Strategy

Is Strategy Only As Good As Its Execution?

“Good idea, bad execution” is a saying all of us have heard on more than one occasion, but recently, we've been curious about understanding and defining what moves great ideas into great companies, or project, or achievements - i.e. what defines successful execution.

Largely attributed to Michael Porter’s work in the 1980s, there is now a clear and widely accepted definition of strategy. It is not surprising that organizations spend a vast amount of capital and time devising strategies to improve performance. However, an often overlooked extension of strategy is execution, of which, far less is known about in a practical sense. There is often some confusion surrounding what strategic execution involves, and how to enhance capabilities. Execution involves assessing firm capabilities, synchronizing people with strategy, and linking rewards to outcomes, making people accountable for the delivery of strategy.

While strategic execution is seemingly linked to “doing” in an organization, our client experiences support the notion that there is a need to go beyond simple understandings or productivity, efficiency, and the emulation of best practices. Evidence reveals that roughly two thirds of organizations struggle to implement strategy. In a study of 275 portfolio managers, the ability to execute strategy was found to be more important than the quality of the strategy itself. The inability to execute strategy has also been named a key reason for executive and company downfalls, with many observers recognizing that strategy gets you to the starting line, but it's execution that gets you to the finish line. It was T.S. Eliot who acknowledged the ‘knowing-doing’ gap in 1925, citing that “between conception and creation falls the shadow.” The best companies don’t necessarily always have the best ideas – they are good at implementation, converting the process of doing into an opportunity for learning. While it is not surprising that organizations spend a vast amount of capital and time devising strategies to improve performance, there is far less known about how to execute successfully.

Execution is best defined as the systematic process of rigorously discussing the ’hows’ and ‘whats,’ and tenaciously following through. In a sense, execution is the carrying out of a strategic plan, going beyond operational effectiveness and improvements, and subsequently linking strategy to all aspects of a firm’s activities. However, every organization can succumb to barriers of execution, particularly:

  1. Lack of flexibility: When asked about the greatest challenge companies will face in executing strategy over the next few years, a third of managers cite difficulties adapting to changing market circumstances.

  2. Ineffective leadership: A 2013 HBR study of nearly 700 executives found that only 8 percent of leaders are effective at both strategy and execution. This is also supported in our own work, whereby we studied successful characteristics of CEOs at a financial firm. Findings revealed that the top 10 CEOs by company returns across 20 years, were those that excelled in both strategy and execution.

  3. Fear of failure and rejection: As “ego and fears of embarrassment prevent an objective and honest appraisal of performance”, execution can be hindered by team members’ insecurities and lack of confidence.

In order to better understand strategic execution, Viewpoint has teamed up with Mount Royal researcher Simon Raby and BIG, to research strategy and execution. If you are an organizational leader, entrepreneur, or somehow involved in strategy in your organization, consider participating in our survey. We'd love to learn more about your strategy and execution experience, and in return, you will have access to our findings and execution understandings.


Author

Kelsey Hahn, Viewpoint Research Team

Why Do Businesses Fail, And How Not To Be a Victim

Around 20 percent of small businesses fail within their first year, with roughly 50 percent failing by the end of their fifth year. What makes these statistics interesting is that despite shifting economic factors, business failure rates remain relatively consistent. After surveying 101 failed startup businesses, a recent analysis revealed that 42 percent reported that the main reason for their failure was a lack of marketability. Businesses fail when they are not solving a marketable problem, or, “not solving a large enough problem that could be universally served with a scalable solution.” But what causes this so called lack of marketability? 
 
A business’s marketability is directly tied to its adaptability - its willingness to alter its models and operations in order to keep up in today’s rapidly changing and unpredictable global environment. Marketability also relates to the way in which a business balances its forces of exploration and exploitation, with exploration referring to the search for knowledge and innovation, and exploitation referring to capitalizing and expanding upon these new ideas found through the exploration process. Too much exploration can lead to a business becoming obsolete, while too much exploitation can result in a business falling behind the technological curve and losing its competitiveness.  
 
A good example of too much exploitation can be seen in the downfall of Sears due to its refusal to innovate and change its business model, ultimately leading to the end of Sears. At its peak in 1965, Sears was worth $92.1 billion in today’s money. That same year, its sales were 1 percent of the entire U.S. economy, with two-thirds of Americans shopping there in any given quarter and half the nation’s households owning a Sears credit card. Now, more than 50 years later, Sears has been fighting a losing battle against insolvency and erasure. Despite having the skills and resources necessary to adapt to the world of e-commerce, Sears lacked the foresight to anticipate and the willingness to adapt. This behaviour is often attributed to the “success trap”, in which companies stop exploring once they have reached a certain level of success, turning to exploitation - “becoming less innovative as they become more competent.” 
 
In contrast, successful businesses are those that strike a balance between exploration and exploitation, adapting to market changes by adjusting their balance accordingly. This balance can be seen in the incredible story of Viciki Hollub, the first female CEO of a major international oil company, and how she managed to turn around a company that had lost $1 billion in 2016 to a profit of $4.1 billion in 2018. Despite intense pressure from shareholders, Hollub’s company, Occidental Petroleum (Oxy), beat out Chevron to acquire Anardarko Petroleum for $38 billion. In addition to the dramatic Anardarko deal, Hollub has also proven herself committed to exploration, pledging to make Oxy carbon neutral through carbon capture technology. While Oxy’s investment in a carbon-neutral future may seem at odds with its recent deal, the balance between exploitation and exploration that Hollub has struck will serve the company’s marketability well in the long-term. By investing in exploration as well as exploitation, under Hollub’s leadership, Oxy is securing a social license and, “regaining society’s trust to operate with the approval of employees, shareholders, and the broader public”

Ultimately, the companies that succeed in 2020s will be those that prioritize learning and innovation: “Companies don’t fail because of changes in the environment, they fail because their leaders are either unwilling or incapable of dealing with said change.” 


Author

Viewpoint Research Team

The Path to Economic And Social Prosperity in Canada

Last week, members of the expert panel on Sustainable Finance released their recommendations on mobilizing Canada’s financial sector, hoping to secure both economic prosperity and better environmental practices. The main takeaway from the panel is that Canada stands poised to become “a decision-maker rather than a decision-taker in a world where sound environmental stewardship is intersecting with market access and becoming critical to competitiveness.” Currently the fourth-largest exporter of oil and the fifth-largest exporter of natural gas, Canada has the potential to become the world’s safest and cleanest producer. Yet for this feat to be accomplished, the energy sector must focus on accelerating innovation, transparency, and market access. 
 
To further innovation, the panel recommends that the federal government “fund an oil and gas clean innovation cluster to pool capital and expertise,” helping to expand the next generation of innovative ventures, and consequently encourage the development and commercialization of cleaner energy-saving solutions.
 
Global perceptions of Canada’s environmental record and the carbon-intensity of oil sands extraction have caused investors in the energy sector to avoid Canada, or demand better data and evidence about the risk to their firms. “If we want to attract global capital back to Canadian resources, it will take an industry-wide commitment to report more comparable and complete data on climate-related financial risks.” Providing this type of transparency is exactly the kind of leadership that investors are seeking from Canada’s industry. 
 
In regards to market access, it is vital that Canada's market more responsibly produce oil and gas. Yet Canadian producers can only invest in cleaner technology if they are able to sell their products. “Though counter-intuitive to some, solving Canada’s market-access stalemate is fundamental to Canada’s ability to contribute to lowering emissions in the world’s global energy supply by displacing higher emissions and less transparent sources.”
 
Our founder, Mac Van Wielingen, strongly argues that this is an opportunity for Canada to be a leader in energy. Having used his decades of experience in the investment management business in capital projects all over the world, Mac’s own recommendations for the future of the energy sector align with those of the expert panel on sustainable finance. In his recent speaking event at the Calgary Petroleum Club, he states: 
 
“The industry must remain passionately committed to innovate and further improve its environmental performance, in the context of a global transition to a low carbon environment...There are two competing visions. One involves a dismantling and diminishment of our leading global industry with enormous financial and social costs. The other is to support the development of a “Clean, Canadian Energy Brand” and strategy to bring more of ourselves into the world, not less. This is Canada’s global leadership opportunity in energy and environmental stewardship.”
 
In addition, Bill Gates, chairman of the board for Breakthrough Energy Ventures (BEV), an investor-led, $1 billion fund committed to funding clean energy innovation, emphasizes the complexity of the issue of climate change. In a recent sit-down with David Rubenstein, president of The Economic Club of Washington, D.C., Gates stated that creative solutions are the key to combating climate changes; projects that utilize “the lens of innovation” are what investors should be focusing on. 


Author

Viewpoint Research Team