In the dynamic landscape of businesses acquired by private equity firms, the imperative to adapt to heightened expectations from new ownership often becomes a paramount concern for management teams. These companies are now evaluated through the lens of a value creation model, colloquially known as the ‘path-to-value.’ This model inherently establishes fresh benchmarks for achieving 3-5 year EBITDA growth, effectively elevating performance standards. However, many management teams find themselves unprepared, lacking the requisite systems and tools to flourish as portfolio companies under this novel private equity ownership.
Unveiling the Performance Potential
Regrettably, a prevailing trend in such scenarios sees companies achieving merely a fraction of their potential performance as outlined in their strategic plans.
This chasm between Strategy and Performance can be attributed to factors like inadequate resource allocation, ineffective dissemination of the strategy, blurred lines of accountability, and anemic performance monitoring. Yet, at its core, these challenges are mere manifestations of a more fundamental issue: the deficiency in strategic execution.
The Power of Strategy Deployment Unleashed
The solution emerges in the form of Strategy Deployment Process (SDP), an invaluable tool offered by private equity firms to empower portfolio company management teams in executing their value-creation agenda. Alternately referred to as Policy Deployment, Strategy Execution, or Hoshin Kanri, Strategy Deployment has historically yielded impressive results for entities under the ownership of industry giants such as Danaher Corporation and GE. It functions as a potent conduit for delivering exceptional profit improvements, surpassing conventional expectations.
Embracing Strategy Deployment bestows organizations with:
- Unwavering Focus
- Perfect Alignment
- Disciplined Approach
- Methodical Rigor
- Robust Accountability
These attributes stand as pivotal pillars for any organization striving for execution excellence. In effect, Strategy Deployment stands as the most formidable instrument for orchestrating transformative change that underpins value creation within a company.
The Elements of Strategy Deployment
At the heart of Strategy Deployment lies its remarkable ability to deconstruct strategy execution into three elemental components, rendering it accessible and effective for teams of all sizes:
The X-matrix: An Envisioned Strategic Odyssey
Central to Strategy Deployment is the X-matrix, a visual masterpiece that encapsulates the essence of a 3-year strategic blueprint. This matrix serves as a concise compendium detailing key initiatives, their custodians, and measurable milestones, all elegantly condensed onto a solitary page. This visual marvel not only aligns the entire organization towards select strategic pursuits but also facilitates seamless communication of the strategic trajectory across all tiers of the organization.
Action Plans: Catalyzing Resource Synergy
Strategy Deployment’s hallmark rests in its emphasis on meticulous action plans, typically spanning the upcoming quarter. These comprehensive plans delineate precise actions, responsible stakeholders, deadlines, and pivotal milestones, vital for propelling the development of novel processes that usher in transformative and lucrative growth. By fragmenting strategic initiatives into manageable action steps, these plans ingeniously propel teams through the essential process-building phases indispensable for realizing strategic objectives. Furthermore, action plans serve as adept allocators of cross-functional resources, promptly identifying bottlenecks and instigating vital dialogues on resource prioritization.
Targets-to-Improve Metrics: The Pulse of Progress
Also recognized as the Bowler Chart, this roster of key metrics gauges advancement vis-à-vis milestones outlined in action plans. This graphical portrayal chronicles organizational progress while concurrently spotlighting areas necessitating adaptations or enhancements. Using color-coding to denote progress—red for lagging behind and green for surpassing expectations—this chart visually encapsulates the organization’s journey. The calibration of targets accentuates early indicators signaling the positive trajectory of process improvements. The resultant transparency fosters accountability and enables timely recalibrations when warranted.
Value Unearthed through the Strategy Deployment Process
For private equity operating partners and managing directors, embracing the Strategy Deployment Process can prove transformational in executing the value creation blueprint. Portfolio company CEOs should probe whether this mechanism can equip them with the acumen to adeptly execute a plan that reaps the returns anticipated by private equity investors. Management teams driven to meet these new expectations deserve access to the tools that pave the way for unequivocal success. Want to learn how SDP could impact your organization? Contact us today to discuss your potential with one of our executive-level team members.
