Does strategy drive executionor is it the other way around?

• Author: Johannsen, Rolland

STRATEGY DEFINES THE NATURE OF YOUR MARKETING AND SALES. Al! financial services companies have a strategy, either by design or default. Some organizations spend considerable time, money, and resources ana-yzing opportunities, assessing competitive position, and developing comprehensive strategic plans. Others engage in less formal activities that establish core principles to help define how and where the company will compete. Still, others have no process at all, relying on an institutional understanding of what the company is and focusing exclusively on managing day-to-day results against established budgets.

It is not the process that determines strategic excellence but the degree to which there is alignment between strategy, execution and performance. At the end of the day, a company's strategy is determined by the sum of the decisions management makes on a daily basis. It is not what management says but what it does that defines strategy. Strong, performers make decisions consistently within a solid framework--whether that framework was established as part of a comprehensive planning process or an innate (and intelligent) sense of "This is how we do things?' Weak performers lack this discipline, making decisions randomly and, certainly, independently of any overriding strategic principles. The result is often a hodgepodge of marginal businesses, disparate positions in disparate markets, inefficient operating environments, internal conflict, higher risk profiles and a lack of any real competitive differentiation.

Strategies are not inherently "good" or "bad." Many can and do work. Rather, the definition of a good strategy is one that is appropriate for a particular institution's market position, financial structure, risk parameters and, most importantly, ability to execute against key strategic principles and imperatives. In our view, there are five important components of successful strategic performance:

* Focus

Focus is, perhaps, the most important element of strategic excellence. Companies that have a strong strategic focus do not dilute their financial and management resources, spend brand equity and/or increase significantly their risk profiles by chasing whatever happens to be "hot" at the moment regardless of their core COM petencies.

* Adaptability

If one thing is certain in financial services, it is that markets...