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Best Business Books 2004: Strategy

The Crucial Link to Execution

Great strategy, poor execution” is the excuse most frequently offered by the CEOs and boards of directors of unsuccessful companies. The last decade provides many examples. C. Michael Armstrong purchased cable companies to help the AT&T Corporation bypass local telephone companies to gain access to the home. Thomas Middelhoff committed to a digital future for Bertelsmann AG. Motorola, when it was led by Christopher Galvin, stood steadfastly behind the development of Iridium satellites to serve travelers’ needs for global cell phone coverage. Under Kenneth Lay, Enron spawned a series of knowledge-based businesses. All of these concepts sounded good; many reflected accurate insights into industry dynamics and appreciation of customer needs. Yet all were unsuccessful.

Is it fair to say that these companies had “great strategies” but simply failed to execute? The knee-jerk reaction to this question by many contemporary businesspeople would be “sure, it happens all the time.” But that’s just plain wrong. “Great strategy, poor execution” is, in fact, a pernicious oxymoron, rooted in ineffective concepts that sharply separate the formulation of strategy from its execution, and assume that there is a linear, sequential relationship between the two. These dangerous misconceptions come in four flavors:

  • The first views strategy purely as insight into industry dynamics and customer needs, evaluated on the basis of novelty, distinctiveness, analytical depth, or intellectual elegance — rather than on results achieved.
  • The second considers strategy as the long view, a step-by-step plan toward a comprehensive vision of a future 15 to 25 years distant — ignoring the reality that timing matters.
  • The third views strategy solely as the province of the CEO and the board of directors, which leaves others in the organization to address the grubby details of execution — and fails to mobilize the people who are best equipped to understand emerging opportunities.
  • The fourth misconception positions strategy as the first and most important driver of decisions about organization and operations — instead of basing strategy on the company’s core strengths and competencies.

So pervasive are these notions — and so widespread is the resulting separation of strategy from execution — that many companies today, in their efforts to increase value, seem to ignore strategy entirely, choosing instead to focus solely on execution. The highly visible failures of companies with poor execution have exacerbated this subtle twisting of the “great strategy, poor execution” oxymoron into a perilous move toward “great execution, no strategy.” Such an approach inevitably consigns a company to producing below-average returns to investors, leaving it vulnerable to competitors.

Integrated Change
Although business gurus have documented the inadequacy of the linear strategy-first-execution-next view in today’s business environment, no one has provided businesspeople with actionable concepts they can use to replace the old thinking. A new framework is needed — one that views strategy as an integrated change program linking together multiple dimensions of strategy: external realities, internal activities and business processes, financial targets, and customers. We think of this as “integrated strategy.”

The three books we selected for this review make the most substantive contributions this year to the development of a new, integrated view of strategy: Confronting Reality: Doing What Matters to Get Things Right, by Larry Bossidy and Ram Charan (Crown Business, 2004); The Future of Competition: Co-Creating Unique Value with Customers, by C.K. Prahalad and Venkat Ramaswamy (Harvard Business School Press, 2004); and Strategy Maps: Converting Intangible Assets into Tangible Outcomes, by Robert S. Kaplan and David P. Norton (Harvard Business School Press, 2004).

A few of the best practitioners of strategy are already doing what theorists and authors are attempting to describe and formalize. Successful companies realize that internal activities, financial results, customers, and external results are all equally important — and that the linkages between these aspects of strategy are all bi-directional. For example, not only must operational priorities and organizational structure conform to the strategy, but an effective strategy also must be built upon superior organizational and operational competencies. Further, although companies can aspire to deliver financial returns that delight shareholders, effective strategies are grounded in realistic appreciation of likely financial results.

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