1.

INTRODUCTION The paper presented studies of two companies that are Unilever and Carillion which

appear to have found a solution to the generic problem and to understand the process of strategy execution when strategy is changing. It is to understand the process of strategy execution when strategy is changing.

2.0

UNILEVER COMPANY When organisations develop new strategies, they define new priorities and new ways

of allocating resources. Unilevers 2000-2004 Path to growth strategy, for example, defined five new priorities. The most important of the five is Focus the brand portfolio. More than that Reconnect with the consumer and Build an enterprise culture are also the example strategy of Unilever. The value of a strategic plan is that it guides decision making throughout the organisation. However, as the strategy gets implemented, many issues are not black or white. That means the plan does not provide complete guidance and grey areas are the main focus of this article. Decisions about the grey areas are normally delegated to lower levels of management. But, because the power structures of these lower levels are normally more aligned with the old strategy than the new, they often give more weight to the status compared than to change. Between 2000 and 2004, Unilever made many important decisions in line with the strategy. In foods, Unilever acquired Best Foods, a company with a few powerful international brands. Nine foods brands, such as Knorr and Lipton, were defined as priorities and many smaller brands, such as Walls and Ambrosia, were sold. In household and personal care, 20 brands, such as Dove, Sunsilk and Rexona, were given priority. These were the black and white decisions where the new strategy gave clear guidance. They were also decisions that directly involved Unilevers top executive team. However, the success of the strategy depended not just on these easy to control, top level decisions, but on literally thousands of smaller decisions about how much to invest in each of Unilevers brand positions. Since it was impractical for the top executives to attempt to make all these resource allocation decisions, they tried to ensure alignment with the strategy by delegating targets to lower levels of management. Inevitably, these managers had

personal interests aligned with local positions and previous strategies. Moreover, in a few product or market segments, the new strategy clearly did not fit the local market. Unilever is not unique in finding that a gap develops between the intended strategy and the enacted strategy. Many companies have similar experiences. The solution is to design a process of interaction between the top executives and lower levels of management that enables better quality debate about the grey areas. Even if top management in Unilever worked continuously for two months, they would only be able to spend three seconds discussing each segment. Just because of the work load alone, the solution of delegating the decisions seems a reasonable way forward. So the problem is not just about the time needed to make all the decisions. It is also about collecting sufficient information at a sufficiently granular level to make wise decisions. Delegating targets is just another way of delegating decisions. It does not solve the problem of the differences in judgment that can emerge between the leaders of a new strategy and the foot soldiers making the coal-face decisions. At Unilever, the arrival of a new CEO (Patrick Ceseau) provided the opportunity to make a much bigger investment in the strategy development process. There were two challenges to overcome in order to improve the outcome. The first was as a result of Unilevers past. The company had been built around local country-based, business units. As a result, the planning process was bottom up, with each country presenting a business plan for the next few years. Bottom up planning worked well when the strategic drive came from the countries. The second issue was the shear complexity of the Unilever business. 3.0 UNILEVERS SEVEN STEP PLANNING PROCESS

Step 1: Bottom up analysis of 11,000 markets and resolution of grey areas Step 2: Communicate market ambitions to businesses for challenge and review with regard to 300,000 product/market positions Step 3: Top down review of overall picture, trade-offs made and further grey areas resolved Step 4: Repeat top down review and ambition setting Step 5: Repeat bottom up review of 11,000 markets and further grey area resolution Step 6: Repeat challenge and review by businesses Step 7: Link strategic choices directly to operating plans with final resolution of remaining grey areas

4.0 CARILLION COMPANY Carillion is a support services and construction company with 5 billion in sales and 50,000 employees. It acquired a UK-wide, regional building company as part of a larger acquisition in 2006. In this UK-based building division, critical contract decisions were delegated to 13 regional business units. While this is a much more focused business than Unilever, the challenge of executing a change in strategy was similar. At the time Carillions leaders, felt that the division had become involved in too many different kinds of building projects. This had occurred because there was a lack of clarity as to the core competencies of each regional business unit. The problem was compounded by the cyclical nature of the industry. Because managers faced meagre order books at some points in the cycle, they were tempted to bid for any project they could find. These projects would solve the immediate problem of underemployed project managers and declining sales. But, they often led the division into areas outside its skill zone, so that, in a number of cases, losses from taking on contracts outside a units skill area far exceeded the benefits of finding employment for underutilised staff and overheads. As a result, a new strategy was hatched. That is focus only on projects within each units competence and edge out into new areas cautiously. But the question was how to implement the strategy. Not only, how to define the competences of each business unit, but also how to ensure that local units only bid on contracts within their competence, while, and at the same time allowing cautious experiments in less familiar areas. Similar to Unilever, the answer came from detailed strategy analysis and dialogue, and a process for raising grey area decisions to the highest level. With the support of central strategy, the division analysed nearly one thousand projects from across its 13 regional business units. Each project was defined by one of 12 sectors, such as offices or schools, 20 types of construction challenge, such as roofing or substructure, five types of contract, such as tender or joint venture, and a number of other variables, such as competence of the project manager, that would help the team understand which project types produced the best and worst profits. The result was a matrix of project types by regions with more than 400 cells. This analysis allowed the capabilities of each business unit to be stress-tested using multiple combinations of factors. It exposed those types of projects which should be avoided in future. A matrix was developed to help units select projects. Some project types, such as

high-rise housing, were unprofitable right across the division. Others, such as buildings with difficult sub-structures, were unprofitable in two or three regions, marginal in two others and profitable in the rest. This led to a black, white and grey (or in Carillion terms a red, green, yellow and white) conclusion. For each region, the strategy defined those project types that were demonstrably within the regions competence (green) and those that were demonstrably not part of the regions competence (red). Regions were prevented from bidding on red types and could bid on green types without reference up the hierarchy. In addition, grey areas (or yellow types) were identified. Regions had to get permission to bid on these projects, first from the division head and then, for larger projects, from the Carillion CEO. This was Carillions way of ensuring that top management was exposed to the grey decisions. Once a region demonstrated competence in a new type, a yellow could turn to green. In addition to the red, green and yellow categories, Carillion also identified a white category. These were project types that had not been executed with enough frequency in the past to make a red, green or yellow assessment. These were treated as yellow types in terms of requiring senior management approval. These projects also involved additional analytics to make sure that the risks were fully explored. Even though Carillion is in a completely different industry from Unilever facing different conditions, the challenge of implementing a change in strategy required a similar focus on the grey areas and on designing a dialogue between top managers and local managers. Carillions regional contracting business also achieved a similar dramatic performance improvement. 5.0 FIVE GUIDING PRINCIPLES

From these two case studies, and other companies we are familiar with, some guiding principles are:
1. Identify the total number of resource allocation decisions that any new strategy is

trying to influence. If the number exceeds 50, there is a risk of strategic slippage because some of the judgments will need to be delegated to lower levels of management. The risk of strategic slippage increases as the number of decisions increases. Unilevers 300,000 decisions is at one extreme. But even Carillions contracting division was involved in more than 2,000 decisions per year about whether to bid or not on a contract.

2. Invest in generating quality data at an appropriate level of granularity. Good strategic

choices depend on good data. If the data supporting the strategy is high level or aggregated, it is easy for managers at the coal face to conclude that the strategy does not apply to them. Hence, whether the number of resource allocation decisions is 50 or 50,000, the data generation process should match it. Moreover, there should be only one database into which all parts of the organisation contribute and from which all parts of the organisation draw. Differences of opinion about the data should be resolved at the point of data entry rather than during the discussion of strategy. Without this common granulated data set, any dialogue between lower and higher levels of management involves trading opinions, and managers closer to the action will always feel that their opinions have more validity.
3. Develop a process that focuses top management attention on significant grey areas. A

one step process is unlikely to be sufficient. The first step may achieve little more than identify the grey areas. The second step is likely to deal with the more tractable grey areas. For many large companies there needs to be a third or fourth step in the process to ensure that top management attention is effectively channelled to the most difficult grey areas. Carillions second step is an ongoing process that brings all grey areas to top management attention.
4. Do not shrink from dialogue, but allow for cooling off periods. Top management

should not expect to be able to make the decisions in the quiet of their board rooms closeted only with supportive consultants. The best choices will result only if there is real dialogue between the layers, properly supported by relevant, granular data. Dialogue is necessary both to validate the strategy and to help communicate it. Dialogue can generate heat as well as light. So some elapsed time is needed between iterations: time to collect more data, time to reflect and time to let go of emotions connected to previous judgments. At Carillion, a management team determined to enter a new sector may have to come back with bid proposals again and again until they convince top managers to support their development.
5. Keep top management engaged until the volume of grey areas is no longer significant.

Implementing a new strategy in a complex organisation takes top management time. These managers are frequently uncomfortable with a process that takes longer than a few months and can become distracted by other priorities along the journey. Hence it is best to manage expectations at the beginning and lock those concerned into the work that needs to be done by advertising the process well in advance. The final step

is always the linking of strategy decisions with the operating plans, but, as in Unilevers case it is often best to leave this until most of the grey areas have been resolved. At Carillion, because the business is bid-based, top managers can be continuously engaged in discussions of grey areas, making it possible for the strategy to evolve as skills develop. 6.0 CONCLUSION A new strategy is often little more than an idea at its outset: for example focus on projects that fit our competences or focus on brands with potential. The strategy may be articulated by the Chief Executive and supported by the best consultants, but its details will not become clear and it will not gather gravitas in the organisation until decisions are actually made and the benefits realised. Hence, new strategies need a powerful process for implementation. Without it, they are just flavour-of-the-month rhetoric. The danger when implementing a new strategy is to focus on the black and white issues. These are easy for top managers to influence, and can make them feel that implementation is going ahead smoothly. But the engine room of strategy execution is often a large number of smaller decisions that are less black and white. The strategy development and execution process must be aimed at these much tougher decisions. What is more there are additional benefits of focusing on the grey areas. The dialogue stimulated by these difficult decisions often generates new strategic insights and often leads to new strategies. The dialogue also ensures that top managers remain in touch with reality. Deep dialogue about the grey areas is an insurance against ivory tower strategies and halfhearted implementation.