The Concept

Palladium is the largest company in the world focused exclusively on helping companies execute their strategies and achieve an execution premium. An execution premium is extraordinary value created by an organization. It may manifest itself as an increase is share price, revenues, brand recognition, customer loyalty or employee commitment. It may also result from dramatically improved consolidation, optimal resource allocation, or reduced cycle times. An execution premium is achieved when strategy is properly clarified and linked to operations through the generation of timely, robust, mission-critical information.   Listen to how Palladium’s founder, Dr. David P. Norton describes an Execution Premium.

In their latest book, The Execution Premium, Linking Strategy to Operations for Competitive Advantage (Boston: Harvard Business Press, 2008), Drs. David P. Norton and Robert S. Kaplan provide a comprehensive management model designed to address one of management’s greatest challenges: linking strategy formulation and planning with operational execution. The six-stage model incorporates elements from the Balanced Scorecard, strategy maps, principles and practices along with management tools developed by leading experts to create a practical approach that will enable organizations to not only plan and successfully execute their strategy, but also to monitor, test and adapt their strategic assumptions in order to ultimately achieve an execution premium.  It consists of six major stages:

1. Develop the Strategy – your organization must be able to state exactly what business you’re in, identify the key issues you face, and determine how best to compete. Developing the strategy uses an array of strategy tools such as mission, values, and vision (MVV) statements; external competitive, economic, and environmental analyses; methodologies such as Michael Porter’s five forces and competitive positioning framework, the resource-based view of strategy, and blue ocean strategies, as well as scenario planning, dynamic simulations, and  war-gaming.
2. Plan the Strategy – your organization must be willing to develop strategic objectives, measures, targets, initiatives, and budgets that will ultimately guide action and resource allocation. You’ll need to be able to describe your strategy, measure your plan, identify plans of action, figure out how to fund your initiatives, and decide who will lead the strategy execution process. Planning the strategy uses such tools as strategy maps and Balanced Scorecards, along with targets and strategic initiatives.
3. Align the Organization – your organization must be able to link company strategy to the strategies of individual business units while both aligning and motivating employees to optimize strategy execution. You align the organization with the strategy by cascading strategy maps and Balanced Scorecards to all organizational units, by aligning employees through a formal communications process, and by linking employees’ personal objectives and incentives to strategic objectives.
4. Plan Operations – your organization must link long-term strategy with day-to-day operations, aligning strategy with operating plans and budgets while focusing on those process improvements that are most critical to the strategy. Planning operations uses tools such as quality and process management, reengineering, process dashboards, rolling forecasts, activity-based costing, resource capacity planning, and dynamic budgeting. 
5. Monitor and Learn – your organization must be committed to monitoring performance results once a strategy has been developed, planned and implemented, enabling you to determine if the strategy is being properly executed. It requires monitoring and learning about problems, barriers, and challenges. This process integrates information about operations and strategy into a carefully designed structure of management review meetings.
6. Test and Adapt – your organization must also test fundamental strategic assumptions to determine if you, indeed, do have the right strategy. This involves testing and adapting the strategy, using internal operational data and new external environmental and competitive data— thus launching a new cycle of integrated strategy planning and operational execution.

By adopting this fluid, closed-loop system, your chances of achieving an execution premium improve measurably.

Building on years of strategy execution experience and this six-stage model, Palladium has further developed an Execution Premium Assessment™ (XPA™) to help companies understand the performance gap between where they are and where they want to be.  XPA uses a proprietary algorithm to show cause and effect relationships between drivers of performance and performance results.  As well, XPA can show organizations how their performance compares to high performing companies globally.

“XPA will help our clients execute their strategies successfully, allocate resources efficiently, and improve decision-making with insight based on data they can trust” says Dr. David B. Friend, Chairman and CEO of Palladium.  “The Kaplan-Norton approach is a proven model that helps our clients achieve their own execution premiums.”  Contact us so that we can help you to achieve yours.

The Execution Premium represents years of research, a synthesis of ground-breaking concepts, and case studies of organizations that have achieved a true Execution Premium.   It underscores how organizations using formal strategy execution management consistently outperform their peers.  Kaplan and Norton provide meticulous detail on how any organization can make strategy a regular part of its business processes.  They describe how companies can establish strong linkages from strategy to operations so that employees’ everyday operational activities support strategic objectives.  They introduce a new framework for management review meetings that clearly separates the operational review meetings, which solve short-term problems and monitor the improvement of key operational processes, from the meetings that review and improve strategy execution.

If you are, or work for, the CEO, CIO, or CFO of an organization that is looking to achieve an execution premium, then this book is required reading.

The Results

Achieving an execution premium will impact your company in a number of different ways – significantly improving performance from financial, customer, internal, and learning and growth perspectives.  Our research has shown that in a world where nine out of ten organizations fail to execute their strategies, 70% of organizations that use a formal process to manage strategy out-perform their peer group.  Here are just a few examples of the execution premiums client companies have achieved as a result of working with Palladium:

• Marriott Vacation Club (USA) saw operating profits rise by 80%, its customers rating MCVI as “easy to do business with” rise by 70%, and the percentage of its employees who understood the strategy rise from 74% to 86%.
• Bank of Tokyo Mitsubishi UFJ saw its net profit rise by 117%, its Moody’s/S+P credit ratings increase from (A2/BBB to A1/A), and it became the #1 ranked brand among Japanese financial institutions.
• SOHO in Indonesia saw its revenues increase by 65%, both its market share and customer satisfaction rating double, and its lead time on a key product reduced from 25 days to 2 days.
• InfoSys saw its revenues rise by 310%, its new product revenues rise 48%, and, it was ranked India’s best managed company.

As these examples so profoundly demonstrate, across industries and across continents, when you successfully link strategy formulation and planning with operational execution, you achieve value creation – an execution premium.

The Creators: Dr. David P. Norton and Dr. Robert S. Kaplan

Together, Drs Norton and Kaplan are the co-authors of eight Harvard Business Review articles and five books: The Balanced Scorecard, The Strategy-Focused Organization, Strategy Maps, Alignment, and The Execution Premium.

David P. Norton is Founder and Director of Palladium, and co-founder of Balanced Scorecard Collaborative.  Norton was previously the president of Renaissance Solutions, Inc., an international consulting firm he co-founded in 1992. Before Renaissance, Norton co-founded Nolan, Norton & Company where he spent 17 years as president, prior to its acquisition by KPMG Peat Marwick. A frequent lecturer and writer, Norton’s work with the Balanced Scorecard has been the subject of many articles and public conferences. Dr. Norton’s books have been translated into 23 languages. The Balanced Scorecard concept was selected by the editors of Harvard Business Review as one of the most influential management ideas of the past 75 years.

Dr. Norton earned a B.S. in electrical engineering from Worcester Polytechnic Institute, an M.S. in operations research from the Florida Institute of Technology, an MBA from Florida State University, and his doctorate in business administration from Harvard Business School.

Robert S. Kaplan is Baker Foundation Professor at the Harvard Business School and co-founder of Balanced Scorecard Collaborative, a Palladium company. He also serves as Chairman of Professional Practice at Palladium. Kaplan joined the HBS faculty in 1984 after spending 16 years on the faculty of the business school at Carnegie-Mellon University, serving as its Dean from 1977 to 1983. Kaplan is co-developer of both activity-based costing and the Balanced Scorecard. He has authored or co-authored twelve books, fifteen Harvard Business Review articles, and more than 120 other papers. In 2006, Kaplan received the Lifetime Contribution Award from the Management Accounting Section of the American Accounting Association.  The Financial Times named him on its 2005 list of Top 20 influential business thinkers. He received the Telecom Italia "Prize for Leadership on Business and Economic Thinking” in 2004, the Distinguished Service Award from the Institute of Management Accountants (IMA), the CIMA Award by the Chartered Institute of Management Accountants (UK), and the Outstanding Accounting Educator Award of the American Accounting Association.

Dr. Kaplan received a B.S. and M.S. in electrical engineering from the Massachusetts Institute of Technology and a Ph.D. in operations research from Cornell University.