The ADEM Strategy Management Model Explained

 Today we live in the information age, where information is one of the most valuable resources and big data is the driving force behind market shifts. Leaders of large firms (e.g., manufacturers, hospitals, teaching hospitals, corporations, chain hotels, franchised restaurants, universities, etc.) must learn how to (1) sense, (2) seize, and (3) reconfigure market and internal data to sustain a competitive advantage (Breznik & Lahovnik, 2014; Teece, 2000). 

Being able to translate data into strategic objectives is the ability to understand market data and a firm’s internal resources to reconfigure them to meet the strategic opportunities of a firm. Some firms outperform others by leveraging their internal resources to create a sustained competitive advantage (Barney, 1991; Campbell & Park, 2017; Wallace, 2019; Wernerfelt, 1984). Large firms use data to organize business plans to differentiate themselves from their competitors and to set their strategic horizon (Ibrahim, 2015). To compete in the information age, large firms must learn how to analyze, interpret, and translate large sums of information into aspirational and agile strategies that are both executable and manageable to sustain a competitive advantage. 

Creating executable and manageable strategic plans is ideal for most large firms, but not always likely. Leaders across industries have a history of poorly executing and managing their strategic plans. According to Alfred North Whitehead (1925), some leaders have “the fallacy of misplaced concreteness.” They have the tendency to create strategies and then mistake them for the reality it is supposed to represent. In fact, leaders of large firms have mismanaged strategies for so long that the SPOTS acronym (Strategic Plans on the Shelf) was created to highlight the problem. The SPOTS acronym means strategic plans on the shelf. Many leaders complain that there is no gold standard for developing, implementing, and managing a strategic plan. As a result, leaders approach the application of strategic planning using incoherent frameworks with the notion of translating, creating, executing, and managing their plans to achieve high-performance outcomes. But they soon come to realize that their notion was only a fantasy, resulting in them shelving their plan. Provided that the current application of strategy management is complex, incoherent, time consuming, and laborious for busy leaders in some large firms, consultants at All Things Strategic created a simplified application for strategy management using the ADEM Strategy Management Model (UAMS Vision 2029 Strategic Plan, 2019).   

The ADEM Strategy Management Model (ADEM model) is a high-level strategy management process that helps simplify the elements of the Balanced Scorecard (BSC) and other strategy management processes. The BSC is a strategy performance management tool that organizes strategy into four perspectives: financial, customer, internal process, and talent and technology. The BSC aligns the business units of a firm to the parent goals of a firm, prioritizes projects, products, and services, measures and monitors progress towards strategic targets, and communicates the progress of the strategic plan. 

The ADEM model was designed to help busy executives across industries work on detailed elements of a plan while pacing and remaining focused on the end goal. The ADEM model organizes the strategy management process into four easy-to-follow phases: 1) Analyze, 2) Develop, 3) Execute, and 4) Manage. Each phase has actionable elements that are dependent on the phase and interdependent to the elements across the model. The Analyze phase consists of analyzing external market data and internal data, avoiding biases in the data, and choosing the most competitive strategic direction for the organization (Porter, 1996). The Develop phase consists of translating market and operational data into a concrete and actionable plan. The Execute phase consists of effectively implanting a strategy into the culture of the organization through strategic alignment of its internal resources and cascading objectives to units. The Manage phase consists of aligning the reporting of the plan across an organization, conducting scheduled strategic meetings to discuss the strategic performance, and testing the hypothesis of the plan, and pressure testing the plan. The ADEM model is cyclical because the steps must be repeated annually and once a firm reaches its strategic horizon. The duration of a strategic plan is based on the lifespan of its strategic vision, which on average is between 5 to 10 years.  

The ADEM model evolved from an 18-month independent research study that involved a sample of 35 busy leaders from across institutions within higher education and the healthcare spectrum in Arkansas and Tennessee. During the research period, leaders were consulted on strategic planning, participated in a retreat, and developed a strategic plan using the BSC methodology. The findings of the research showed that busy leaders became mentally exhausted with the unfamiliar process and felt a lack of control. Many of the executives completed the analysis and development phases of the plan then later either shelved the plan or handed it off to leaders who were not involved in the initial planning phases to implement and manage the plan. The execution rate of their plans was extremely low. As a result, the four phases of the ADEM model evolved into a practical application for busy leaders to give them knowledge of the unfamiliar process, the order of the process, and a sense of control in the process. 

The design and development of the ADEM model were laborious. Using the Affinity Diagram to assist with the creation of the model, brainstorming ensued followed by extensive research on the best linear process flow for the BSC and multiple strategy management systems. Based on the research findings, concepts and ideas were sorted into affinities as patterns emerged. Affinities are groups of ideas, opinions, issues, concepts, or words with similar characteristics and relationships. Four main themes emerged from the affinity groups that identified the best strategy management process and the ADEM model was born. See Figure 1. 

Figure 1: Unorganized elements of the Balanced Scorecard 

Figure 2: Organized elements of the Balanced Scorecard grouped into affinities

Figure 3: Naming the elements of the Balanced Scorecard that are grouped into affinities  

Figure 4: The ADEM Strategy Management Model

Analyze

The analysis phase of the ADEM model consists of five elements: market analysis, external interviews, internal interviews, focus groups, and town halls. Analyzing the market involves being able to interpret large sums of data in order to seize market opportunities and determine a direction (Porter, 1996). To perform these tasks, leaders must analyze the market share and outmigration trend data; competitor activities, and anticipated strategies, competitors, and major trends impacting their business. Leaders must conduct an internal analysis that includes interviews with senior leaders and external stakeholders. They also must conduct focus groups that include leaders, managers, and supervisors from across the firm. Lastly, they must conduct town halls with frontline employees to capture information from those who directly impact the operations of the firm. Although strategy is top-down, it must engage the entire workforce (Davenport, Kaplan, & Norton, 2001). To capture feedback from the entire workforce, leaders must create a survey and gather it. The survey must include questions that solicit both qualitative and quantitative responses. Leaders must know the qualitative narrative of the workforce as well as the quantitative results. They need to analyze and code the data from the market analysis, executive interviews, focus groups and town halls, and the survey data to develop a strategic vision, a change agenda, and an activity to guide the development of strategic objectives at the strategic planning retreat. 

Develop

The development phase of the ADEM model consists of seven elements: strategic vision, change agenda, objectives, strategy map, measures and targets, initiatives, and balanced scorecard. Leaders must use the market analysis and internal analysis data to create a strategic vision. A strategic vision is the catalyst for creating a strategic plan (Smith, A., personal communication, December 24, 2019). A strategic vision is the Achilles heel in the process of strategy management. Leaders must write a strategic vision that clearly communicates their strategic position in the market, how they differentiate from their competitors, and how the vision translates the strategy into actionable steps. According to Davenport, Kaplan, & Norton (2001), translating strategy into actionable steps for an organization begins with the strategic vision. Leaders must work collectively to draft a strategic vision that supports the organization’s desired position in the market and has elements that include a strategic horizon, a niche, and a bold direction. A strategic vision has a lifespan and a destination. It does not describe the purpose of an organization; it communicates the desired direction of an organization.

A strategic vision must be translated into a change agenda (CA) to communicate the changes that must occur in a firm to accomplish its strategic vision. See Table 2 below. CA is a one-page document that communicates the current state of business domains (activities) and their desired future state (Kaplan & Norton, 2008). A CA articulates the actions that a firm must take to move from its current state to its desired future state. A CA must be socialized with employees across an organization for feedback prior to developing a strategic plan. After socializing the CA, leaders must approve it before using it to develop a strategic plan. The development of the CAs is an imperative step in initiating the development of objectives at the retreat. The lack of socializing the plan with employees across a firm can create an undesirable outcome and minimize efforts in the execution phase of the strategy management process. If a strategic vision is the Achilles heel of a strategic plan, a CA is the tendon that holds it in place for strategy development at the retreat. 

A retreat must be organized and structured in a workshop form to leverage the knowledge of the participants and to maximize the benefits of a diverse team-based effort. The first duty in organizing this is to ensure that the participants are a diverse group of leaders, managers, and frontline employees in order to capture a holistic view of a firm. Diversity, equity, and inclusion must be practiced when creating a competitive strategy. The activities at the retreat must be structured in a format that includes educating participants on strategic concepts, discussion of the concepts through a feedback loop, and building out the concepts (such as strategic objectives) in small groups and sharing outputs with a large group. These activities must be facilitated by a strategist who understands the concept of groupthink. The first activity that should be discussed is the translating of market and internal data. The participants must be able to translate the data into strategic implications. Strategic implications are potential strategic ideas that support a strategic position in the market and that address opportunities and threats in the market. At the retreat, small diverse groups of 5 to 10 participants should write down three to five strategic implications per group and discuss them with the larger group using a method of item elimination. Next, the participants must be arranged into perspective groups that represent the four perspectives of the strategy map. A strategy map is a one-page, cause-and-effect diagram that communicates the strategic plan (Kaplan & Norton, 2008). It consists of four perspectives: financial, stakeholders, internal process, and talent & technology. The financial perspective includes objectives that support the short and long-term return on investment and return by the institution. The stakeholder perspective includes objectives that contribute to the institution’s value proposition for stakeholders (e.g. customers, clients, communities, and employees). The internal process perspective includes objectives that support the creation and delivery of value to stakeholders. The talent and technology perspective include objectives that support the human capital, technological capital and cultural capital that drive performance improvement. In the perspective groups, the participants should develop bold strategic objectives that align with the perspective and share the objectives with the larger group. Strategic objectives are bold directional statements that are developed to point to a market position and create a competitive advantage. All the groups’ strategic objectives should be scrutinized and strengthened. Some of them should be removed. Lastly, all the strategic objectives should be populated into the four perspectives of a strategy map through the guidance of a strategist who is well-disciplined in the BSC methodology. If there are any gaps in the strategy, they become apparent at this point. 

Weeks after the retreat, leaders who participated in the retreat must return to their perspective groups and conduct strategy sessions to develop measures, targets, and initiatives that align with the strategic objectives outlined. Measures are metrics that measure the progression of the strategy. There are two types of measures: lead and lag. Lead measures account for day-to-day progression. They are considered drivers because they drive operational performance toward strategic outcomes. Lag measures account for desired strategic outcomes. They are measured once a year or at the end of the strategy period. The six categories of measures are percent, ratios, indices, ratings, raking, and numbers. Targets are the desired expectations to measure. There are three types of targets: look forward, look backward, and look around. Look forward is a target that is created to defy the market; It is not designed for comparison. It is designed to lead the market. Look backward is a target that considers historical data to determine the desired future expectation. Look around is a target that compares competitors’ benchmarks to determine the desired future expectation. Initiatives are projects with beginning and end dates. It includes team leads, resources, project managers, and change managers. It is the only action in a strategic plan, whose role is to move strategic measures toward their targets. Once a measure and a target are identified and fully developed, strategic initiatives are created, mapped to an objective(s), prioritized, and funded. According to Kaplan and Norton (2008), in a strategy-focused organization, the balance sheet should include a budgetary line item for strategic initiatives that identifies the funding source. This concept is called StratEx. When initiatives are funded at the organizational level; they remove the idea of competing priorities and give initiatives a fair chance of being implemented. Leaders must collect all the information from the perspective groups and collectively organize it and create a Balanced Scorecard for the firm. The next step in the process is to execute the plan. 

Execute

The “Execute” phase of the ADEM model consists of strategic risk management, alignment, cascading, communication, change management, and personal scorecards. Strategy often fails in the execution phase because leaders do not like to hold their peers and direct reports accountable. These leaders resist and try to avoid this step in the strategy management process. They ask questions like, “Why don’t we just publish the strategy and let leaders choose what they want to work on?” The thought of having work to do beyond the development phase of the strategic plan is exhaustive for some leaders. This is primarily since leaders are challenged to participate in the exercise of developing strategic plans, but not necessarily execute them. Strategic plans regularly find a comfortable place on a shelf, where it is rarely referenced and easily forgotten until someone needs to push an agenda forward. Like the findings that led to the ADEM model, leaders want control of the process and lacking control tends to lead them to create politically driven concepts that can drastically cause the process to fail. 

Strategic risk management works to identify strategic risk in the strategic plan. Execution enables organizations to align risk-taking to strategy to drive sustainable strategic execution (Smart & Creelman, 2013). Bringing strategy and risk close together is fundamentally important (Smart & Creelman, 2013). There are three types of organizational risks: known known, known unknown, and unknown unknown. Known known risks are operational risks, such as employees stealing time. This is a known behavior that is consistent in organizations but mitigated through policies. This behavior does not pose a major threat to an organization. Unknown unknown is a risk that leaders cannot predict, such as a natural catastrophe. Although leaders in organizations cannot predict this risk, they can develop catastrophe plans to mitigate the risk in case a natural catastrophe occurs. Strategic risk is considered known unknown. An example of strategic risk is partnering with a sole-source supplier for a rare item needed to manufacture a product. The strategic risk is that the failure of the sole-source supplier to deliver rare items in a timely fashion or to increase the cost of the rare item can affect a firm’s cost and profit margin. As a result, leaders of firms must create strategies to mitigate the occurrence. Failure to properly evaluate and challenge risk in a strategic plan is the biggest intellectual failure for leaders (Smart & Creelman, 2013). The strategist must work with leaders to assist them in creating mitigation strategies and contingency plans.

Alignment of the internal resources to the strategic plan is essential in the strategy management process. The first step of aligning an organization is to identify leaders who represent strategic themes. These strategic themes are the business pillars of the firm. For example, in a teaching hospital, the pillars are clinical, education, and research. Leaders must be responsible for managing strategic themes to ensure accountability. The failure to complete this activity creates a misaligned organization. According to Kaplan and Norton (2006), synergy is created through strategic alignment. The strategists must work with leaders to determine which business units had to be aligned with the parent strategy, what objectives would cascade down to each business unit, and what internal resources would be shared, combined, leveraged, etc. A parent strategy is the strategy that represents the organization. In a large organization, children’s strategies are aligned with the parent strategy to leverage resources and to create synergy across the organization.  

Cascading objectives from the parent strategic plan down to a business unit plan is only applicable when a firm has primary and secondary value chains within the firm or business units located in multiple sites. According to Risinger (2018), leaders must cascade with the intent to create relationships between the parent plan and business unit plans. This process must include three options: duplication, extension, and creation. Duplication is the process of identifying an objective in the parent plan that the business unit can directly support, including it in the plan along with its associated measure(s), target(s), and initiative(s). Extension is the process of identifying an objective in the parent plan in which the business unit can contribute, but which it does not directly support. In this case, include it in the business unit plan with both a modified measure and target, including creating new initiatives that support the way the business unit can contribute to the objective. Creation is the process of creating a new objective along with new supporting measures that align with the parent plan but uniquely contribute synergy within an independent business unit. The alignment of business unit BSCs with the parent BSC enhances the likelihood of stimulating strong organizational performance and executing a higher percentage of priorities (Risinger, 2018). 

Creating a communication plan and mobilizing change for a strategic plan are crucial for engaging stakeholders in the strategic management process. Communication must be aligned with the progress of the strategic plan to ensure that stakeholders are well informed of the strategy. Effective communication includes key executive sponsors, key messages to specific groups, communication channels, and a timeline for received communications. Mobilizing change is essential in the strategy management process. Change is inevitable in all organizations, and it is impossible without the help of employees (Kotter, 2012). Identifying executive sponsors, creating sponsor roadmaps, training and developing functional managers, and the assessing behaviors of employees in the cycle of change are imperative. Helping functional managers understand the barriers to change such as awareness, desire, knowledge, ability, and reinforcement is essential for strategy execution. 

The execution of a strategic plan includes the alignment of strategic job families with the strategic pillars. Strategic job families must appropriately align with each strategic pillar to fortify the plan for positive synergy. 

Strategic job families are described as groupings of jobs, roles, and responsibilities related to specific pillars and by professions. The execution of a strategic plan includes the alignment of strategic job families with the strategic pillars. Strategic job families must appropriately align with each strategic pillar to fortify the plan to create positive synergy. The alignment of strategic job families includes the development of career pathing, succession planning, and new competency profiles include skills, tools, and culture, (Kaplan & Norton, 2008). The alignment of strategic job families also includes the assessment of each employees’ competency to identify performance gaps that must be addressed for a strategic plan to be executed effectively. Performance gaps are opportunities created by new strategic priorities identified in the organization’s strategic plan. According to research, the most effective way to close performance gaps is to address the development and social and emotional sentiments of employees. Gilkey, Caceda, Robertson, and Kilts (2015) wrote that more proficient strategic thinkers had a higher sense of complex cognitive and emotional fortitude to make compelling informed choices for engaging employees in strategic management. Addressing the development and the social and emotional sentiments of employees begins with the application of the P3 model (Smith, A., personal communication, December 28, 2019). The P3 model consists of three elements: passion, path, and purpose. The strategists must collaborate with the Office of Human Resources (OHR) and work with unit leaders in a workshop setting to develop career paths, create succession plans, and build new competencies that align with the strategy as well as each employees’ passion, path, and purpose. According to Smith, engaging employees in strategy starts with a leader’s understanding of his or her employee’s passion, path, and purpose (Smith, A, personal communication, December 28, 2019). Smith’s P3 model helps to engage and mobilize employees in the strategy process to increase strategy execution by helping employees better align their passions to role expectations that move the strategy forward. This approach helps mitigate resistance as employees begin to seek opportunities for themselves to better engage versus a top-down plan with new expectations and extra work. 

Personal scorecards (PS) are performance sheets that align employees to the firm’s strategic plan. PS are created after a firm’s business unit strategy is developed along with the alignment of strategic jobs families. According to an independent survey, employees are more engaged in a firm when they know how their day-to-day work contributes to the growth of a firm. The PS consists of personal objectives, measures, and targets. The personal objectives include growth and development opportunities. The personal objectives must be aligned with a firm’s objective and supported by measures and targets that contribute to moving a measure toward its target. Monthly, leaders should meet with their employees to review their PS and to provide feedback. Transformational leaders seek to engage with their employees to create a connection, provide direction, and imbue motivation (Northouse, 2018). Leaders who engage their employees with PS should be transformational leaders to mobilize their employees to help grow with the organization.

Manage

The management phase of the ADEM model is the bedrock of the strategy process. This phase consists of a governance calendar, initiative review, strategy review, and strategy refresh. Leaders must consider the management phase not only for managing the progress of a strategic plan, but also as an opportunity for iterative learning. Leaders must use the management phase as a learning opportunity to grow a firm. Strategy is a hypothesis that is tested continuously throughout the cycle of the strategic plan (Kaplan & Norton, 2008). Based on monthly, quarterly, or annual outcomes, leaders in a firm must analyze their outcomes and make adjustments accordingly. They are to leverage the management phase to bring value to decision making. They must be able to refocus strategic objectives to produce the desired outcomes, refine measures to meet the desired expectations of strategic objectives, adjust targets based on resource needs, operationalize strategic initiatives that have been implemented, and realign internal resources to enhance value for customers. The management phase consists of a governance calendar, initiative review, strategy review, and strategy refresh.

Establishing a governance calendar aligns business units across a firm to structure reporting. Initiative reviews are scheduled monthly within units and led by business unit leaders. In these meetings, leaders report on the progress of initiatives in their units. Strategy review meetings are scheduled quarterly and/or semi-annually. In these meetings, business unit leaders from across the firm come together to discuss the progress of objectives, targets, and initiatives. These meetings are led by the Chief Executive of the firm. These meetings are designed for intense strategic discussions for iterative learning and are a time when business unit leaders share information with other leaders and receive feedback. The strategy refresh meeting is scheduled annually. In these meetings, the existing strategy is tested. New market data and internal data are introduced to leaders who are challenged to make sense of the data in the strategic context of the organization. The market is agile and moves constantly. Leaders who fail to remain adaptive to market trends are leaders who fail to exist. In this meeting, the strategists facilitate activities such as scenario planning and war gaming to pressure test the existing strategy plans and make adaptations accordingly. The changes to the plan are communicated to all stakeholders and appear as redline edits in the plan. 

The lack of adherence to the methodology of the strategy management process creates an undesirable outcome and a wasted opportunity. Leaders that fail to effectively execute and manage strategies permit competitors to enter its market, create performance gaps, and negatively affect its bottom-line.

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