Why Strategy Execution Fails

In your response to the prompt, you may have identified some of the following factors
that play a role in derailing strategy execution:

 Too many initiatives or unclear priorities

 Poor communication between senior leaders and employees
 Ineffective distribution of resources 

A lack of organizational focus underlies many of these problems. Research has

identified that those businesses that do execute strategy successfully do so by
constantly making difficult choices/tradeoffs and setting clear priorities that allow them to
focus on and measure the most critical elements for the business’s continued success. 

We have designed this course to provide you with frameworks and tools that will allow
you to make those difficult choices and measure their effectiveness. 

During the course, you will have the opportunity to learn from business leaders
throughout the world. Here are a few of those leaders on the tough choices they have
had to make to execute strategy successfully. These choices introduce themes that we
will develop throughout the course.

1.5.2 Strategy as Position

Identifying a Value Proposition and
Differentiators
Perhaps your definition focused on describing the competitive position your business
has taken within the marketplace. This is the first of the four Ps: strategy as position.

Position in a competitive market is always an important consideration, and it’s often the
first thing that comes to mind when we hear the word “strategy.” However, in order to
implement strategy effectively, businesses should also analyze their strategies from
three additional angles, aligned to the control systems introduced in Lesson 1. In this
lesson, we will uncover each of the four Ps by analyzing the strategy of C3.ai, a
business-to-business (B-to-B) software company based in California that helps its
customers design and deploy artificial intelligence applications. 

To get us started, let’s learn about the company’s value proposition from CEO Tom
Siebel. A value proposition is the mix of product and service attributes that a business
offers to customers in terms of price, product features, quality, availability, image, buying
experience, and after-sales warranty and service. Differentiation is what sets a firm’s
value proposition apart from competitors' and answers the question, “Why will customers
choose to buy from us as opposed to our competitors?” Together, a business’s value
proposition and its sources of differentiation shape its strategy as position. 

As Tom shares here, an important dimension of C3.ai’s value proposition is its unique
ability to develop artificial intelligence applications at a level of sophistication that lies
beyond the internal capabilities of its customers. These applications address critical
challenges for large enterprises in both the public and private sectors. For example,
Enel, a multinational energy company based in Italy, is able to predict instances of fraud
(such as electricity theft) and outages across millions of its smart meters using C3.ai
technology.

Note: This online case is based on a case developed by Professor Robert Simons and
Researcher George Gonzalez of the California Research Center (HBS Case No. 119-
004). 

Identifying Span of Control

Let’s begin with span of control. Recall that span of control defines the range of
resources for which an individual is given decision rights and held accountable for
performance.

At Go Mobile, team leaders have a narrow span of control: they do not have decision
rights over product pricing, product mix, stock levels, or promotion design. 

Please set span of control for your selected job by moving the slider to the appropriate
value. 

There are two things to remember as you adjust the span:

1. Your selection should illustrate the span of control as it currently exists in the job,
rather than the ideal span of control for the position.
 2. When setting the span of control, it is important to think about the possible range
of resources typically available to someone in that particular job, rather than the
resources available to the organization as a whole. For example, let’s say you
were setting this span for a vice president of marketing. You wouldn’t want to
consider how many resources this vice president has relative to the CEO or more
junior managers in the business. Instead, you would want to consider what level
of resources the role currently controls relative to the range of resources a vice
president of marketing could potentially control in any business. 

Setting Span of Control

Span of control is determined by the allocation of resources, such as:

 Headcount
 Budget Allocation
 Balance Sheet Assets
 Decision Rights: Products and Services
 Decision Rights: Intangible Resources

Next, let’s turn to span of accountability. Recall that span of accountability refers to the

range of trade-offs inherent in the performance measures used to evaluate the
achievements of the person in that job. At Go Mobile, team leaders have a wide span of
accountability: they are responsible for running their stores as independent business
units, and they are accountable for a number of critical store targets, such as sales
targets, profit targets, and unsold inventory.

The diagram here presents common financial and non-financial measures and the range
of trade-offs within them.
Left side of funnel. List of non-financial measures. Measures at the bottom of the funnel
entail the narrowest trade-offs. Moving up the funnel, trade-offs in the measures listed
become increasingly wide. From bottom of funnel, measures listed are inputs, process,
outputs, product reliability, customer satisfaction, market share, brand equity, and
competitive position.

Right side of funnel. List of financial measures. Measures at the bottom of the funnel
entail the narrowest trade-offs. Moving up the funnel, trade-offs in the measures listed
become increasingly wide. From bottom of funnel, measures listed are operating
expenses, manufacturing costs, sales revenue, profit and loss, P and L and current
assets, return on capital employed, residual income, and market value.

Setting Span of Influence

Draw on your analysis to adjust the span of influence slider for this job.

Span of influence is determined by job attributes such as:

 Entrepreneurial Gap (Span of Accountability > Span of Control)

 Stretch Goals
 Cost Allocations
 Cross-Unit Task Forces
 Dotted-Line Reporting
 Matrix Accountability 

Finally, let’s turn to span of support. Remember, this slider is answering the question:
How much support can I expect when I reach out to others for help? Adjust the slider to
indicate how wide the span of support currently is for the job you have chosen to
analyze.

Setting Span of Support

Span of support is determined by organization-wide variables such as:

 Shared purpose
 Group identification
 Trust
 Group-based rewards
 Equity ownership
2.5.5 Analyzing Job Design
Problems
Reviewing the Supply and Demand Balance for Your
Chosen Job
Now that you have set all four spans, you will have the opportunity to see whether the
design of your job works.

If your sliders form an “X,” or if the lines otherwise intersect, your job is designed so that
supply and demand are in balance. Generally, this is good news. But, as we will
consider momentarily, you must still evaluate whether you have adjusted the sliders
optimally in relation to your strategy. For example, are you satisfied with the width of
the entrepreneurial gap? Are you satisfied with the amount of time this person is
spending influencing others?

If your sliders do not form an “X,” or if the lines do not otherwise intersect, the supply of
resources and the demand for resources are not in equilibrium. You will now have the
opportunity to consider how to improve the job by adjusting the four spans.

Job Design Span Definitions

Span of control defines the range of resources for which an individual is given decision
rights and held accountable for performance.

Span of accountability refers to the range of trade-offs inherent in the performance

measures used to evaluate the achievements of the person in that job.

Span of influence identifies how much a person must reach out to and influence others
across the organization in order to succeed.

Span of support identifies how much support individuals can expect to receive when
reaching out to others for help.

What is the relationship between supply of resources and demand in the job you’ve
chosen to analyze?

Select the option that reflects your JDOT analysis.

Demand > Supply
Supply > Demand
Supply and demand are balanced

Results
 55.60000000000001 percent selected Demand > Supply
 31.3 percent selected Supply = demand
 13.100000000000001 percent selected Supply > Demand

-3-2-1123-1155.6%Demand > Supply31.3%Supply = demand13.1%Supply > Demand

288 of 348 participants have responded. You may return at any time for the latest results.
Poll submitted

If the job you are designing is out of balance because demand for resources is greater
than supply of resources, you need to either find ways to increase the supply of
resources or reduce the job’s demands. 

If the job is out of balance because supply of resources is greater than demand for those
resources, you should find a way to demand more of the person doing the job or
reallocate resources to be more productive.

If demand is greater than supply for your job, which of the possible actions presented
here would be best to improve this job? Keep in mind that, for a job to succeed, each
span must reflect the business’s strategy. 

Select the option that best applies.

Find ways to increase the supply of resources (i.e., increase span of control and/or span
of support).
Reduce the job’s demands (i.e., decrease span of accountability and/or span of
influence).
Do both.
Pointers for Adjusting the Spans
As you prepare to adjust the spans and improve the design of this job, here are some
pointers to keep in mind: 

Span of control (strategy as position)

The most direct way to adjust this span is to increase resources (additional headcount,
budget allocations, assets, and decision rights). But resources are scarce and adding
them to one job usually means taking them from another. Before you do this, ask
yourself if the benefits outweigh the costs. You must be sure that the job is getting the
right level of resources: given your strategy, some jobs are more important than others.
If you have identified that resources are being used inefficiently, or if you believe that the
role would benefit from an entrepreneurial gap, you should reallocate resources to other
jobs that will create more value in the organization.

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Span of accountability (strategy as plans)

Ask if your current measures promote entrepreneurship or compliance—and whether the

balance between span of control and span of accountability is appropriate for the role
and to your business strategy. To increase entrepreneurial behavior, you can
widen span of accountability by using fewer, high-level measures (e.g., customer
satisfaction, return on capital employed); if you have found that the entrepreneurial
gap is too wide, narrow it by increasing the number of detailed measures to allow for
fewer trade-offs (e.g., headcount, input qualities, line-item cost budgets).
 Access preceding image details

Span of influence (strategy as patterns of action)

If your lines don’t cross, the job may be too complex: the individual in that job may be
facing too many demands to influence others if they are to succeed. The most common
solution is to simplify the job and thereby narrow span of influence. You can do this by
reducing the entrepreneurial gap, reducing pressures from stretch goals, eliminating cost
allocation across units, reducing the number of cross-unit teams and task forces, and
moving to single-line reporting. 

If, on the other hand, you think those in the role would benefit from being forced to
influence others, you can do the opposite: increase the entrepreneurial gap, implement
stretch goals, allocate costs across units so that employees pay attention to the costs
generated by other units, create cost-unit task forces that encourage knowledge sharing,
and use matrix reporting. We will explore some of these techniques—all of which are
designed to push employees out of their comfort zones and spur innovation—in greater
detail in the next lesson.

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Span of support (strategy as perspective)

When you cannot provide employees with the “hard” resources (span of control) they
need to perform their jobs, you can compensate by increasing the level of support they
receive from others. Remember: design mechanisms alone cannot accomplish this—
leadership is required. You will need to build a culture where employees are willing to
help each other voluntarily. To do so, top management must invest heavily in instilling
employees with a shared sense of purpose, fostering a sense of group identification,
cultivating trust, ensuring equity in rewards and recognition, and offering group-based
rewards such as equity ownership to employees.

Access preceding image details

Making Job Design Changes

Now, adjust each of the spans based on the changes you’ve proposed. Continue making
adjustments until the lines intersect, while ensuring that each span still reflects the
strategy of the business in which the job is located. For your reference, we have
provided the key variables underpinning each of the spans.

Once you have rebalanced the job design, please complete the memo activity that
follows the tool.

Please use the radio buttons for each span to widen or narrow each slider until the lines
intersect. Once you are satisfied with your redesign, you will be able to download a
summary of your job design changes.

Aligning Job Design to Strategy

Congratulations. You have now finished the second module in Strategy Execution. Let's
review what we have learned about empowering employees to execute strategy.  

In our first lessons, we discovered that cascading strategy into job design is both
important and challenging. For any job to succeed, the supply of resources available to
an individual must equal the demands placed on that individual. Managers can analyze
and improve this balance by adjusting span of control, span of accountability, span of
influence, and span of support.

But what happens when you find that a job is not balanced? This was the challenge
facing Meghna Modi at Go Mobile. She needed her store managers, or team leaders, to
behave entrepreneurially and cultivate deep customer relationships to compete
effectively with the small mom and pop businesses nearby. To do so, she held team
leaders accountable for wide measures like store revenue and profit. 

At the same time, she wanted to capitalize on the benefits of scale that come with being
a multi-store retail chain. This meant that many critical decisions around product price
and inventory levels must be made at headquarters rather than left to store managers.
For team leaders, this mismatch created a gap between their narrow span of control and
the wide measures for which they were accountable. This gap is called
the entrepreneurial gap, and it’s very common in many of today’s fast-moving, customer-
centered businesses.

Span of influence at Go Mobile was mid-range. Team leaders had to sometimes reach
out to Meghna Modi and their district managers for help, but much of their work was self-
contained in their individual stores.

How can a business help employees succeed in such circumstances? They can ensure
that they provide a wide span of support. We saw Meghna struggle with this problem as
she redesigned the district manager job to ensure that the district managers would give
the team leaders the support they needed as she scaled the business.  

As we have seen, accounting for the “soft” demands and resources of a job—reflected in
the spans of influence and support—is every bit as critical as thinking through the more
traditional “hard” resources defined through the spans of control and accountability. In
Module 3, we will explore how you can best design these two “soft” spans. 

We ended this module by having you analyze a job in your own business using JDOT
and develop recommendations for improvement. We encourage you to share what you
have learned about JDOT with others in your organization and to think about how you
can implement the job improvements you identified.
A typical management job in the “old” Henkel is shown in the left JDOT diagram.
Everything worked, but there was not much tension in the system—leading to the
complacency Kasper inherited. He quickly made two changes. First, he centralized
shared service, which effectively reduced resources and narrowed the span of control for
operating managers. Second, he widened span of accountability by changing
performance measures. Employees were now held accountable for fewer but wider
measures: in particular, customer-focused measures were now included in everyone’s
scorecard. These changes—narrowing span of control and widening span of
accountability—created an entrepreneurial gap. As a result, management jobs
throughout the business became more dynamic. 

Next, he widened span of influence by using a common technique for generating

creative tension: a forced ranking system. This new system held employees accountable
for results, rather than for effort, and ranked their performance relative to their peers. We
will study this ranking system later in the lesson. 

To perform well under this new job design, employees were forced to innovate and
collaborate with each other in unforeseen ways. As a result, teams began sharing best
practices and learning from each other.
As you learned in the last module, an entrepreneurial gap coupled with a wide span of
influence will only work if employees have the necessary level of support. Kasper
increased span of support in several ways. For instance, he created a new bonus
structure linked to overall business performance, group performance, and team
performance, which motivated employees to collaborate and help each other succeed. In
addition—and most importantly—he developed a new set of core values focused on
putting customers first and took great pains to ensure that these values were
communicated effectively, as we will see later in the module.