Having your cake and eating it: When do you need a new structure to execute in the new normal?
If your company underwent drastic changes in its strategy or operating model during the past 2 years, you are not alone. Back in 2020, garment companies started to produce face masks, and appliance manufacturers churned out respirators. Not every CEO made such dramatic shifts in their operations, but many of us needed to re-orient our goals and execution to survive and thrive.
In addition, some sectors have experienced fundamental shifts accelerated by the pandemic and are most likely permanent. For example, mall operators have seen a radical shift in consumer behavior relative to in-person shopping; car manufacturers are facing a permanent transition to electric mobility.
The question is: if your strategy changed, should our organization change too? Do you need to execute differently? The answer is yes.
Different goals, different execution: the Harley-Davidson LiveWire story
Harley-Davidson is one of the most iconic brands in the world. Like all global brands, its appeal is grounded in consumer perceptions about tradition and the permanence of its values.
Tradition can be an asset, but when it comes to the transition the motorcycle market is undergoing, H-D was at risk of staying mired in producing increasingly outdated products in the middle of a fundamental shift to electric mobility.
H-D saw the opportunity and launched an electric motorcycle, the Livewire, which existed alongside their line-up for some time. But H-D realized it could not properly execute its electric strategy while still focusing on its more traditional bikes. As a result, it announced in December 2021 that it would spin off LiveWire as an entire brand and operations.
One goal, well-executed
H-D’s story is not isolated. Ford Motor Company made a similar announcement for the same reason: the execution capabilities to support a strategy based on innovation (in this case, transitioning to electric bikes) cannot durably co-exist with those required to enable a strategy based on efficiencies at scale. While H-D has yet to reveal how LiveWire is set up, we can expect that many execution aspects are different from their traditional, scale-based operations:
● Strategic goals and metrics geared towards innovation & speed to market vs. production volume
● Leadership more focused on empowering teams for creativity
● Flatter structure, more cross-functional to accelerate problem resolution in the face of new challenges
● Talent: more electrical engineers, battery experts, materials specialists
H-D rightly understood that execution and strategy must be in sync. In fact, they did not choose one strategy over the other: they intend to maximize the remaining potential of the traditional large bike market while building market leadership in electric bikes, but they identified the risk of pursuing two very different strategies with a single execution model.
What are you trying to do and how well are you doing it?
Not every company needs to spin off some of its operations to succeed. But every company CEO should be crystal clear about their goals and able to determine whether they are executing them well.
One Line-of-Sight client is a large family office and wealth management firm. Employees’ morale was low, and the firm struggled to reach its goals for assets under management.
After running a Health Scan on their operations, they realized they were in fact pursuing two very different segments with a single operating model: on one end, high net-worth individuals requiring individual touch and a delivery model based on customer intimacy, and on the other end, mid-market clients who needed to be serviced at scale to be profitable. The mix of high-service and phone-based support was inadequate for either segment, costing both sales and profit.
After a comprehensive review of their execution capabilities, they set up two delivery models in two divisions for their two segments: a customer-intimacy-based model to serve clients with very high investable income and an operational excellence-based model for mid-market. As a result, the client increased their retention in both segments, and they doubled their assets under management despite the pandemic.
Where to start
If you feel that your execution capabilities and your strategy are increasingly at odds, run a health scan to evaluate how clearly you have articulated your strategy (to yourself, to your executive team, and to your employees), and how much your execution capabilities are enabling, or preventing success. Are employees focusing on the right things, and are you helping them do so? It’s ok to develop new goals when circumstances demand it, but goals and execution should remain in lockstep. If you want to evaluate how much execution tax you’re paying due to misalignment with your objectives, give us a call. We can discuss how other companies have done it, and how you can do it too.