Paul Leinwand and Joachim Rotering are two of PwC’s finest here lending their expertise to HBR and looking at the Starbucks example f how to integrate Strategy and Execution. Research has shown that only about 8% of company leaders excel at both strategy and execution. Leaders who master both strategy and execution start by building a bold but executable strategy, addressing the questions “What are we great at?” and “What are we able to achieve?” rather than coming up with lofty plans and asking functional and business-unit teams to do their best to execute.
Next, leaders must ensure that the company is investing behind the change, which means linking the budget closely to the strategy. Finally, leaders need to make sure the entire organization is motivated to go the journey. Great leaders know that success stems from specific skills that come together in unique ways to do the challenging tasks in executing the strategy.
For decades, we’ve often thought of leadership profiles in unique buckets—two popular varieties were the “visionaries”, who embrace strategy and think about amazing things to do, and the “operators”, who get stuff done. We intuitively knew that there must be leaders that span these areas, but in fact, few do. According to a global survey of 700 executives across a variety of industries conducted by Strategy&, the strategy consulting division of PwC, only 8% of company leaders were said to excel at both strategy and execution.
You may think that success can be achieved by excelling at either strategy or execution individually—that great visionaries can change how we see the world, or that amazing operators can wind up outperforming competitors. But our experience and research suggests that the days of keeping strategy and execution as separate topics are ending: We need leaders that can create big promises to customers, and help their organizations deliver on those promises.
Take Starbucks: CEO Howard Schultz created a very ambitious aspiration for the company, far more than just being a seller of coffee. He wanted Starbucks to be a “third place” for conviviality beyond home and the workplace. Visit a Starbucks anywhere in the world, and you will find the same consistently comfortable and welcoming ambiance. But he didn’t get there simply by telling his staff to “be warm and friendly”.
Starbucks has been able to deliver on its promise because that promise is tightly linked to the company’s distinctive capabilities. The feel of Starbucks stores isn’t created merely by the layout and the décor—it exists because the people behind the counter understand how their work fits into a common purpose, and recognize how to accomplish great things together without needing to follow a script.
Over many years, Starbucks has built a capability to foster a relationship-driven, “employees-first” approach. It was Schultz who famously said “You can walk into [any type of retail store] and you can feel whether the proprietor or the merchant or the person behind the counter has a good feeling about his product. If you walk into a department store today, you are probably talking to a guy who is untrained; he was selling vacuum cleaners yesterday, and now he is in the apparel section. It just does not work.”
Schultz made sure that Starbucks would be different: Workers are called “partners” rather than employees, and even part-time staff (in the U.S.) receive stock options and health insurance. At the height of the global financial crisis, when other companies were cutting HR costs wherever they could, Starbucks invested in staff training, including coffee tastings and courses that ultimately qualified employees for credit at higher education institutions. Beyond employees, much of what you will see and experience at Starbucks has been well thought out to accomplish the company’s mission, from the music played to the furniture selected. Even the bathrooms are strategic at Starbucks, because they play a part in allowing customers to spend time in the “third place.”
Leaders like Howard Schultz don’t just have both the visionary and operator skills—they deeply value the connection between the two skill sets. In fact, they see them as inextricably linked, since a bold vision needs to include both a very ambitious destination and a well-conceived path for execution that will get you there. This is ever more important today, where differentiating your company is so difficult. Differentiation increasingly requires more innovative thinking, and the use of very specific areas of expertise (like Apple’s winning design, a capability that wouldn’t have been prioritized in most technology companies before Jobs).
Leaders who master both strategy and execution start by building a bold but executable strategy. Next, they ensure that the company is investing behind the change. And last, they make sure the entire organization is motivated to go the journey.
Developing a bold but executable strategy starts with making sure leaders have addressed the questions of “What are we great at?” and “What are we able to achieve?” rather than coming up with lofty plans and asking functional and business-unit teams to do their best to execute. Indeed, they spell out the few differentiating capabilities that the company must excel at to realize the strategy.
Ensuring that the company is investing behind the change means that leaders recognize that the budget process is one of the most important tools in closing the strategy-to-execution gap. Cost isn’t an exogenous variable to be managed—it is the investment in doing the most important things well. But rarely are budgets linked closely to the strategy. If your company is merely incrementalizing the budget up or down by a few percentage points, ask yourself whether the investments are really reflective of the most important tasks.
Motivating individuals is a hugely underleveraged tool to close the gap between strategy and execution. Great leaders know that success stems from specific skills that come together in unique ways to do the challenging tasks in executing the strategy. But today most employees don’t even understand how they are connected to the strategy. In a recent (not-yet-published) survey of 540 executives, managers, and non-managers by Strategy&, only 28% of employees said that they feel fully connected to the purpose and identity of their organization. Articulating the strategy in human terms—what capabilities the company will need to build, and what skills are required to do so—not only helps the company focus on how to develop the right talent, but it allows individuals to understand how their role fits into the overall strategy, and allows them to see their work in a much more fundamentally connected way.
Paul Leinwand is Global Managing Director, Capabilities-Driven Strategy and Growth, with Strategy&, PwC’s strategy consulting business. He is a principal with PwC US. He is also the coauthor of several books, including Strategy That Works: How Winning Companies Close the Strategy-to-Execution Gap (HBR Press, 2016).
Joachim Rotering is the Strategy& Global Leader as well as the Europe, Middle East and Africa Leader. He is a Managing Director with PwC Strategy& Germany and works primarily with clients in the oil, chemicals, and steel industries.
ADAM PRETTY/GETTY IMAGES