Strategic Management Done Right: Set up a Strategic Management Office (SMO)

Note: This article originally published by my colleague David Tang.

Most organizations struggle with Strategy execution. In fact, numerous studies from top consulting firms (including McKinsey, Bain, BCG) and Harvard Business Review have shown approximately 70% of strategies fail due to poor execution. Furthermore, organizations only realize about 60% of their strategies’ value.

Having a Strategic Management Office–i.e. SMO–may improve your chances of success. The SMO is the team responsible for managing the Corporate Strategy of the organization.

The ultimate role to execute Strategy lies with the line managers and employees. However, without a core command and coordination office (i.e. the SMO), Strategy is either skipped from key processes or the processes are ineffectual across business units, causing poor Strategy execution.

The high failure rate for Strategy execution can often be attributed to scattered and uncoordinated Strategy Management processes. Effective Strategy implementation necessitates synchronized efforts by different executive groups.

The following describes how Strategic Management is performed at many organizations:

  • Strategy Development is typically performed by coordinating a meeting at an off-site location for the top team, doing a SWOT analysis in view of the changing circumstances and the information gathered since the last yearly Strategy gathering. These planning sessions are useful yet lack a clear and pragmatic framework to share the updated Strategy across the board.
  • Individual departments issue their own annual Strategic Plans, and their strategies are hardly shared by the Corporate Strategy with other units. There is hardly any alignment between the various units and corporate strategies. The departmental plans do not aid corporate or business unit strategic initiatives.
  • The Finance team’s annual budgeting process at year end is typically unaffected by the Strategic Plan; as most firms do not link their financial budgets to strategic priorities.
  • Likewise, the Human Resources unit conducts annual performance reviews for all employees at the year end, but most of the managers and front-line people do not have rewards tied to successful Strategy implementation.
  • Senior executives meet at least once a month during a year to review progress and initiate actions, but always get engaged in tactical issues and fire-fighting. Many leadership teams report spending less than an hour per month discussing their units’ Strategies.

Does this sound familiar?

The SMO provides the coordination and connection among these fragmented processes, as outlined above. More specifically, the SMO should manage 9 cross-functional processes, depicted below.

These 9 processes are categorized into 3 groups.

1. Core Processes

All the Core Processes must be run by the SMO.

  1. Scorecard Management — Design and report on the Balanced Scorecard (BSC) measures. For more resources on BSC, refer to these best practice documents from Flevy (here).
  2. Organization Alignment — Ensure all business and support units are aligned with the strategy.
  3. Strategy Reviews — Shape the agenda for management strategy review and learning meetings.

2. Desirable SMO Processes

These processes are performed by existing organizational units. These processes should eventually be incorporated into a central organization with strategic focus.

  1. Strategic Planning — Help the CEO and executive team formulate and adapt the strategy. For an in-depth discussion on Strategic Planning, check out our article (here).
  2. Strategy Communication — Communicate and educate employees about the strategy.
  3. Initiative Management — Identify and oversee management of strategic initiatives.

3. Integrative Processes

The integrative processes fall under the natural domain of other functions where the SMO plays a coordinating role, ensuring that the processes are closely incorporated with the enterprise Strategy.

  1. Planning/Budgeting — Link financial, human resources, information technology, and marketing to strategy.
  2. Workforce Alignment — Ensure all employee’s goals, incentives and development plans link to strategy.
  3. Best Practice Sharing — Facilitate a process to identify and share best practices.

Interested in setting up a Strategic Management Office (SMO)? We have a series of frameworks on SMO:

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“Strategy without Tactics is the slowest route to victory. Tactics without Strategy is the noise before defeat.” — Sun Tzu

For effective Strategy Development and Strategic Planning, we must master both Strategy and Tactics. Our frameworks cover all phases of Strategy, from Strategy Design and Formulation to Strategy Deployment and Execution; as well as all levels of Strategy, from Corporate Strategy to Business Strategy to “Tactical” Strategy. Many of these methodologies are authored by global strategy consulting firms and have been successfully implemented at their Fortune 100 client organizations.

These frameworks include Porter’s Five Forces, BCG Growth-Share Matrix, Greiner’s Growth Model, Capabilities-driven Strategy (CDS), Business Model Innovation (BMI), Value Chain Analysis (VCA), Endgame Niche Strategies, Value Patterns, Integrated Strategy Model for Value Creation, Scenario Planning, to name a few.

Learn about our Strategy Development Best Practice Frameworks here.

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I blog about various management frameworks, from Strategic Planning to Digital Transformation to Change Management. https://flevy.com