To be sure, both American and GM face challenging industry conditions in which earning an attractive level of profitability is reserved for only the most advantaged players. But even when industry economics are attractive, standout results do not come from standout execution alone.
Another example is retail banking. A typical retail bank doesn’t really need a distinctive strategy to produce an attractive return on capital as long as it executes well. Most retail banks have strategies that are virtually indistinguishable from one another. Their leaders all talk about targeting the same customers; having intimacy with those customers; and being the best at service, relationship management, product development, and risk management. However, the ones that truly excel have created distinctive, coherent strategies that enable them to have superior execution. Think of Wells Fargo in the U.S., Standard Chartered in Asia, and Lloyds Bank in the U.K. when Sir Brian Pitman was its chief executive.
So the next time you hear statements like these —
- “I’d rather have great execution with a mediocre strategy than the other way around.”
- “You don’t win by having a better strategy; you win through superior execution.”
- “We don’t need a new strategy to fix our performance; we just need to execute the one we have.”
— remember this: You need a good strategy to have good execution. Yes, having a good strategy alone isn’t enough to win, but your ability to execute well depends on how good your strategy is and how well it’s understood by everyone who makes major decisions for your business. When your business or company is not executing well, take a look at your strategy. Improving it — and your most important stakeholders’ understanding of it — may hold the key to unlocking better execution.
- Ken Favaro is a senior partner with Booz & Company based in New York. He leads the firm’s work in enterprise strategy and finance.
- Evan Hirsh is a partner with Booz & Company’s engineered products and services practice, and is based in Cleveland.
- Kasturi Rangan is a principal with Booz & Company in Cleveland. He focuses on corporate and business unit growth strategies for automotive and other industrial companies.