We all know that this type of title for a blog is designed to catch the eye and attract you in… so while you are here it is worth thinking about the following.
Today the FT reported that HP boss, Ms Whitman blamed “inconsistent execution” for their latest poor performance. She said that Management mistakes in the enterprise group had led to the loss of 5 percentage points of market share in industry-standard servers in the quarter. This equalled a loss of approximately $54.5 million.
Inconsistent execution is the enterprise performance management challenge that was highlighted back in the early 1980’s when a survey of management consultants reported that less than 10 percent of effectively formulated strategies were implemented successfully (Walter Kiechel, “Corporate Strategists Under Fire,” Fortune, Dec. 27, 1982). Fortune returned to this topic in a (often quoted) 1999 article where they concluded that in the majority of cases—we estimate 70 percent—the real problem isn’t [bad strategy]…it’s bad execution.” (R. Charan and G. Colvin, “Why CEOs Fail,” Fortune, June 21, 1999). So clearly Ms Whitman believes that HP is suffering from ‘bad execution’ but what is also interesting in Ms Whitman’s update is the reference to Management mistakes, referred to as Op Losses in the risk management world. So does this mean that HP have a strategy execution issue and a risk management issue… or is it a single issue?
I would argue that risk is a fundamental part of strategy execution and therefore HP has a single issue i.e it has inconsistent execution and a contributing factor to this appears to be poor risk management practices. In our current ‘continuous turbulent’ times, where the business environment is experiencing increased rates of global change, increased regulatory pressures, increased pressure from shareholders to deliver in a challenging economic climate and increased boardroom pressures, organisations need to integrate their strategy execution and risk management processes and approach. The Risk-Based Performance Management (RBPM) methodology provides the guide as to how to do this, how to put risk and specifically risk appetite at the heart of your strategy execution and how to ensure your organisation operates within appetite. And in HP’s case, saves $54.5 million in revenue lost.