According to The Economist Intelligence Unit (EIU), 90% of executives fail to meet their goals. The secret weapon the 10% use to ensure they do hit their goals? Strategic alignment.
In any industry or market, some companies do better than others. Strategic alignment is one of the key differences between organizations that perform well and those that don’t. In fact, research from EIU shows that up to 80% of the differences between organizations’ performance can be explained by their level of strategic alignment.
This makes strategic alignment critical to any organization that wants to achieve its goals and outperform competitors.
Sometimes this work is done at the executive level—defining overall strategy and getting everyone on the same page. Other times it’s about strategic planning and resource allocation for key projects and initiatives. And sometimes it’s about an apparently simple decision such as buying some software or selecting the site for a new warehouse, but in all cases, increasing strategic alignment leads to better results.
What is Strategy?
Most people think of “vision statements” and “mission statements” as being “strategy” but they are only a small part of the strategic plan. Your mission and vision are simply statements about what your organization is for and where the executives would like to take it.
Strategy—in the context of “strategic alignment”—is the “how.”
For example, your vision/mission might say: We want to be the most profitable widget manufacturer in the world.
The key question to ask before taking any action is, “How should we do that”? In the case of your widget manufacturing organization, you could ask, “Are we going to be the lowest cost provider and take massive market share… or should we be the one that offers the highest level of service, but does so at a high margin?”
The “how” statements lead you to strategic goals—the targets you have to reach to achieve your vision/mission. If you decide you’re going to be the low-cost, high volume widget maker, that means your strategic goals might be something like:
- Reduce costs to supply widgets
- Increase distribution channels
- Manage cash flow
In the real world, you’d want to put some specific numbers against these goals, but this big picture of what you’re trying to achieve (be the most profitable widget company) combined with a high-level statement of how you’re going to achieve it (by being low cost, increasing distribution while managing cash) is your “strategy.”
What is Strategic Alignment?
Having a strategy is not enough. In fact, research by Charles Darwin University suggests that having a strategy has no real effect on the performance of your business. It’s aligning your activities to your strategies that makes the difference.
That’s a big statement, but it’s obvious if you think about it.
For instance, deciding you want a cup of coffee (your strategy) is not the same as getting up and making a cup of coffee (aligning your actions to your strategy).
This gets to the heart of what strategic alignment is. Most people think of strategic alignment as a noun (“the state of having everything aligned to strategy”), but it’s better to think of strategic alignment as a verb—it’s about action. Let's define it:
STRATEGIC ALIGNMENT (verb): The process of aligning an organization’s decisions and actions to support the achievement of strategic goals.
Note that the definition talks about decision-making and actions. Actions typically follow decisions so if your organization doesn’t have the ability to make well-aligned decisions, they really can’t take well-aligned actions.
It’s also important to note that strategic alignment involves NOT doing some of the things that you might currently be doing—things that do not support the realization of strategic goals.
Why Does Strategic Alignment Matter?
There has, over the last few decades, been a lot of academic research into the effects of strategic alignment on organizational performance. There are some really powerful conclusions:
- The EIU study that the level of strategic alignment of an organization explains up to 80% of the difference in performance between organizations. This is a critically important result.
- A research article in Strategic Organization found that 51% of the difference in organizations’ performance can be explained by strategic alignment and another 38% can be explained by the level of consensus / buy-in. So alignment is important, but so is buy-in and support—together they explained around 90% of the variation in operational results of organizations.
- Another study from the European Journal of Investment Systems shows that 18% of the difference between the overall performance of organizations is explained by the level of strategic alignment between their business goals and the activities undertaken by the IT department. So, aligning IT investments to support your strategy really is important.
There are many studies into the impact of strategic alignment, but the message is clear. Strategic alignment matters because it is very strongly linked to improved business results.
Strategic Alignment of Projects and Initiatives
Selecting projects and initiatives is one area in which strategic alignment can be easily and quickly improved and where that work has a massive impact on the performance of your organization.
Selecting projects is often done by an executive committee and, because of this level of visibility, people tend to assume that the resulting project portfolio is aligned to strategy.
Research indicates that this is not the case. According to research by PMI, 20% of projects in your portfolio contribute so little to strategic goals that they should be stopped.
This matters because 50% of projects are under-resourced. By focusing resources on the most strategically important projects, you deliver value with lower risk. In fact, projects that are aligned with strategy are 57% more likely to achieve their business goals.
Let's put it another way. By measuring the strategic outcomes of your projects and ending projects that are not delivering your intended results, you can reallocate those resources to other successful projects or begin a new, strategically aligned one. Spider Impact makes the whole process data-driven and highly visual so you can actually see the impact your projects are having on your strategic goals.
Spider Impact for Strategic Alignment and Execution
Spider Impact strategy execution software helps governments, organizations, and non-profits around the globe become strategically aligned to successfully execute strategy and deliver improved business results. Try it free today with a Spider Impact test drive, or request a demo with one of our customer success advocates.
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