Strategy or Execution: Which Is More Important?

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Many business leaders think they’d rather have great execution than a superior business strategy, but according to Ken Favaro, Evan Hirsh, and Kasturi Rangan of Booz & Company, you can’t have the first without the second.  That’s the central message found in “Strategy or Execution:  Which Is More Important?” published in the Summer 2012 Strategy+Business

Most of the people who dismiss strategy don’t understand what it really is.  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 compete in order to achieve maximum long-term value.  Execution, on the other hand, is producing results in the context of those choices.  Therefore, you cannot have truly good execution without having good strategy.

Consider Toyota and General Motors.  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.
  • 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 isn’t enough; you have to have good execution, too.  But this shouldn’t be confused with the point that the quality of your execution depends a lot on the quality of your strategy.

The airline industry provides another example.  Southwest Airlines has outperformed American Airlines 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).
  • A more coherent set of capabilities to deliver that proposition (maintaining a simpler fleet, and...

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