment: promotes the alignment of objectives at all levels of the organization.
Continuous improvement: fosters a culture of continuous improvement through the Plan-Do-Check-Act (PDCA) cycle.
Effective communication: establish clear communication channels for the transmission of strategy and monitoring of progress.
Weaknesses
Rigidity: can be inflexible in the face of sudden changes in the environment.
Time-consuming: requires significant investment of time and resources for implementation and maintenance.
Top-down approach: not suitable for organizations with more participative cultures.
It is a powerful tool that allows organizations to evaluate their performance in a holistic and excellence-oriented manner.
Selecting the right framework and final recommendations
The choice of the appropriate approach will depend on a number of factors such as strategic objectives, size, organizational culture, the industry in which it operates and available resources. It is important to evaluate the strengths and weaknesses of each approach, selecting and combining those that best suit the company's specific needs.
Regardless of the framework chosen, it is essential to have a team committed to implementing the strategy, an effective communication system and mechanisms for monitoring and evaluating progress. Successful implementation of a business strategy requires continuous effort and constant adaptation to changing market and environmental conditions.
Bibliography
Barney J., Hesterly W. (2006). strategic management and competitive advantage: concepts. Publisher Pearson College Div.
Doerr J. (2018) Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs. Publisher Portfolio.
Hutchins D. (2008). Hoshin Kanri: The Strategic Approach to Continuous Improvement. Publisher Routledge.
Kaplan R. Norton D. (1996). The Balanced Scorecard: Translating Strategy into Action. Harvard Business Review Press
Hakes Chris (2007) The EFQM Excellence model for Assessing Organizational Performance: A management Guide. Van Haren Publishing
Comments