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Executing on strategy is a primary challenge for CEOs and top management. Even the biggest brands and most talented teams struggle to hit their strategic goals. In this podcast, we’ll talk about both the obstacles and pathways to better execution.
In his book, Strategic Execution: Driving Breakthrough Performance in Business (Stanford University Press), Snell and co-author, former SunTrust Chief Human Resources Officer Kenneth Carrig, offer a four-part model for executing strategy. They call it the “4A’s” of execution: alignment, agility, ability and architecture.
Snell’s research includes interviews with senior executives at companies across a variety of industries, including UPS. In this conversation, Snell and UPS Chief Strategy and Transformation Officer Scott Price discuss the principles for both better leadership and execution.
Below are snippets of their talk:
Working in silos can keep employees from understanding big-picture strategy. UPS’s Price says the key is to communicate effectively, both horizontally across business units and from the top to the bottom of the organization.
Communicate in terms everyone can understand, he says. Be clear.
“What alignment is to leadership means something very different to somebody out in the field," Price reminds us.
Invest in talent and leadership, says Snell. Don’t just focus on productivity. Attract, develop and train your people.
Then be ready to move employees to where they can succeed.
“You need to be ready to reallocate and reprioritize human resources,” Price adds, since competitors can pop up quickly, challenging the way you handle and execute strategy.
The design and configuration of your company — its structures, processes, technology and budgeting cycles — should propel growth, not impede it.
To ship nearly 21 million packages a day, Price notes that UPS needs the “architecture to maintain efficiency using scalable technology. We need the right structural pieces in place.”
Forward-looking organizations must flex, adapt and adjust to evolving markets, technology and innovation.
It’s akin to what the military labels “situational awareness,” says Snell. Ask yourself, what could surprise us?
“You used to be able to do 12- and 18-month planning cycles. But things can change so quickly in one to two quarters,” Price explains. “There are parts of an organization that don’t like change. The outside world isn’t so predictable anymore.”
Top image: UPS's Scott Price, left; UVA's Scott Snell, right
Show Open: 00:01 [Music] I'm Brian Hughes and I'm James Rowe.
Dean Foust: 00:43 Hi, this is Dean Foust and I'm substituting in for James and Brian on this episode of Longitudes radio. If you go to amazon.com and you do a search for books on business strategy, you'll find more than 40,000 hits. But what's often overlooked is how you execute a strategy. In fact, the graveyard is filled with companies who had brilliant ideas, brilliant technology, but who couldn't execute on these ideas. But there's one expert who has spent a lot of time thinking and researching this question. His name is Scott Snell, and he's a professor at the University of Virginia's Darden School of Business. Scott Snell is the co-author also with Ken Kerig of a new book titled Strategic Execution. The authors interviewed several of our senior executives at UPS and they were kind enough to include UPS in the book. And as fortune had it, our Chief Strategy and Transformation Officer Scott Price, who coincidentally is a graduate of the Darden school, had a chance to discuss this topic of strategic execution during a recent visit to the Darden school. I was there and I had the pleasure of capturing their conversation on tape. I hope you enjoy listening. The first speaker you'll hear is Scott Price from UPS.
Scott Price: 01:59 You interviewed many senior executives and I think there would be a presumption that the vast majority of them would focus on strategy, but yet that's not what you heard. You heard mainly around the whole top of give execution.
Scott Snell: 02:12 Well, the genesis came from SunTrust working with Ken and they looked at the banking industry and you know, this, they, they found top core tile versus bottom core tile was not who had a better strategy. It was how well you executed. Um, and so we started to poke at this notion, um, if execution is so critical, how should we think about it? And as we started talking to organizations, they all said, yes, it's critical and no, we're not as good at it as most people would think. There was some pretty amazing companies that we were talking to who had great reputations for execution who still said, we struggle with this.
Scott Snell: 02:57 And um, and so what we did was we said, you know, what are the 20% of things that capture 80% of the discussion? So we really started all of these working groups around, you know, what are the key drivers of this? And we just listened. We had our own thoughts on this, but we started to listen, what are the commonalities across these organizations? And this is where they came up with the four that we, you know, we attributed four A's to alignment. Does everyone across the enterprise see clearly what the strategic intent is and their role in that? Is there shared expectations for a superior performance? And is there accountability around that? This, this notion of alignment, uh, is such a simple concept and it is, uh, so, uh, pernicious in the ways that, uh, the organization gets scattered. So this, this issue of alignment seemed very, very critical.
Scott Snell: 04:02 Uh, the second was architecture. What, you know, what is the infrastructure of the organization, the structures, the processes, the technologies, et cetera. Um, even the budgeting cycles as we were talking and what we found was the architecture is supposed to propel the organization, but in many cases, particularly with large organizations, it was the drag, but getting the architecture right, streamlining the organization, making decisions, um, not just quicker, but at the right places in the organization was, was critical. The third was ability, the talent and leadership that in fact every, every CEO that we talked to, when we began sort of broadly around the issues of execution, they began with the leadership, the talent and the culture of the organization. And many organizations are pretty behind the curve. We started to talk about it as the talent syndrome, which is, we know it's critical. We're not spending enough on it, enough time, enough money. Consequently, we have business opportunities. We don't have, we don't have leaders, managers and talent for.
Scott Price: 05:10 It's a capability debt.
Scott Snell: 05:11 No question. And the, the, the market is there, the business has resources but not the human resources around that. And then the last was agility, which, you know, it seems to be all we talk about now, but it was actually an executive at American Express who said, if you think that execution is just the big curtain up where everybody knows their parts and dances, the dance as choreographed, that's pretty outdated uh, thinking about execution, how do you have these contemporaneous, uh, uh, coordination of resources to either respond to the market quickly or lead the market when you see an opportunity? So alignment, agility, architecture and ability. And then we said, does this capture, we would go back to those companies and say, do those four hit at what you believe are the big buckets? And the answer we got was a two part answer. One was, yes, those are the buckets. But immediately they said, and they're all connected to each other. They're not separate things. They really create a system.
Scott Price: 06:19 I saw in your book that agility and that concept of agility seems to be prime, but it seems to be wildly different company to company. You used to be able to do 12 and 18 month planning cycles. It's impossible to do that anymore because things can change so quickly in one to two quarters. Competitors can pop up so quickly and challenge pool of margin that you had planned on using to help pay this journey. It is this dynamic reallocation and re-prioritization of resources.
Scott Snell: 06:50 I think that's right. Most of the companies we worked with were larger organizations and so they're, in that context, they've looked kind of really good, but lumbering and the, the reallocating resources was probably the, the biggest drag, but it wasn't the first thing in terms of a prerequisite that people were talking with us about. Um, the first is what our military friends call situational awareness. What are the surprises? How do you build that into the organization? We saw some other things about you, uh, around agility, which is how do you take some of the most important decisions and take them out of the C suite and put them lower in the organization. We started referring that as lowering the center of gravity like an athlete would. There was just too much that you wouldn't see from the C suite. So those were sort of the first two prerequisites of agility, situational awareness and lower center of gravity. There's the classic, are we trying things? We, we live in a world of design thinking, but it's the smaller bets learning fast and sharing that through the organization. Once all of those pieces were in place, then it seemed like the big brick in this was wait a minute, our, our, our resource cycles, are annual. And they're not going to go away. So how do you have a quicker turn on a quarterly or a monthly or even shorter basis when you have to, I'm not sure what your experience is with that.
Scott Price: 08:21 The agility to me is, is the agility and the thinking, the agility of the resource allocation and building within the company and culture that agility means that I have to accept change.
Scott Snell: 08:33 Yeah.
Scott Price: 08:33 And there are parts of any organization that don't necessarily like change and in fact got very comfortable with the annual cycle and the predictability. The outside world's not predictable anymore. What we're moving towards is zero based budgeting, true zero based budgeting, which was very hard for the organization. And the second is dynamic re-forecasting tied to a often it was clear in many parts of our organization that there was opportunity to improve. Um, and where we ended was that we needed to have the ability to manage that process outside the traditional planning process. And so we've created a transformation office. They're holding everyone accountable to achieving these external benchmarks. A lot of it is tech enabled. A lot of it is outsourcing and that process creates the seed dollars that everyone wants to be able to invest into the future. But mapping that on a quarter to quarter basis to continue to protect EPS means that you have to be very dynamic, which means that a lot of people believe that these resources granted in the budget cycle are theirs and they don't like the idea at the end of Q two you can challenge whether or not they're going to get their funding and Q4 or not because there may be something else that comes out. It's a cultural shift that has to occur as well because there is sort of a sense of how it should be. Uh, and when you go in and you challenge that, people start to mistake that as being career decisions for them. It's not, it's just simply saying the human resources as well, the financial resources are going to go do something else. So it's a very significant shift.
Scott Snell: 10:07 What we heard was the biggest challenge challenge on execution was alignment. So if you have somebody who's thinking 12 months, 18 months, and a long cycle for the business, and then there are these rapid fire requirements or opportunities, you can quickly create diversions. Diversions is the wrong word, but dispersion of attention in the organization. And we heard that that alignment was the, probably the most critical factor on execution had to be addressed first. If the, if you didn't have it, it almost didn't matter what else you did well. But what you're describing to me sounds like the seeds of, of misalignment.
Scott Price: 10:51 I wish I had been told on my first day at Darden in the arc of your career, organizational behavior, communication may not seem important today, but it's really important at some point if you actually achieve what you set out to achieve because that becomes 90% of the job. And to me alignment is a combination of who are the individuals that get it and how do you leverage them to try and off balance, you know, offset the individuals who don't get it. And then how do you communicate? We're a global company. We have 455,000 employees. We have very different business models. It's not just the, you know, the Brown package car driver. We have freight forwarding, we have a freight business, we have supply chain.
Scott Snell: 11:32 You're describing the problem really well or the opportunities.
Scott Price: 11:35 For startups and where to go, which we're now balancing, I call it the Airbnb of warehousing and we're onboarding to be able to marry small and midsize businesses with more flexible fulfillment and warehousing. Keeping all of those groups aligned to the purpose of the mission of the organization and still your shareholder happy. It's a challenging process and it's very much around alignment, but it's the communication of the alignment, understanding there is no single communication platform. You've gotta be able to be agile in terms of how you do it.
Dean Foust: 12:07 During the conversation, professor Scott Snell noted the importance of communications and how it came up in an interview for his book that he conducted with UPS chief operating officer, Jim barber. We pick the conversation up there and the next speaker you'll hear is Professor Snell.
Scott Snell: 12:23 Jim Barber was talking about alignment. He says there's two elements of it, one sort of horizontal across the business units and the other is from the top to the bottom of the organization. Right? Or from the center out. And he said something that was interesting and what I think we picked up on, which was it's not just communication, it's translation. Because what it means to us, uh, what alignment means to us in the top team means something very different in terms of, uh, somebody out in the field and what that, what they need to do, what their responsibilities are to that. So he was describing in terms of when do you tell them timing issue and then how do you tell them in a way that makes sense, makes sense to them. And I, and I think it's multiple media, it's multiple engagements around that. Um, but the more, the more you're thinking about agility, the more that has to be the centerpiece of execution. We heard a very interesting story from Microsoft that Satya Nadella meets once a week. I think it's Fridays with his top 14 leaders every Friday and kind of does what you're describing of: What's going on in your businesses? What do we need to share with each other and how does that feed to the, to the mission, the strategic intent of the organization? Those leaders then all meet with their teams. I think it was the following Wednesday, but the steady cadence of bringing the organization back together, even while all the diversity of activities are going on. Are you doing things like that?
Scott Price: 14:00 Every Monday at 11:30, the weekly management committee alignment meeting in essence is what the intent of that is keeping us all on the same page. And of course we have lots of governance et cetera. Um, but the pace of change means that those meetings are critical for everyone to be able to help in the trade offs. Because you know, I think in any large scale global company you tend to migrate to silos and those silos become planning silos and resource allocation silos and all the sorts of things that you know, traditionally have worked. And now what we're having to do is trade off between business segments and functions in a way that hasn't been done in the past. And I think, you know, the one area that with agility you also have to be able to ensure that your employee base understands how do I succeed? And, and that's one thing in this whole process which is what are the skills and competencies of the future? How are you communicating them? And then how are you helping people achieve that?
Scott Snell: 14:59 You're asking my question for me.
Scott Price: 15:00 It's hard.
Scott Snell: 15:02 It's a culture shift, but it's also a talent, a leadership-
Scott Price: 15:04 It is.
Scott Snell: 15:05 Shift as well.
Scott Price: 15:06 It is. And, and you know, we, we have been a company that has succeeded enormously by creating universal soldiers. But what's happened is technology has eliminated the ability for a universal soldier to be immediately productive if they do not have specific experiences in that area, whether it be data science, autonomous view goals, all of the sorts of changes that will occur. We're going to have to bring in external talent. We have to equip people with the tools and the knowledge. And part of that comes back to human capital management systems, which we're working on, online training and development programs to give individuals the tools.
Scott Snell: 15:46 You know, what's interesting is that, I don't remember this so much coming out of UPS, but we heard it frequently that the resistance to change was not born from, I don't want to change or I don't want the company to change or I'm complacent in this role. In many cases there's this gap between I know what we could do and should do, perhaps. The resistance is actually don't know how to do it. I, I, I'm S I'm so well ingrained in what I have been doing. That new way of working is what's foreign to me and I'm, and because I see so much risk around agility or just some kind of transformation that it's that lack of knowledge that leads to sort of the ossification in their roles.
Scott Price: 16:39 You know, it's, um, maybe I have a slightly different perspective now after a year and a half, you know, UPS transformed itself three times in history. I mean, these were major transformations. So, two in the first maybe 30 years of existence and then back in sort of the sixties seventies and early eighties as the regulatory environment in the United States changed and we were able to build this ground network and build it up, we've now got the transformation, we're very clear on strategy. We've announced it into the external market, we've aligned it internally and with our board now we've got to communicate and execute to it, which is going to start to force some of these trade offs. But it is hard. I think UPS is a culture of, of being able to transform.
Scott Snell: 17:26 The way you're describing it. I think it would give a false sense that it's shifting from A to B when I think change will be fairly continuous in a, in a, in a more dynamic operating model. One of the things we haven't talked about, but you're sort of teasing it out, at least for me, is the role of the, the architecture, the, the technology, how processes change. I remember having a conversation with one of your, uh, colleagues. UPS is so known for these incredible processes. You engineer that, you know, the the heck out of, of all of those processes, measure everything. But as we talk about agility, that's, it's not just engineer and eliminate waste, it's creating a much more robust model for execution. You're investing, I don't even know the number now.
Scott Snell: 18:28 Our capital budget is $7 billion a year.
Scott Snell: 18:31 So.
Scott Price: 18:33 It's a lot of cash.
Scott Snell: 18:34 How is, how, how would you describe that in this world of, of the next iteration of UPS?
Scott Price: 18:42 So, so there's three buckets. So the first bucket is just continued capacity. And you know, we're, we ship 20 million packages a day. It was 19 when you wrote your book. Wow.
Scott Snell: 18:55 Guess we have to update it.
Scott Price: 18:56 When, when you grow, like we're growing and you have to just continue to add capacity. So that's a chunk of it. The second chunk is around how you make today's capacity more efficient using today's scalable technology. So if you think around automation and you think about [inaudible] like the Orion, the DIAD, which is a pad, a tablet that we give our, our, our package car drivers, there's a lot of scalable technology where we're able to continue to refine it and create a higher level of efficiency. The third bucket is the harder bucket because if you think of autonomous vehicles, you think of aerial mobility, drones, you think about robotics, you think about AR, VR glasses. Each one of those have a theoretical efficiency, but trying to figure out one, how does it disrupt the process that exists today and it will, and two, when does it become practical from a shareholder's perspective to go hard on those, that third bucket, much more transformational. So you know, I think of it as foundational capacity. We're modernizing through automation and today's technology. There's truly transformational areas that we need to focus upon that you have to invest the dollars on. But the NPV on those isn't quite as clear. But if you're not out there engaging in them and challenging today's processes with those sort of future technologies, you're going to get left behind. And all of those require investment and resources.
Scott Snell: 20:29 I'm going back to the agility piece. What you do in that you invent the venture fund.
Scott Price: 20:36 Yes.
Scott Snell: 20:36 Was two pieces of the agility which was trying things. Yes. Right? So you learn quickly. But the other was you've got a hand in maybe some peripheral kinds of issues that may or may not define.
Scott Price: 20:49 They look peripheral today. So I'm gonna use Fast Radius as an example. It started as a minor and they are a platform for three D printing. Um, and we just approved them a major part of their series B. um, and what in essence, my view is that three D printing is going to disrupt the entire spare parts industry. Um, it is going to create virtual inventory and therefore the combination is around where those mega three D printing, um, factories are created. We would like them to create nearest our core hubs because they can do an APM cutoff of a print and we can guarantee next day delivery. So that started out as a periphery where internally we, we moved [inaudible] on there. But now it's like, well, wait a minute. If we don't control where those things are manufactured, we lose, we could lose the movement. And so to me that's an example of the type of a future investment that we're making to be able to ensure we capture the move, where to go is another version of that. We in 12 months went from concept, we built the platform. Um, we've relocated it to Atlanta to be close to our organization. So in essence what it does is it helps companies deal with the surge and it helps companies deal with not wanting to necessarily be in a fulfilled by environment, but yet they don't have the capital to create their warehousing infrastructure. Where to go basically takes the millions of square footage of available warehousing that exists in the United States. And like Airbnb, marries supply and demand. And you think about, that's not necessarily a UPS core comp, but what it does is it gives us access to the movement that happens outside those facilities to an end customer.
Scott Snell: 22:40 You know, what you're describing. And we've gone or kind around the horn of the, you know, the four elements of our framework of alignment, architecture, ability, and agility. The story you're telling now that begins with an execution topic we heard from so many organizations, is that you're investing way, way ahead of the curve for your, your ability to execute years from now.
Scott Price: 23:05 Yes.
Scott Snell: 23:05 And I think the mindset of many people when we say strategic execution is somebody came up with a strategy and now we go execute it. And if you haven't done the work five years before, you don't have the capacity, not, not capacity in a warehousing or, or a supply chain, but the capabilities to do that. And, and you're, you're taking me there.
Scott Price: 23:28 Thanks for the time.
Scott Snell: 23:29 Yeah.
Scott Price: 23:30 Good to see you again.
Scott Snell: 23:30 Good to see you.
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