Creating the Office of Strategy Management

by Robert S. Kaplan & David P. Norton

Overview — Organizations often fail to execute their strategy—failure rates may range as high as 60 to 90 percent. Successful companies align their key management processes for effective strategy execution. Creating a new corporate-unit level, the Office of Strategy Management (OSM), may help align management processes to strategy. The authors explain, among other topics, OSM core processes, desirable OSM processes, integrative processes, and positioning the OSM. Key concepts include:

Strategy management is an emerging profession.
Each organization must ask itself: What are we doing to make strategy management a core competency of our organization?
Create an Office of Strategy Management, position it at the level of other senior corporate staff offices, and give it responsibility and authority for the nine key strategy management processes.

Author Abstract

Organizations often fail at strategy execution. Various sources have reported implementation failure rates at between 60 and 90 percent. A Bain Consulting study of large companies in eight industrialized countries found that seven out of eight companies failed to achieve profitable growth between 1988-1998, defined, rather modestly, at 5.5% annual real growth in revenues and earnings, with returns that exceeded their cost of capital. Interestingly, 90% of companies in the Bain study had strategic plans with targets exceeding these growth targets; few achieved them. 1 For the past 15 years, we have studied companies that achieved performance breakthroughs by placing the Balanced Scorecard as the centerpiece of a new strategy management system. The successful companies align their key management processes for effective strategy execution. Many of these companies have now sustained their focus on strategy execution by establishing a new corporate-level unit, an Office of Strategy Management (OSM). Not all organizations, however, have understood the need for a corporate-level office to align existing management processes to strategy. Companies, after developing Balanced Scorecards, often make a major error by continuing to plan, allocate resources, budget, report, communicate, and review performance as they had in the past. [1] Chris Zook, with James Allen, Profit from the Core (Boston, MA: Harvard Business School Press, 2001).