The common perception is that strategy is done at the top of the org chart, and execution is done below. It is exactly the opposite – let me explain why.
First, I should explain that I have always hated the use of the term “execution.” Its common definition is fundamentally unhelpful, and contributes to what executives often call “the strategy-execution gap.”
Usually when businesspeople talk about “strategy” and “execution,” the former is the act of making choices and the latter the act of obeying them. My quibble with this characterization is that the things that happen in the activity called “strategy” and the activity called “execution” are identical: people are making choices about what to do and what not to do. In my 36 years of working with companies, I still haven’t seen an example of a strategy that was so tightly specified that the people
With those emphatic words at an NFL owners meeting in New York on October 18, 2017, Houston Texans owner Robert C. McNair set off a firestorm. His all-pro receiver DeAndre Hopkins skipped practice in protest, and the entire team threatened a walkout that was averted only by a 90-minute team meeting in which head coach Bill O’Brien managed to settle them down. Texans players described McNair’s comments as sickening and horrible.
McNair, the 80-year-old billionaire energy magnate — he’s ranked 186th on the Forbes 400 list, with a net worth of $3.8 billion — is not used to apologizing, but he had to do so on October 27, when ESPN Magazine broke the story. In his “apology,” he asserted that when he said “We can’t have the inmates running the prison,” he hadn’t meant “We can’t have the inmates running the
In retrospect, it turns out that Theresa May, the British prime minister, took a terrible risk by calling a snap election on the back of a 24-point Conservative Party lead over Labour in the polls. She had hoped to increase her power in Parliament from a slim majority of 330 seats — a mere four seats above a majority — to something in the range of 380 seats. Instead, her party dropped 12 seats and will now be forming a painful minority government at a time of great political turmoil due to Brexit. Is the lesson: Don’t take risks? No, the lesson is to take a customer-centric perspective on risk to avoid exposing yourself to risks that you didn’t contemplate.
When it comes to taking a risk with customers — whether they are website users, shareholders, movie patrons, or voters — you have to think about the question they’ll ask themselves as a
Joe Bower and Lynn Paine “had me at hello” (to quote Jerry Maguire) with their new HBR article, “The Error at the Heart of Corporate Leadership.” Laying out their data, they find that long-term oriented companies create more financial value and more jobs. In fact, if more American companies were focused on the long term, they estimate, investors would have an additional $1 trillion, workers would have an additional 5 million jobs, and the country would have more than an additional $1 trillion in GDP.
I agree with their vision of a future in which more companies focus on the long term and become more productive for the world (their findings accord with my own work on the dangers of short-termism). But I long for actions that go beyond admonitions to managers and boards to do better, that give both parties a better chance to stand up
The CEO of a large Australian company called me to relay a particular strategy development problem his firm was facing, and ask for my advice. The company was an eager user of my “cascading choices” framework for strategy that I have used for decades and written about extensively, most prominently in the 2013 book I wrote, with friend and colleague A.G. Lafley, called Playing to Win.
My Australian friend explained that each of his five business unit presidents was using the Strategy Choice Cascade, and that all of them had gotten stuck in the same place. They had chosen a Winning Aspiration and had settled on a Where to Play choice. But all of them were stuck at the How to Win box.
It is no surprise, I told my friend, that they have gotten stuck. It is because they considered Where to Play without reference to How
I think we can all agree that corporate functions tend to be a locus of frustration for pretty much all employees — except, of course, the ones from the function that is the object of the frustration in question. If you have ever thought to yourself “Doesn’t legal understand that we are going to lose this deal if they don’t sign off soon?” or “Why is HR’s answer always Our rules don’t allow that?” you are not alone.
Recent McKinsey research showed that senior executives have a low level of satisfaction (an average of only 30%) in their corporate functions across the board. McKinsey’s recommendations are all sensible, such as: “Create incentives for functional leaders to contain costs, instead of allocating costs that business units can’t change.” This issue has long been a bugbear for me. Despite chronically low satisfaction and lots of intelligent prescriptions like this, the problem by
One of the tricky things about strategy is that good strategies end up seeming inevitable, and that makes them difficult to analyze. After the fact, we have trouble distinguishing cause from effect, or strategic choices from good luck — and as a result, we draw suspect lessons from the exercise. This is especially true when the success in question was a surprising one.
For a sterling example, look no further than Donald Trump. Ex-post-facto rationalizing has portrayed his rise as being largely the result of Hillary Clinton’s strategic fumbles (not enough campaigning in the Rust Belt) and bad luck (James Comey). In this telling, Trump won the election not through his own actions but because he happened to be up against a particularly incompetent opponent. Another line of thinking argues that Trump’s win was a function of external factors: the media’s obsession with celebrity, the large field of GOP primary candidates, the
Though never dormant for long, the debate about shareholder value maximization is having another flare-up. That discussion is a good thing, I think. However, it feels to me that all of the argumentation contains an unhelpfully false premise.
Proponents of shareholder value maximization got a crucial logical boost in the late 1970s when Mike Jensen, a friend of mine and a great scholar, made the argument that the only way a corporation can make intelligent decisions is if it has a single goal that it seeks to maximize because it is impossible to optimize two (or more) things at once. “Stakeholder theory” or “triple-bottom-line thinking” will just leave management dazed and confused because it is unclear how these multiple objectives should be traded off. In contrast, seeking to maximize shareholder value creates a singular goal – a corporate north star if you will – to guide all corporate decision-making.
In a recent article, Paul Leinwand, Cesare Mainardi, and Art Kleiner presented some survey findings underscoring the well-established fact that few leaders (only 8%, according to their study) are good at both creating good strategies and putting them into practice. But they seemed to almost completely ignore a really interesting finding from their research, which is that leaders who are good at strategy are nearly always also good at execution — to the extent that making a distinction between the two is futile.
Let’s take a look at the findings presented:
In this table, the vertical “execution” axis represents the respondents’ assessment as to whether good stuff actually happened in the marketplace. The horizontal axis measures whether respondents believe that leadership provided a useful starting point in that effort. The survey presupposes, therefore, that whatever happens in execution can be meaningfully separated from strategy.
The problem with making
The senior team of a large player in the global wealth management business recently asked me for my opinion on their strategy. They had worked long and hard at coming up with it. Their “Where to Play” choice was to target wealthy individuals who wanted and were willing to pay for comprehensive wealth management services. Their “How to Win” choice was to provide great customer service across the breadth of their wealth management needs. I pushed and probed, but that was it.
Sadly, like the majority of strategies that I read, this firm’s strategy failed my sniff test and for that reason I would bet overwhelmingly that it will fail in the market as well. The test I apply is quite simple. I look at the core strategy choices and ask myself if I could make the opposite choice without looking stupid. For my wealth managers, the opposite
The RBV view, first articulated by Berger Wernerfelt in 1984 and then by Jay Barney in 1986 and 1991, put forward a view of competitive advantage as based on accumulating competitive resources. The main (though not only) criticism it levels at TPS is that for positioning to work, market structures have to
Back in the early 1960s, the great Boston Consulting Group founder and strategy theorist Bruce Henderson asserted that there was only one way to successfully compete: gain a relative market share advantage over all competitors so as to have lower costs than all of them. The payoff is that it puts the firm in a position to drive those relative costs even lower as competition unfolds due to the learning curve advantage.
One then became two in 1980, when Michael Porter pointed out that there is another way to compete: differentiation. His view of the generic strategies for advantage gained considerable traction both in classrooms and boardrooms.
To someone like me, a micro-economist by training and at heart, the idea that all competition can be classified in terms of these two generic strategies corresponds well to the fundamental demand dynamics that companies face.