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What matters more – strategy or execution?

Jul 19, 2010 Business Daily, Strategy

“The simple fact—frustrating though it may be to the great number of hard-working and capable people inside an organization—is that their best execution efforts can be negated by strategic choices that turn out badly. It may make employees feel good to be told that company performance is 10% strategy and 90% execution. It may inspire them and also provide motivation. But for the most part, it’s not true. A company’s strategic decisions, although made occasionally and often involving a relatively few members of the management team, play an enormous role in driving eventual success or failure. We just don’t always like to admit it. ”

PHIL ROSENZWEIG, The Halo Effect (2008)

Phil Rosenzweig’s book was one of the most interesting business tomes of recent years. I always recommend The Halo Effect to all those who attend my executive programmes.

Here he is reflecting on that well-worn saying: “Company performance is 10% strategy and 90% execution.” This aphorism resonates well with can-do types, people who like to get their sleeves rolled up and spend their time doing stuff. Herb Kelleher, legendary boss of Southwest Airlines, famously said: “We have a strategy – it’s called doing things.”

But wait just a minute. If you think that means that you don’t worry much about the “thinking” part of strategy, and that you spend more effort on the “doing” part, think again. Being action oriented, having a hands-on attitude, being busy doing things rather than reflecting on them – these are all wonderful attributes in a manager. But never, ever forget that CHOOSING which things to do is just as important as, or indeed more important than, actually DOING them. As Peter Drucker, management’s orginal guru, put it long ago: “There is nothing so useless as doing efficiently that which should not be done at all”.

In other words, you had better be damn sure that you have chosen the right things to do in your organisation, before unleashing everyone to be hyper-efficient at doing them. Herb Kelleher is a case in point. He was only confident about stressing the doing part because he had got the thinking part absolutely spot-on. Southwest Airlines revolutionised air travel across the world by being different, not by doing whatever every other airline did. It was the world’s first value carrier, reducing fares to a third or less of what most airlines then charged, by cutting out all the frills (lounges, meals, dedicated seats) and focusing on what customers really valued (friendly, efficient service, on-time flights, frequent departures).

Southwest’s strategic decisions (made originally in the 1970s) put the company on the path to outstanding performance for decades. It has been the world’s most consistently profitable airline over that period, and was also the best-performing stock in America over the 1972-2002 period. So strategy matters, never you doubt it. Of course, the can-do Mr Kelleher ensured that the original strategy was executed very, very emphatically throughout his organisation – that part also matters a great deal. But had he made the wrong, unimaginative strategic choice in the 1970s, no amount of great execution would have mattered to Southwest. It would have been just another hard-working me-too player.

Consider this: Safaricom is renowned to be a great executor, perpetually on an action footing. But it is executing outstanding strategies: choosing the mass market; developing multiple revenue lines; innovating into many interesting directions such as banking; maintaining an interlocking ecosystem. Bidco is a another company where people are in “do, do, do” mode. But Bidco made very interesting choices in its formative years, and took on its more established competitors by being different, not by doing more of the same.

So do have a bias for action, by all means. But just make sure you have spent enough time thinking about the right direction first.

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