Tuesday, November 5, 2013

What to focus on Strategy or Execution?

"I once heard a business leader say, “Strategy is results.” He meant that strategy doesn’t matter as long as you are producing results. Many other business leaders feel the same way. Often, this is because they associate strategy with analysis and execution with getting things done, and they attribute more value to doing than to analyzing. From that perspective, a strategy is a lofty, self-evident statement such as “Our strategy is to maximize customer value” or “Our strategy is to become the market leader.” Such “strategies” don’t contribute much to producing results. Possibly, they motivate the troops, although even that is highly debatable.
On its surface, this view that strategy is less important than execution is hard to refute. If that’s all strategy is, execution is clearly more important. But any seasoned strategist knows that strategy is not just sloganeering. It is the series of choices you make on where to play and how to win to maximize long-term value. Execution is producing results in the context of those choices. Therefore, you cannot have good execution without having good strategy.
Most everyone would agree that you cannot achieve good results without having good execution; similarly, most would agree that having a good strategy alone is no surefire formula for success. But too many jump to the wrong conclusion that this makes execution more important than strategy.
Consider the Toyota Motor Corporation and General Motors Company. Yes, Toyota produced better results than GM for many years because it executed better than GM. But it was able to out-execute GM because it made much clearer and more coherent choices about where it would play and how it would compete. This included sharper choices about its target customers; its value proposition in terms of products, features, and price points; and the superior capabilities it needed to deliver that proposition to those customers. In other words, Toyota out-executed GM primarily because it had a clearer, better strategy than GM. The fact that Toyota faltered in 2010 and 2011 reinforces the point that good strategy alone is not enough; you have to have good execution too. But this should not be confused with the point that the quality of your execution depends a lot on the quality of your strategy.
The airlines industry provides another example. Southwest Airlines Company has outperformed American Airlines Inc. for decades. Is this because Southwest has executed better than American? Absolutely. But it’s no coincidence that Southwest also has a better strategy. It has a more sharply defined target market (the point-to-point economy traveler), a more compelling value proposition (lowest price, most convenient, and most passenger friendly), and a more coherent set of capabilities to deliver that proposition (maintaining a simpler fleet, running a point-to-point operation). Having a better strategy has made it possible for Southwest to consistently out-execute American.
In fact, no matter how much American Airlines improves its execution, it will never be enough to overcome the lousy economics of the airline industry and make it a big value creator. The company would have to find a more distinctive strategy. Likewise, no matter how much GM improves its decision-making culture, product development processes, or dealer operations, that effort won’t be enough to produce superior results without a coherent strategy. Fortunately, bankruptcy has given both companies breathing space to find distinctive and coherent strategies."
I found this article a couple days ago and i thought it made a very interesting argument, what is more important strategy or execution? the author states many examples of situation where a clear strategy proved to have been better than execution. On the other hand, we can use the example of twitter who till date, do not have a clear strategy for their business but have been able to execute their model to the fullest, and have hence become quite successful. i recently heard someone say its better to have a mediocre idea and a fabulous execution team, than , a mediocre team and a fabulous idea. my question would be is there a real choice as to which is better between strategy and execution or should companies be striving for a balance of both. i think that depending on the nature of the business and market, this tips the scale on which may get more emphasis.
Reference:
Strategy or execution by Ken favaro http://www.strategy-business.com/article/cs00005?gko=733e9, November 4th, 2013

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