What's More Important: Strategy or Execution?

Last Updated Jun 27, 2009 12:10 PM EDT

It's an age-old question. It's easy to say that companies need to do both, but there are times when one - strategy or execution - is more critical than the other is. Knowing which one to focus on is the key. Here are a few examples of how it works ... and doesn't work.

When HP hired Carly Fiorina to take the company forward, they truly believed the company needed a bold new direction and new strategy to get there. They thought the company had lost its way and needed a "rock star" leader to show the company "the path."

They couldn't have been more wrong. Seven years later Fiorina was out and new CEO Mark Hurd had managed to pull off one of the most effective turnarounds in corporate history. Sure there was some strategy, but he did it primarily with basic management blocking and tackling.

He did it with no-nonsense discipline, by wringing out expenses and improving efficiency, and by putting the right people in key decision-making roles and empowering them to do what it takes to improve operating results.

Carol Bartz's top-down restructuring of Yahoo was also very much an operational change.

On the other hand, companies sometimes need new strategy. IBM was getting ready to split itself into pieces when Lou Gerstner showed up. Gerstner transitioned IBM from big iron to IT services, a gut-wrenching strategy change for a company of that size. Of course, there was a great deal of execution needed to accomplish that feat - changing Big Blue's inertia alone was a gargantuan task. But at the core of the turnaround was a necessary change in direction and strategy.

Now let's look at five famous corporate failures:

  • Digital Equipment missed the transition from mainframes to PCs.
  • De Lorean's concept was better for a fantasy time machine than a practical automobile.
  • Commodore didn't realize how important backwards compatibility was to its installed base.
  • Polaroid missed the transition to digital.
  • Sharper Image failed because the market for dumb, overpriced gadgets disintegrated.
It's hard to argue that these companies flopped because they failed to execute. They failed because of failed strategy.

Of course, I can argue that all the best run companies focus on both strategy and execution. Competent CEOs recognize the need for both and have processes for both. I can't imagine that a company can be successful otherwise.

But that argument, while true, misses the central point of all the examples above. There are times when one - strategy or execution - is indeed more critical than the other is. Recognizing those times and knowing which one to focus on is a critical skill that few managers seem to possess. And that's the main reason why even great companies sometimes fail to overcome significant hurdles.

You might also want to check out 10 Rules for Effective Strategic Planning.