MHI Solutions Improving Supply Chain Performance
Building high‑performing supply chains and achieving other key business objectives starts with a clear strategic vision, but even the most brilliant strategies often fail due to poor execution, stranding organizations short of their goals and leaving billions in unrealized value on the table. Experts see potential in leveraging artificial intelligence to overcome barriers to implementing strategy and close the strategy‑execution gap.
WHEN FORMER WALMART CEO Doug McMillon announced the retail behemoth had used a generative artificial intelligence (AI) tool to optimize its search function, making it faster and easier for online shoppers to find what they’re looking for, it was just another example of the company’s success in bringing a core strategic vision to life.
The generative AI project, which, along with others, has juiced e‑commerce sales by 20% annually since 2024, was the latest in a string of initiatives the world’s largest retailer has implemented across its supply chain to deliver on its high‑level strategy of driving growth by enhancing the customer experience.
Walmart’s consistent growth over six decades provides a resounding answer to the question posed rhetorically by the author of a circa‑1995 case study: “Why is Wal‑Mart so successful? Is it Good Strategy or Good Strategy Implementation?”
Few observers today would disagree with the author’s conclusion that the company has succeeded beyond Sam Walton’s dreams “not only because it makes sound strategic management decisions but also for its innovative implementation of those strategic decisions.”
Indeed, Walmart has mastered what, for many companies, is a daunting challenge: not just developing a winning strategy but executing it successfully. Most companies fall short of their broader objectives not because their strategic vision is flawed, but because they fail to turn strategy into action.
Cesare Mainardi, former CEO of Booz & Company and now an adjunct professor of strategy at Northwestern University’s Kellogg School of Management, uses the term “coherence” to describe alignment between strategy and execution. In his view, companies achieve coherence by leveraging capabilities that differentiate them from competitors and by focusing execution relentlessly on strengthening those capabilities to create sustained competitive advantage.
“Companies that connect what they promise—their value proposition to customers—to what they do better than their competition outperform and win,” Mainardi said. “In short, they succeed because they are far more coherent than their competitors. This is the ‘what’ of a successful strategy. The ‘how’ requires connecting strategy to execution, and this is where most companies fail.”
The strategy‑execution gap is real, and its impact on organizations’ competitiveness and financial strength is substantial. Statistics drawn from a range of strategy and execution studies paint a picture of the scope of the problem:
- Sixty‑seven percent of companies say their strategies fail due to poor execution, according to the Balanced Scorecard Institute (BSI).
- According to the Brightline Project Management Institute, 90% of senior executives admit they fail to reach all their strategic goals due to weak implementation.
- Organizations lose 10% of annual revenue due to mismanaged execution of strategic initiatives, according to the Project Management Institute.
- Harvard Business Review (HBR) found that 40% of strategic value is lost due to breakdowns in execution.
But there’s hope: Just as AI is enabling innovations in tactical supply chain and logistics functions that support broader strategic objectives—such as demand planning, inventory/warehouse management and procurement/route optimization—strategic management experts see a wide range of opportunities for AI to help organizations overcome implementation roadblocks. In doing so, AI can help close the strategy‑execution gap.
STRATEGIC CLARITY AS A STARTING POINT
AI tools can synthesize vast datasets to help leaders clarify strategic direction, provide real‑time insights for faster decision‑making and improve communication of higher‑level goals and objectives across the organization. In addition, they can foster cross‑functional collaboration and alignment on objectives through advanced supply chain orchestration while enhancing the effectiveness of strategy management tools and methodologies such as the Balanced Scorecard and Lean Six Sigma.
Strategic clarity in the supply chain is often compromised by attempts to serve competing goals that exacerbate the gap between strategy and execution, Mainardi said. Companies pursue growth only to get trapped on a growth treadmill, strive for functional excellence and become world‑class at everything, but master nothing, and reorganize repeatedly in the name of change. They go lean across the board and end up cutting not just the fat but also the bone, while efforts to become agile and resilient often devolve into reactive decision‑making that pulls the organization away from its strategy.
“All of these tendencies show up vividly in supply chains, where pursuing every objective at once (cost, risk, resilience, sustainability) often produces the incoherence leaders should avoid,” Mainardi said.
David Floyd, principal consultant for consulting firm BrightOrg Services, sees potential for AI to improve strategic clarity. He said the technology helps leaders synthesize the vast amount of data they need to make sound decisions when developing strategies—and also to mitigate the bias that frequently colors those decisions.
“At the end of the day, strategy is about making choices, and there’s only so much information that a person or a team can process mentally to make those different choices,” Floyd said. “An AI tool can take in an immense quantity of complexity information and then be a thought partner [in making strategic choices]in a more objective way.”
Leaders will ultimately make decisions based on their own experience and knowledge, their understanding of their teams and human intuition. While AI tools do not replace these, the technology’s ability to help hone strategy and accelerate its development will benefit organizations significantly, Floyd said.
Mainardi envisions AI having widespread applications in aligning strategy and execution, but achieving strategic clarity is the non‑negotiable starting point for any organization that hopes to close the strategy‑execution gap.
“Supply chains and value chains are messy, complicated combinations of people, companies, technologies, processes and knowledge that take a long time to perfect, and they need to be surgically designed to support the strategic intent rather than being buffeted by changing objectives every few years,” Mainardi said. “When leaders are clear‑minded about their strategy and the supply chain they need to build, they can focus AI on supporting design choices, monitoring execution and reinforcing coherence over time.”
ENHANCING EXISTING TOOLS
Strategy management frameworks such as the Balanced Scorecard—which provides organizations with a way to evaluate performance on strategic initiatives across four key perspectives, including financial, customer, internal processes and learning and growth—already are widely used across industries and represent a major opportunity for companies to benefit from AI‑driven enhancements.
Walmart, for example, has used it in its Supply Chain Optimization Program to monitor and improve supply chain performance, reducing cycle times by 15% and inventory levels by 10%. In addition, Procter & Gamble’s Supply Chain Excellence Initiative implemented the Balanced Scorecard to enhance supply chain innovation, increase supply chain velocity by 25% and reduce costs by 10%, according to published reports.
Together with project management methodologies like Agile that allow teams to pivot quickly and tweak execution in the face of rapidly changing conditions, AI is contributing to a “transformational shift” in how companies implement strategy to an “adaptive execution” model, according to Adam Asch, senior consulting associate for Strategy Management Group (SMG), the parent company of BSI.
Asch describes three ways AI is “supercharging” strategy execution in a blog for SMG’s website:
- Real‑time performance dashboards: Instead of relying on quarterly reports or manual spreadsheets, AI automates the collection and analysis of performance data. Leaders can see at a glance how objectives are progressing, which initiatives are lagging and where corrective action is needed before it’s too late.
- Predictive analytics for risk and opportunity: AI doesn’t just explain what happened; it helps predict what’s next. Imagine knowing months in advance that a workforce capacity gap will hinder your growth initiative, or that shifting customer sentiment poses a threat to a strategic objective. With predictive analytics, strategy execution becomes proactive rather than reactive.
- Intelligent Objectives and Key Results (OKRs) and Balanced Scorecard alignment: One of the biggest challenges in execution is ensuring alignment across business units. AI can analyze objectives, detect redundancies and recommend opportunities for alignment. It becomes far easier to keep OKRs and Balanced Scorecard measures aligned with strategic themes and outcomes, thereby reducing wasted effort and maximizing impact, Asch wrote.