The Kernel of Good Strategy - Connecting Boardroom to Operation

 

In most organizations, no matter what the board members strategies, plan and work on selecting the right KPIs and put policies and framework in place, yet teams on the ground perform their day-to-day work on As-Is basis prefer the no-change, no-risk, no-responsibility work mode. Decision makers will lean after sometime to let the plan be a plan and let the operation proceed as-is. The real-issue, there is no or limited connectivity between boardroom objectives and the personal objectives of the operating teams. The connectivity issues may come from different gaps in the implementation plans like communication, functional decomposition, KPIs, career progression, training, business process, and many other things

Richard Rumelt’s Good Strategy/Bad Strategy introduces the "kernel" of good strategy—a framework built around diagnosis, guiding policy, and coherent actions. While this approach provides clarity at a high level, its real value lies in how it connects the strategic vision formed at the board level to actionable steps within an organization’s operations. Bridging this gap requires a structured process of functional decomposition, translating strategic goals into operational plans that can be implemented effectively across departments and teams.

In this article, we focus on the mechanics of functional decomposition, ensuring that strategic objectives are not only understood but also realized through aligned, tangible actions at every level of the organization.

 

1. Diagnosis: Defining the Strategic Problem

At the Board Level:

The first step is to identify the core challenge or opportunity facing the organization. At the board level, this involves:

Ø  Comprehensive Analysis: Reviewing market trends, internal performance, and competitor actions.

Ø  Clarifying the Root Issue: Distilling complexity into a clear and focused statement that defines the problem.

Translating to Operations:

Functional decomposition starts by breaking down this strategic diagnosis into specific implications for each operational function.

Ask Key Questions:

Ø  What does this challenge mean for our supply chain, production, or customer service?

Ø  How does it affect sales, marketing, or HR priorities?

Ø  Identify Metrics: Define specific indicators to track progress (e.g., production efficiency, customer satisfaction, or market share).

Example:

When Ford diagnosed its challenges in the mid-2000s as operational inefficiencies and a bloated product lineup, this strategic insight translated operationally into the need to streamline manufacturing processes and consolidate global platforms.

 

2. Guiding Policy: Crafting the Strategic Approach

At the Board Level:

The guiding policy defines the overall approach to address the diagnosis. This policy provides direction without prescribing specific actions, ensuring flexibility while maintaining alignment. At the board level, this might involve:

Ø  Defining Priorities: Deciding what the organization will focus on and what it will deprioritize.

Ø  Establishing Boundaries: Clarifying what falls outside the strategy’s scope.

Translating to Operations:

To connect the guiding policy to the ground level, organizations must cascade strategic priorities into department-specific objectives.

Ø  Functional Alignment: Each department should identify how its activities contribute to the overarching policy.

Ø  Policy Translation: Use middle management as translators to break the guiding policy into language and tasks relevant to their teams.

Ø  Develop Playbooks: Create playbooks for operational teams that explain how the strategy impacts their roles, such as adjusted workflows or new KPIs.

Example:

Domino’s Pizza adopted a guiding policy focused on rebuilding its brand around product quality and transparency. For operations, this translated into specific priorities for R&D (recipe overhaul), marketing (honest communication), and IT (investing in online ordering systems).

3. Coherent Actions: Executing the Strategy Operationally

At the Board Level:

The board defines high-level actions that align with the guiding policy. These actions must be coordinated, feasible, and impactful. However, execution is left to the functional and operational levels.

Translating to Operations:

Functional decomposition plays a critical role in ensuring coherent actions are not abstract but actionable:

Ø  Break Down Actions by Function: For each department, determine specific initiatives that align with the overarching strategy.

Ø  Production: Adjust manufacturing processes or supply chain logistics.

Ø  Sales & Marketing: Reposition products or redefine target audiences.

Ø  HR: Upskill employees or hire new talent to meet strategy demands within time frame.

Ø  Use Cross-Functional Teams: Align actions across departments to ensure synergy. For example, product development and marketing should collaborate closely if the strategy focuses on innovation.

Ø  Prioritize and Sequence Actions: Identify quick wins to build momentum while planning long-term initiatives.

Example:

When Equinor (formerly Statoil) rebranded to signal its shift toward renewable energy, coherent actions were required across functions:

Ø  Operations: Invest in offshore wind infrastructure.

Ø  HR: Upskill employees to manage renewable projects.

Ø  Marketing: Rebrand communications to emphasize sustainability.

Functional Decomposition: From Strategy to Action

Step-by-Step Approach:

1.      Strategic Diagnosis (Board Level): Define the core challenge and opportunity.

            Example: "Market shift to renewable energy threatens core business model."

2.      Strategic Priorities (Board Level): Develop a guiding policy to address the diagnosis.

Example: "Pivot to renewable energy while leveraging expertise in offshore technologies."

3.      Operational Implications (Executive Leadership): Break the guiding policy into functional impacts.

Example: Operations focus on wind energy projects; HR prioritizes retraining programs.

4.      Departmental Plans (Middle Management): Translate implications into department-specific actions.

Example:

·        Engineering: Develop designs for offshore wind platforms.

·        Marketing: Position the company as a leader in renewables.

5.      Execution (Frontline Teams): Implement day-to-day actions aligned with strategic objectives.

       Example: Procurement sources sustainable materials; frontline staff work on renewable energy installations.

6.      Feedback Loops: Establish mechanisms for regular feedback between operational teams and the board to adjust strategies as needed.

Practical Tips for Bridging the Gap

ü  Involve Middle Management Early: Middle managers are crucial translators of strategy. Engage them in workshops to align their understanding and ensure clear communication with their teams.

ü  Simplify Communication: Avoid jargon when translating strategies into actions. Use straightforward language and visuals to clarify the link between boardroom decisions and operational goals.

ü  Align Incentives: Ensure KPIs and rewards are aligned at every level of the organization, reinforcing the guiding policy.

ü  Pilot Initiatives: Test strategic actions on a small scale before rolling them out company-wide. This minimizes risk and builds confidence in the strategy.

 

Conclusion

The kernel of good strategy is not just about crafting a high-level plan—it’s about ensuring that the vision set at the board level is effectively translated into operational reality. Through functional decomposition, organizations can connect the diagnosis, guiding policy, and coherent actions to the specific tasks and initiatives needed to drive success.

By systematically breaking down strategy into actionable steps for every function and ensuring alignment across all levels, companies can turn ambition into achievement, avoiding the pitfalls of miscommunication and misaligned efforts. The key lies in clarity, alignment, disciplined execution, and accountabilities.