In today's business environment, strategy has never been more important. Yet research shows that most companies fail to execute strategy successfully. Behind this abysmal track record lies an undeniable fact: many companies continue to use management processes-top-down, financially driven, and tactical that were designed to run yesterday's organizations. Now, the creators of the revolutionary performance management tool called the Balanced Scorecard introduce a new approach -The Strategy-Focused Organization- that makes strategy a continuous process owned not just by top management, but by everyone.

The key driver behind creating the Strategy-Focused Organization is the ability to execute strategy. A study of 275 portfolio managers reported that the ability to execute strategy was more important than the quality of the strategy itself! These managers cited strategy implementation as the most important factor shaping management and corporate valuations. This finding seems surprising, as for the past two decades management theorists, consultants, and the business press have focused on how to devise strategies that will generate superior performance. Apparently, strategy formulation has never been more important.

A 1999 Fortune cover story of prominent CEO failures concluded that the emphasis placed on strategy and vision created a mistaken belief that the right strategy was all that was needed to succeed. "In the majority of cases we estimate 70 percent the real problem isn't bad strategy but… bad execution," asserted the authors. Thus, with failure rates reported in the 70 percent to 90 percent range, one can appreciate why sophisticated investors have come to realize that execution is more important than good vision.

Why do organizations have difficulty implementing well-formulated strategies? One problem is that strategies the unique and sustainable ways by which organizations create value are changing but the tools for measuring strategies have not kept pace. In the industrial economy, companies created value with their tangible assets, by transforming raw materials into finished products. A 1982 Brookings Institute study showed that tangible book values represented 62 percent of industrial organizations' market values. Ten years later, the ratio had dropped to 38 percent. And recent studies estimated that by the end of the twentieth century, the book value of tangible assets accounted for only 10 percent to 15 percent of companies' market values. Clearly, opportunities for creating value are shifting from managing tangible assets to managing knowledge-based strategies that deploy an organization's intangible assets: customer relationships, innovative product and services, high-quality and responsive operating processes, information technology and databases, and employee capabilities, skills, and motivation.

In an economy dominated by tangible assets, financial measurements were adequate to record investments in inventory, property, plant, and equipment on companies' balance sheets. Income statements could also capture the expenses associated with the use of these tangible assets to produce revenues and profits. But today's economy, where tangible assets have become the major sources of competitive advantage, calls for tools that describe knowledge-based assets and the value-creating strategies that these assets make possible. Lacking such tools, companies have encountered difficulties managing what they could not describe or measure.

Most of today's organizations operate through decentralized business units and teams that are much closer to the customer than large corporate staffs. These organizations recognize that competitive advantage comes more from the intangible knowledge, capabilities, and relationships created by employees than from investments in physical assets and access to capital. Strategy implementation therefore requires that all business units, support units, and employees be aligned and linked to the strategy. And with the rapid changes in technology, competition and regulations, the formulation and implementation of strategy must become a continual and participative process. Organizations today need a language for communicating strategy as well as processes and systems that help them to implement strategy and gain feedback about their strategy. Success comes from having strategy become everyone's everyday job.

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