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THE GOLD STANDARD FOR FASTER, HIGHER, STRONGER PERFORMANCE IMPROVEMENT: A Playbook

2 North Highland The Gold Standard for Faster, Higher, Stronger Performance Improvement: A Playbook

CONTENTSINTRODUCTION

CITIUS | Get Faster with Foresight

ALTIUS | Climb Higher with Practical Innovation

FORTIUS | Grow Stronger with Winning Talent

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5

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The Gold Standard for Faster, Higher, Stronger Performance Improvement: A Playbook North Highland 3

The winner of the 1904 Olympic marathon, Thomas Hicks of the United States, ran the race in three hours and 28 minutes.1 Over 100 years later, in 2012, Stephen Kiprotich from Uganda took gold in the same event. His race time? Two hours and eight minutes.2 Had the 1904 and 2012 gold winners competed against each other, 2012’s Kiprotich would have won by nearly an hour and a half.

Elite athletes strive to fulfill the Olympic motto, continually performing at elevated levels to be faster (citius), higher (altius), stronger (fortius). Some advances, like those made by Olympic marathon runners are precipitous, due in large part to advances in equipment, training methods and access to sports. Other advances are marginal, incremental.

In 1936, Jesse Owens held the world record in the 100 meters. Had Owens been racing last year in the world championship of the 100 meters, when Jamaican sprinter Usain Bolt finished, Owens would have been 14 feet from the finish line when the tape fell.3

A 14-foot difference in a modern-day sprint is significant. It’s the difference between total obscurity and, well, Usain Bolt. But factor in Bolt’s advantages—cutting-edge gear and training, and a specially fabricated track designed to make humans travel as fast as possible—and that 14-foot difference is nearly eradicated. All things being equal, Owens, who in 1936 ran on a track made of cinders (the ash from burnt wood) and used a gardening trowel to dig his own starting blocks, still may have lost to Bolt. But the race would have been fierce, and the margin for victory razor-thin.

Sometimes the gains in speed, height and strength are made at breakneck speeds; others are made incrementally, plodding slowly, but surely, upward. What is guaranteed is that what you achieve this year will not be enough the next. Goals and standards move onward and upward, creating an unrelenting demand for new means and methods to deliver on ever-steeper performance curves.

Like athletes, organizations cannot control their competition. The attempt to out-market, out-build or out-price often nets an unsatisfying and futile battle of wills. Future-focused companies, the kind that use leadership and innovation to rise above in a commoditized world, take a different approach: they outperform the competition.

Today, only 10 percent of executives strongly believe that their organization is performing at its full potential.4 The remaining 90 percent could, and should, be working faster, higher and stronger in ways that are consistent and sustainable. And profitable.

of executives believe their organization is not operating at its full potential.

90%EXECUTIVES

90%

1. Athletics at the 1904 Summer Olympics—Men’s marathon, Wikipedia, March 15, 2016

2. “Stephen Kiprotich’s Olympic marathon win gives Uganda second gold ever,” The Guardian, August 12, 2012

3. “Are athletes really getting faster, better, stronger?”, David Epstein, TED Talk, April 2014

4. In May 2016, North Highland conducted a global survey of more than 200 respondents in executive positions of vice president or above from companies with $1 billion or more in revenue (The 2016 North Highland Performance Improvement Study).


44%

55%

The potential factors limiting and propelling the performance of today’s companies are numerous, but for this piece we focus on the three most critical: operational excellence, growth and innovation, and people.

Today, 44 percent of executives say the metrics of their front, middle and back offices* either don’t clearly align to the overarching business KPIs, or don’t exist at all.5 A playbook for operational excellence is critical because the opportunities to realize in-year and long-term return through simple tools like financial metrics and organizational efficiency are low-hanging fruit for most organizations.

Most organizations understand growth strategies, and how they fit within the broader organizational objectives. But innovation is another story. 41 percent of executives report that innovation at their company is treated like a siloed project, run without accountability to the corporate growth strategy.6 Organizations need a playbook for growth and innovation, to bring the two into one framework for practical innovation and sustainable growth.

Lastly, organizations need a playbook for people, because they are an organization’s greatest asset and vulnerability. 55 percent of executives report that they believe their organization doesn’t possess the talent across all business functions to drive their corporate growth strategy.7 Without a strategy for cultivating talent—in the right way, on their terms—companies will never achieve gold.

Improving performance in these three categories, incrementally and sustainably, is how companies win today. This series of playbooks provides the secrets for effecting the kind of performance improvement that realizes results faster, for in-year returns that gain momentum in the long term.

In this race, your greatest competitor is yourself. Choose excellence, choose to be ever-faster, ever-higher and ever-stronger. Choose to stand at the highest rank of the podium, not just because you beat the other guy, but because you continuously prepared to be your best.

Citius, altius, fortius.

The Gold Standard for Faster, Higher, Stronger Performance Improvement: A Playbook

INTRODUCTION

of executives say their office metrics don’t align to business KPIs, or don’t exist at all.

44%EXECUTIVES

of executives believe their organization doesn’t posess the talent to drive their corporate growth strategy.

55%

EXECUTIVES

* Front office: sales personnel and corporate finance employees, including marketing and customer service. Middle office: Core business process, including supply chain, core business products/services, development and delivery. Back office: Functions dedicated to running the business such as IT, HR and finance.

5. The 2016 North Highland Performance Improvement Study




Andy Potts had an Olympic obsession. By 2002 it had been simmering for years, sated by brushes with success as a competitive swimmer. In 1995 he earned a spot on the USA Swimming national team and placed fourth at the 1996 Olympic Trials in the 400 individual medley. Three years later he retired, and begrudgingly walked away from Olympic dreams.

Six years passed, and he couldn’t ignore the call any longer. He was 26—middle-aged by elite athlete standards—and hungry to push his mind and body to new limits of performance. He aspired to be a triathlete. An Olympic-level triathlete. But he knew that to do that he would have to train smarter than the competition. He enlisted the help of Coach Mike Doane and so began the most data-driven, precise training regimen the world had ever seen.

It’s called feedback training, and data rules everything. The training plan is reassessed every 24 hours based on the constant monitoring of three variables: wattage (the

The OPERATIONAL EXCELLENCE Playbook: Get Faster with FOREsight

“Excellence is an art won by training and habituation. We do not act rightly because we have virtue or excellence, but we rather

have those because we have acted rightly. We are what we repeatedly do. Excellence, then, is not an act but a habit.”

–Aristotle

power Potts’ body produces), cadence (the tempo of his arm and leg movements) and heart rate. Every night, Doane analyzed his athlete’s response to the day’s training—a minimum of 4,320 data points per day—looking for the best ways to optimize his performance, holistically. It goes beyond lap times and mileage and grand training schedules; it’s performance improvement, empirically based and whole-body focused, in its most human form.8

And the method worked. Potts, by all accounts out of his prime and a newcomer to the sport, competed in the 2004 Summer Olympics and went on to earn the title of Ironman World Champion in 2007, just five years after he started training.9

In business, as in athletic training, there are no mysterious secrets to performance improvement. The magic is in using data, or feedback, to apply the right practices, with the right cadence, to the right functions. The gold is in having the holistic foresight to see how to incrementally piece together the tools


CITIUS | FASTER

8. “The Making of an Olympian,” Popular Science, July 20, 2008

9. www.AndyPottsRacing.com


of operational excellence to drive Olympic-worthy performance not just in one corner of the business, but across front, middle and back offices evenly, appropriately and strategically.

This is “Operational FOREsight,” and it’s where smart companies win. They look to four aspects of operational excellence—financial metrics, operational and

organizational efficiency, risk management and compliance, and effectiveness—not as siloes, but as opportunities to catalyze. They assess these facets as interdependent characteristics of a high-performing organization, just as heart rate, power and cadence are to an elite triathlete. And they apply them across front, middle and back offices for amplified power.


CITIUS | FASTER

Does your organization have FOREsight?

FINANCIAL METRICS: Are you measuring your middle and back operations with the same rigor as front office functions? Do all of your financial metrics—cost reduction, revenue growth, optimized working capital —reflect the business strategy? And are

you regularly reassessing your metrics to ensure they are fueling continuous improvement and growth? Is the process for gathering financials and the output metrics standardized across front, middle and back offices?

OPERATIONAL AND ORGANIZATIONAL EFFICIENCY: Do the strategic objectives of your front, middle and back offices include non-financial, yet critical measures of speed, throughput and quality? Do the operational measures align to support one another?

RISK MANAGEMENT AND COMPLIANCE: Are core members of your front, middle and back offices equally informed about the risk factors in each business function (e.g., supply risk associated with critical raw material in product manufacturing) and

regulations that impact your organization?

EFFECTIVENESS: Is your organization taking an overall integrated view across financial and non-financial value drivers to assess its effectiveness? Is your organization measuring those value drivers and utilizing the findings to improve

operations across front, middle and back offices? Overall effectiveness also includes the customer experience aspect. For example, the overall effectiveness of a company’s Order to Cash (OTC) process should not only be assessed from the company’s financial and non-financial metrics—cost per order, order cycle time, level of automation, etc.—but also from the perspective of a company’s customers. Is the OTC process providing a delightful experience to the customers in terms of order accuracy, invoice accuracy, on-time fulfillment and issue resolution?


Operational FOREsight: A Quick-Start Guide

If you answered no to any of those questions, an Operational FOREsight approach provides an opportunity to drive immediate value with limited spend.

Over the last decade, methodologies like Agile, Lean and Six Sigma have gone mainstream. Most savvy organizations have reaped the benefits, primarily in the middle office, of more productive and faster work streams and reduced defects. But you can only squeeze so much juice from a lemon.


CITIUS | FASTER

Today, Lean performance measures are table stakes. Companies looking to out-operate the competition must manage their front and back offices as methodically as they do their production. Likewise, they must use data—qualitative and quantitative—as rigorously in the middle and back offices as they do in the front.

Through the lens of the four processes of operational excellence, here’s how to apply Operational FOREsight principles today for immediate alignment that positions you for long-term growth:

Financial Metrics

• Assign financial metrics, all aligned to the corporate strategic vision, to front, middle and back offices. Include not just cost-related metrics but also metrics related to revenue, revenue growth, working capital and fixed assets.

• Standardize the processes for inputting financial results; standardize the financial reporting tools for increased visibility and transparency across offices.

• Financial metrics are not one-size-fits-all. Assessing the health of your organization requires a blend of data and feedback unique to your people, processes and product. Identify the financial data that is the best reflection of your organization’s health. Create the data source if it doesn’t already exist.

• Reassess the metrics you are using annually, or after transition, to ensure they are still the right numbers to assess health and diagnose potential issues. Regularly test your metrics to ensure they are comparative, understandable and behavior-changing.



CITIUS | FASTER

Operational and Organizational Efficiency

• Align the strategic objectives of the front, middle and back offices to support one another.

• Create incentives for supporting cross-office strategic objectives.

• Consider a cross-functional Operational FOREsight team, comprised of core members of the front, middle and back offices, to socialize and catalyze strategic objectives. Once strategic objectives have been agreed, this committee would ensure accountability and test and refine as needed.

Risk Management and Compliance

• Identify risks within the front, middle and back offices’ functions, and create mitigation plans against each.

• Implement a customized education program for front, middle and back offices. Drill-down into risk and regulations specific to their functions, while providing a holistic education on the risk management and compliance ecosystem for your organization.

Effectiveness

• Identify the top non-financial value drivers for your firm, e.g., customer experience.

• Create the methods and processes for measuring those metrics. Again, these metrics should be comparative, understandable and behavior-changing.

• Report on these metrics regularly and across offices. Think of this report as the dashboard for your overall corporate health and fitness.

• If any of these metrics begin to slide, utilize your cross-functional Operational FOREsight committee to implement solutions specific to front, middle and back office capabilities; test and refine within.

Being fast isn’t always about time. It can be about being agile, and it can be about using data to gain insights and efficiencies that secure your spot in the marathon, not just the sprint, for continuous performance improvement.

In August 2015 The New York Times wrote a rather scathing piece on Amazon’s data-driven experiments in pushing employees to new levels of productivity and efficiency. Based primarily on interviews with former employees, the article paints a grim picture of CEO Jeff Bezos’ data-driven management style, citing among other things hostile work environments and a culture that was unfriendly to parents and those with health issues.10

Managerial style and cultures aside, the article also details Amazon’s vanguard approach to using big data to improve operations.

Because of the nature of its business Amazon is gifted with a real-time flow of big data, measuring nearly everything its customers do: what they put in their shopping carts, but do not buy; when readers reach the “abandon point” in a Kindle book; and what they will stream based on previous purchases. Internally, that data can

BIG DATA AND OPERATIONAL EXCELLENCE: THE AMAZON EFFECT

also tell when engineers are not building pages that load quickly enough, or when a vendor manager does not have enough product in stock.

In Amazon warehouses, employees are monitored by sophisticated electronic systems to ensure they are packing enough boxes every hour. When used effectively, sensors like these can track machine performance, optimize delivery routes and employee performance, going so far as to measure employee movements, stress, health, and even who they converse with and the tone of voice they use.

Big data’s nascent role in operational excellence is as exciting as it is scary. For most employees, the thought of being monitored continuously is likely more Big Brother than big data. But perhaps like drones, what was once disturbingly new will become acceptable, even commonplace, in the pursuit of operational excellence.


CITIUS | FASTER


10. “Inside Amazon: Wrestling Big Ideas in a Bruising Workplace,” The New York Times, August 15, 2015



ALTIUS | HIGHER

Innovation has become such a buzz word in business that it’s lost its power and practicality. Real innovation, the kind driven by strategy and design, yields returns that beat the S&P by 228 percent over the last 10 years.11

But the practice of innovation has become so diluted—and mismanaged—that many organizations don’t recognize its value. Thirty-eight percent of organizations have failed to realize significant financial gains as a result of their innovation efforts over the last five years. Another 10 percent don’t see innovation at their company as a value driver at all, either in the past, present or future.12

Several trends may be influencing this perception. First, innovation feels ambiguously difficult. Technology is increasingly making the world smaller, more competitive, and customers more demanding of 24/7 accessibility and

individualization. It’s enabled widespread disruption and a windfall of companies like Uber, Airbnb and Tesla that are turning traditional ways of doing business on their head.

Second, we don’t work the way we used to. The emergence of the Millennial workforce, which expects more collaborative, flexible working environments, are challenging traditional organizational structures. Yet for 41 percent of companies, innovation remains primarily a “creative” function, unaccountable to the corporate growth strategy and exclusive to those with an “innovator” title.13

Third, innovation—even the kind that renders big financial gains—isn’t on its own sustainable. After a burst of energy—either through traditional growth strategies or an innovative new offering—growth doesn’t descend gradually. It drops like a stone, taking with it motivation, inspiration and money.

The GROWTH & INNOVATION Playbook: Climb Higher with Practical Innovation

$10,000 Investment in the DMI Design-CentricIndex vs S&P Index

Jun ‘03

$50k

$40k

$30k

$20k

$10k

Jun ‘13

DESIGN INDEX$39,922

S&P INDEX$17,522

+228%

Company Growth Rates Beforeand After “Stall Year”

0-4 -3 -2 -1

YEAR

GR

OW

TH R

ATE

%

1 2

Stall Year

3 4

2468

10121416

DMI, Motive Strategies, 2014

$10,000 Investment in the DMI Design-CentricIndex vs S&P Index

Jun ‘03

$50k

$40k

$30k

$20k

$10k

Jun ‘13

DESIGN INDEX$39,922

S&P INDEX$17,522

+228%

Company Growth Rates Beforeand After “Stall Year”

0-4 -3 -2 -1

YEAR

GR

OW

TH R

ATE

%

1 2

Stall Year

3 4

2468

10121416

DMI, Motive Strategies, 2014

“When Growth Stalls,” Harvard Business Review, March 2008

11. Design Management Institute, Motiv Strategies, 2014





ALTIUS | HIGHER

In sports, we look at University of Oregon’s iconic track coach Bill Bowerman as a legacy of true innovation. He developed the waffle-tread running shoe—literally cast from a waffle iron—out of a need for greater traction for his athletes and an innate curiosity. But Nike founder Phil Knight brought the growth. A trained accountant and a self-proclaimed growth-obsessed businessman, Knight made Bowerman’s innovation practical. And incredibly lucrative.

Establishing and maintaining consistent growth is so much bigger than a great idea, and creativity and discipline are not opposing forces. For the greatest impact, the two must work in alignment, and to do that we must think differently about growth and innovation.

HOW PRACTICAL INNOVATION IS DIFFERENT Many misleading myths have caused innovation to under-deliver for companies

PRACTICAL INNOVATION

COMMON CONCEPTIONS

You must think “outside the box”

Start with an idea management system (IMS)

It’s all about the product

The more ideas, the better

It’s all about creativity

Making detailed financial proformas early is key

Inform with intentional constraints around customer needs, corporate strategy and capabilities. Creativity will be more productive.

Learn some principles and methods before making big IT investments. Like a scalpel, which can harm or heal, an IMS is just a tool.

Robust innovations nearly always involve non-product elements (e.g., channels, business models, processes, etc.).

A few strong ideas are better than a bunch of bad ones.

The combination of discipline and creativity creates break-throughs more quickly and repeatedly.

For breakthrough innovations, get a sense for the scale of the opportunity early on. Project more detailed financials as the concept takes shape (desirability, feasibility and viability).



ALTIUS | HIGHER

The Why: This is your strategic mission, and defining it is step one. It should be informed first and foremost by the corporate strategy and supported by:

• ASSESSMENT: Diagnostics to understand current attitudes and performance toward innovation.

• INTENT: Detail the purpose, ambition level (see the “The Innovation Ambition Matrix” below), risk tolerance and direction for innovation.

• ROADMAP: Create a detailed plan for designing and implementing an innovation strategy.

• VALUE: Detail a business case for delivering practical innovation.

From this philosophical launching pad, companies now need an infrastructure to support practical innovation. They need a framework to make innovation executable, repeatable and valuable. That framework must cover three critical elements: the Why, the What and the How.

The What: These are the things – ideas, products and solutions – that you commit to being proficient in developing, and the incubator for bringing them from concept to prototype:

• SCOPE: Establish innovation focus areas. Then identify different methodologies to drive idea development against those focus areas.

• DISCOVER: Create the processes and infrastructure to develop promising ideas into more established solutions for prototyping, piloting and launching. Those processes should include steps for soliciting and vetting ideas, portfolio management and pipeline management.

• DESIGN: Bring your best ideas to life.

• LAUNCH: Create repeatable processes for launching, testing and refinement.

The Innovation Ambition Matrix: Crystal-clear clarity around ambition and risk tolerance sets the stage for a successful innovation strategy.

Range (Industries, Markets)

TRANSFORM INVADE

ADAPT EXTEND

Existing

Dis

rupt

Com

pete

New

Inte

nt

Your goal is to change the way things are done in your industry, to provide radically better services and

solutions for your customers, to fix endemic problems, to change the game.

Your goal is to conquer a new market or industry, taking advantage of the status quo that exists among

the powerful incumbents and the customer needs they have left under-served.

Your goal is to embrace the dynamics of your industry and to provide the best responses to them. You want to

stay relevant to your customers and to compete effectively with your peers.

Your goal is to seek growth by entering new markets or industries in which your brand promise is still

intelligible, credible and valuable to your customers.



ALTIUS | HIGHER

The How: This is how you promise to enable go-to-market for new ideas and support continuous innovation. Here’s what you’ll need:

• OPERATING MODEL: Create an organizational structure, including organizational/staffing model, governance and reporting, and metrics, that supports innovation.

• PORTFOLIO MANAGEMENT: Develop a process for managing your pipeline of innovation ideas.

• CHANGE MANAGEMENT: Perform an analysis of the changes that innovation will require of employees and their activities. Create a plan to effectively manage the transition(s).

• CULTURE AND LEARNING: Articulate how the innovation function will communicate its purpose and integrate and engage with the enterprise as a whole.

• SUCCESS METRICS: Today, 36 percent of companies measure innovation exclusively against activity metrics, such as the number of projects in the pipeline or ideas generated14, a short-sighted approach that does a disservice to the innovation function and the enterprise. Create, monitor and socialize innovation metrics that tie to the corporate growth strategy.

• SENSING AND ADAPTING: Consistently revisit your “Why” (innovation assessment, intent, roadmap and value) to ensure you are adapting to the market and the needs of your organization.

Bowerman and Knight were the ultimate power duo—innovation and growth working together toward one common goal. Finding that duo internally, and creating points of coordination, cohesion and accountability, will amplify the individual worth of each function and collectively have a greater impact on the broader business KPIs.


Three years before his death, Peter Drucker outlined the seven areas of opportunity for companies seeking to innovate. In his piece, “The Discipline of Innovation,” Drucker argues that organizations can turn conscientiousness, or the act of methodically analyzing these seven opportunity areas, into innovation gold.

1. Unexpected Occurrences: The German scientist who synthesized novocaine around 1905 had intended it to be used in major surgical procedures. Surgeons, however, preferred total anesthesia for such procedures, and still do. Instead, novocaine found a fan base in dentists. Instead of embracing this unexpected occurrence the inventor spent the remaining years of his life traveling from dental school to dental school making speeches that forbade dentists from “misusing” his invention. In innovation, organizations must maintain clear eyes and a balanced view into both problems and opportunities to recognize greatness.

2. Incongruities: The identification of incongruities —between expectations and results, between growing markets and falling profits, or within the logic or elements of a process—opens the door for innovative opportunities.

3. Process Needs: Drucker uses the example of Japan’s ancient roadways as an example of how to inspire innovation through the identification of process needs. Much of Japan’s road systems are only marginally modernized versions of the paths laid down for oxcarts in the 10th century. So the Japanese employed an adaptation of the reflector system used on American highways to provide greater safety for motorists. A minor innovation that enables traffic to move smoothly, with minimal accidents, exploited a process need.

“Innovation is not being brilliant. It’s being conscientious.” - Peter Drucker

PETER DRUCKER’S SEVEN SOURCES OF INNOVATION

4. Industry and Market Changes: When an industry grows quickly—Drucker argues that the critical figure seems to be around 40 percent growth in 10 years or less—its structure changes. It is in those times that opportunistic organizations offer new ways of doing business.

5. Demographic Changes: Drucker writes, “The Japanese are ahead in robotics because they paid attention to demographics. Everyone in the developed countries around 1970 or so knew that there was both a baby bust and an education explosion going on. Consequently, the number of people available for traditional blue-collar work in manufacturing was bound to decrease and become inadequate by 1990. Everyone knew this, but only the Japanese acted on it, and they now have a 10-year lead in robotics.”

6. Changes in Perception: Or perhaps more accurately, the ability to predict changes in perceptions offers huge insights into innovation opportunity areas. The computer is a fantastic example of something that was once perceived as a threat and as something only big business would use. Today, we hardly even perceive computers at all, other than to subliminally acknowledge we couldn’t live without them.

7. New Knowledge: When Drucker wrote this piece in 2002 “new knowledge” meant something different. Today, it means things like artificial intelligence, deep learning and the IoT. Regardless, the sentiment rings clear: “It may be difficult, but knowledge-based innovation can be managed. Success requires careful analysis of the various kinds of knowledge needed to make innovation possible.”

(Source: “The Discipline of Innovation,” Peter Drucker for the Harvard Business Review, August 2002)


ALTIUS | HIGHER




FORTIUS | STRONGER

The GOVERNANCE & ORGANIZATIONAL EXCELLENCE Playbook: Grow Stronger with Winning Talent

A thousand wins. Four NCAA National Championships. Consecutive Olympic golds. Iconic basketball coach Mike Krzyzewski’s apparent super power is in custom-building teams that are laser-focused on a common goal: winning.

His talent revolves on and off the court every four years, external competition evolves constantly and the stakes get higher with each season. Yet consistently Coach K, as he’s called, has refined young college players into well-oiled championship teams, and he restored Team USA to the gold standard of basketball not once, but twice, bringing together the egos and personal rivalries of NBA players to do so. To say Coach K has mastered organizational excellence is an understatement.

To hear Coach K describe it, there is no secret to his success, only a consistent application of commonsense fundamentals and coaching principles. Yet, there is magic in this consistency, and in his ability to recruit and build teams destined for gold.

In his book “The Gold Standard: Building a World-Class Team,” Coach K writes that over the course of his prolific career he learned to shape each team differently, adapting to its members, situations and demands. And amidst these shifting variables Coach K found consistency in the “right chemistry of talents and personalities.”

“A kind of balance is important so that the skills complement one another in order to cover all the elements of the game,” Coach K writes.

The elements of the game for basketball are, arguably, easy to define. The elements of business strategy are not. And that is the crux of most organizational issues today. Companies have lost focus of their corporate strategy when building teams, capabilities and organizational structures, and they lack precise definitions of what success looks like for their full team to individually contribute to that overarching strategy. They aren’t connecting the dots, building the structural connections between strategy and capabilities to empower organizations to work together, as a team, toward one common goal. And without a common goal, in basketball as in business, no one wins.

Several trends have significantly contributed to and threaten to exacerbate challenges in connecting the dots between strategy and capabilities.

The basic barriers to entry in business have rapidly evolved. All companies now – whether they sell pocket knives or pocket PCs – must do so in a digital, multi-channel, customer experience-obsessed marketplace. And the requirements of this marketplace have challenged the core



FORTIUS | STRONGER

capabilities of most organizations. So, 69 percent of organizations outsourced and contracted those commoditized functions,15 inadvertently creating a complicated, mixed organizational structure that is no longer aligned to the organization’s business strategy, either in core capabilities or performance measures.

The workforce is changing. Until last year, Baby Boomers made up the largest portion of the U.S. population, and Generation X represented the biggest share of the workforce. Now Millennials lead in both categories: They hold about 20 percent of all management jobs, up from 3 percent in 2005, according to U.S. Bureau of Labor Statistics data in 2005, and with a global population topping 75.4 million they’ve surpassed

“My hunger is not for success, it is for excellence. Because when you attain excellence, success just naturally follows.”

– Coach Mike Krzyzewski

Baby Boomer numbers by 500,000.16 Your incumbent leadership and associated business-critical expertise are heading out the door, along with your heritage operational structures based on outdated notions of employee values and motivations.

Additionally, global expansion is challenging teams to find ways to collaborate, deliver and innovate while working across multiple time zones and in different cultures.

These trends, when coupled with a weak alignment between strategy and capabilities, leave companies vulnerable to the life-threatening symptoms of organizational dysfunction: lost productivity, wasted resources and squashed innovation.


16. U.S. Census Bureau, April 2016


If organizational excellence had a FitBit, here’s what it would measure. Assessing these enablers of organizational maturity allows a company to identify key opportunities to optimize performance in both the near- and long-term.

1. Performance Insights: Sustained organizational excellence is predicated on an organization’s ability to turn performance data, targets and insights into meaningful action and improvement.

2. Organizational Strategy: To be effective, an organization must have a strategy, aligned with organizational purpose that every team member—from the boardroom to front-line employees —can get behind and feel responsible for delivering.

3. Operational Agility: Operational excellence is grounded in an operating model that serves as the blueprint to operationalize the end state vision. Following the guiding principle “design to scale,” agility needs to be embedded into core and supporting processes, structure, roles and governance to enable continuous improvement.

THE EIGHT ORGANIZATIONAL EXCELLENCE HEALTH INDICATORS

4. Relevancy of Purpose: An ideal culture of excellence is the final manifestation of a clear corporate vision, mandate and reason for being (i.e., “purpose”) that permeates the organization.

5. Innovation: Sustained excellence is only possible in context of a culture, environment and set of capabilities that allows the organization to deliver new, differentiated experiences, products and services to their stakeholders.

6. Employee Competency and Engagement: Employees are both a critical enabler of an organization’s excellence, and a key recipient of the benefit of being excellent.

7. Leader Accountability: The most important element of sustained organizational excellence, leadership, is both a dimension of excellence and a key enabler of an organization’s ability to create and sustain excellent performance.

8. Collaboration Effectiveness: Collaboration among employees, vendors, customers and stakeholders is the new normal for creating sustainable improvements in any organization.


FORTIUS | STRONGER




FORTIUS | STRONGER

Here’s the four-step playbook for organizations looking to realize the type of organizational excellence that catalyzes capabilities and talent against one common goal: winning, on your terms.

1. Valuate: Diagnose the performance improvement opportunity and plan for the future. Look to organizational maturity assessments, performance analytics and customer insights to reveal your greatest improvement opportunities.

2. Assess: Dive deeper into the situational context and articulate insights. A crystal-clear definition of the corporate growth drivers will unveil the capabilities needed to get there. A subsequent capabilities audit will reveal deficiencies. Talent acquisition and development functions then take the lead in filling those gaps with top performers that possess the capabilities and values that you need.

3. Evolve: Design, build and test organizational improvements. Explicitly define what success looks like for each of your core business units—front, middle and back—to clearly demonstrate how the success—and failure—of each business unit tie to the all-up growth targets. Then, realign vision, strategy and leadership to make it work. Through a

series of pilot iterations, target operating model designs and other change roadmaps companies then must test and refine to get it right.

4. Operationalize: Deploy, embed and optimize the solution. Here, you bring it to life. Once operationalized, companies must manage by evidence with a performance management tool. Here is where your connecting-of-dots renders the full picture. Through a measurement strategy and dashboard, your three core business units can now work against clearly defined success metrics. Make them accountable to each other, and the business as a whole, with a consistent dashboard and measurement strategy that provides early indicators of potential problems, and opportunities to celebrate successes.

Operational excellence is a blend of hard and soft sciences, found at the perfect sweet spot of two speeds: the speed required to successfully maintain operations, and the speed that enables growth and innovation. It is a strategic game of connect-the-dots where the objective isn’t winning, but excellence. If you can achieve excellence in the critical category of organizational structure and governance, victory will follow.


Google coddles its employees with free food, massages and other lavish perks, yet some of its best engineers still grouse about their jobs and bosses as they struggle to get assignments done.

The Internet company tackled the puzzling problem with a study that concluded that how teams work together is more important than who is on a team.

Google’s study, based on internal data analysis, found that teams work best when their members feel like they can take risks, can count on each other, have clear goals, and believe their work matters.

Some of those findings were reinforced by a recent study published in the Academy of Management Journal by Jasmine Hu, an assistant professor of management at Notre Dame University, and Robert Liden, a management professor at the University of Illinois at Chicago. That analysis of 67 different teams working at six different companies found employees excel when they feel their work will help their colleagues, customers and community.

“The social aspect of teams is very important because many times people are just not motivated to work for money alone,” Hu says. “They want to have the opportunity to achieve a positive impact on the lives of others.”

An emphasis on team dynamics influences every aspect of operations at Google, including hiring. The company hires only several thousand of the 2 million applications it receives per year (making Google 25 times more selective than Harvard,

ARE YOU HIRING INDIVIDUALS OR TEAM MEMBERS?

Yale or Princeton) and the hiring process includes a mix of phone and onsite interviews, all of which are team-based in terms of participation and decision-making. Google candidates are assessed on four qualities: general cognitive ability, leadership, role-related knowledge and “Googleyness.”

So how do you assess a candidate’s effectiveness as a team member? In his 2015 book “Work Rules!,” Google’s head of people operations shares some of the questions candidates in the company’s team-based operation may face, including:

• Tell me about a time your behavior had a positive impact on your team. (Follow-ups: What was your primary goal and why? How did your teammates respond? Moving forward, what’s your plan?)

• Tell me about a time when you effectively managed your team to achieve a goal. What did your approach look like? (Follow-ups: What were your targets and how did you meet them as an individual and as a team? How did you adapt your leadership approach to different individuals? What was the key takeaway from this specific situation?)

• Tell me about a time you had difficulty working with someone (can be a coworker, classmate, client). What made this person difficult to work with for you? (Follow-ups: What steps did you take to resolve the problem? What was the outcome? What could you have done differently?)


FORTIUS | STRONGER



FORTIUS | STRONGER

When Sir Dave Brailsford became head of British Cycling in 2002, the team was defined by its impressive record of losses: British Cycling had only won a single gold medal in its 76-year history. Brailsford, a former professional cyclist who holds an MBA, had six years to prepare the team for the 2008 Beijing Olympics. Six years to turn around a nearly winless 76-year streak.

His approach was simple—he gambled that if the team broke down everything that goes into competing, and improved each element by 1 percent, they could achieve a significant aggregated increase in performance. The

process was grueling, driven by incremental successes. But at the 2008 games Brailsford’s squad won seven out of 10 gold medals available in track cycling. They did the same at the London Olympics four years later.17

Many Olympic sports involve feats of incredible dynamism, gravity-defying strength and natural-born talent. But the most successful athletes aren’t necessarily the fastest, highest or strongest naturally, but simply the ones who were motivated to commit to continuous, incremental performance improvement. Even just 1 percent at a time.

Copyright ©2016 The North Highland Company. All Rights Reserved.

ABOUT NORTH HIGHLAND

North Highland is a global management consulting firm known for helping clients solve their most complex challenges related to customer experience, transformation, performance improvement, and technology and digital. We add value and support our clients across the full spectrum of consulting, from strategy through delivery. We bring the big ideas, then we make them real. North Highland is an employee-owned firm, headquartered in Atlanta, GA, with more than 3,000 consultants worldwide and 60+ offices around the globe, and has been named as a “Best Firm to Work For” every year since 2007 by Consulting Magazine. The firm is a member of Cordence Worldwide (www.cordenceworldwide.com), a global management consulting alliance. For more information, visit northhighland.com and connect with us on LinkedIn, Twitter and Facebook.

17. “How 1% Performance Improvement Led to Olympic Gold,” Harvard Business Review, October 30, 2015

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Tina Ehrig Vice President, Global Head of Strategy and Performance Improvement +1.615.370.6249 [email protected]

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