Strategy and Execution
Here’s a thought experiment for you…
Let’s say you have two companies of similar sizes with similar needs that want to create value. In thinking through how to do that, you decide to focus on the following:
Grow the balance sheet to take on larger opportunities.
Hire to open new markets and broaden geographic reach.
Invest to bring capabilities in-house in order to vertically integrate and capture more of the value chain.
Is this good or bad strategy?
The answer is, and I know this is the answer because we happened to run this A/B test at Permanent Equity, it depends. Because we did these three things at two of our similar-sized businesses and while one more than doubled sales and profits over 18 months, the other increased sales, but swung to losses. The reason that’s so is because growth is risk, and if you don’t execute amid increasing complexity and scale, those things will eat you alive.
So whether or not something is good or bad strategy depends entirely on execution.
Our good friend Scott Felsenthal, who runs a fifth generation family business, posted this on X recently: “Anyone can copy strategy, but not execution. The point is…do what you do better than anyone else. It’s completely within your control.”
To which I responded: “A corollary is that strategy without execution is hokum.”
What’s interesting is that I think you can execute your way out of bad strategy, but you can’t strategize your way out of poor execution. That’s interesting because “strategic” jobs tend to be higher up, higher paid, and higher profile while execution is on the front lines and taken for granted. This is why Undercover Boss is such a compelling premise. It forces higher-ups back onto the front lines and they inevitably learn something about execution that then helps inform strategy.
So just as if you operate a business you should constantly be talking to your customers, you should also regularly be on the front lines executing. If you’re not, hokum.
-Tim
