Strategy versus Execution: what’s more important?

April 23, 2009

The January 29, 2009, Wall Street Journal had an article “CEO’s Debate: Execution vs. Strategy” that caught my attention. Many prominent CEO’s were asked, “What’s more important: strategy or execution?”

These are not mutually exclusive choices. Both have a profound bearing on the overall success of an organization. Consider the following matrix:

    execution-vs-strategy3

  • G-4 is where a company wants to be: great strategy and great execution.
  • R-1 is the least desirable position to be in: poor strategy combined with poor execution—unless action is taken, a company in this state is headed for extinction.
  • Y-2 indicates that a company is poorly executing a great strategy suggesting there are opportunities for process improvements to support better business execution.
  • Y-3 indicates that a company is doing a great job executing a poor strategy suggesting the marketplace is not impressed with the company’s offerings in spite of the fact it is executing well—this does not bode well for the continued health and vitality of the company.

Few companies achieve the state described in G-4. Even if a company is experiencing great strategy and great execution, there is certainly no guarantee that it will continue to experience this.

One thing is clear: A company in a state other than G-4 puts executives at risk for losing their jobs and puts employees continued tenure at risk as well.

Let’s rate some companies that are household names:

  • General Motors: R-1 for poor strategy and poor execution

  • Apple: G-4 for great strategy and great execution

  • Oracle: G-4 for great strategy and great execution

  • Sun: Y-2 as one must assume that there is great value in Sun’s intellectual property (over $7 billion) that makes Oracle and IBM interested in acquiring them; the larger issue has to be execution

Many years ago, one of the most admired Silicon Valley companies was Silicon Graphics, a company that produced graphic workstations that enabled the creation of the blockbuster movies such as “Jurassic Park,” “Terminator,” and others. CNET News reported on April 1, 2009, that SGI was being sold for “a paltry $25 million.” The article goes on to say:

“When a one-time tech powerhouse winds up bankrupt and sold off for chump change, that’s bound to ignite the daily bloviation fest….SGI was a comet, soaring through the tech firmament during it’s brief moment of glory. But it’s only one in a list of former high-tech flyers to come crashing back to earth, a roster that includes the likes of Novell, Borland, WordPerfect, Digital Equipment Corporation, Wang, Data General.”

Charles Cooper, the author of the CNET article, aptly includes thoughts from Andy Grove who wrote the following in his 1996 book, Only the Paranoid Survive:

“…when it comes to business, I believe in the value of paranoia. Business success contains the seeds of its own destruction. The more successful you are, the more people want a chunk of your business and then another chunk and then another until there is nothing left.”

In its heyday, Silicon Graphics was like the Apple of today. In a few short years, it moved from “great execution/great strategy” (G-4) to “great execution/poor strategy” (Y-3) to “poor execution/poor strategy” (R-1) ultimately taking it to bankruptcy.

Where do most CEOs focus their attention? Strategy. It is as though the CEO expects the rest of the leadership team to drive execution. At the end of the quarter or fiscal year, what area most contributes to CEOs losing their jobs? Execution.

While it is possible to pick a place on the matrix that reflects the overall company state, it is important to also consider each function in the company in light of this same matrix, e.g., Sales, Marketing, Product Management, Order Administration, Engineering, Operations, Service, Human Resources, etc.

Executives must regularly and routinely look holistically at the implications of each function as contributing to the overall health and vitality of the company. Today’s success does not ensure tomorrow’s success.

What do you think?

Dave Gardner, Gardner & Associates Consulting

http://www.gardnerandassoc.com

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