Many of you sell products or services that are complicated in their technical make-up or functionality. You employ people with highly specialized skills, and the sound of complex jargon fills your meeting rooms and hallways. That technical culture, of course, is a necessary and appropriate facet of the business you’re in.
However, if you are to survive and to prosper, if you are to provide bountiful rewards for both shareholders and employees, and if you are to have the money to invest to stay relevant and inspirational for customers, you have a core need to produce strong profitability. And the logic and laws by which some companies achieve strong profitability and some do not are quite simple. In fact, exactly two things are required to achieve superior profitability:
1) A strategy that enables you to either sell at a higher price than your competitors by virtue of your superior offering (like Apple and Goldman Sachs), or to produce at a lower cost than your competitors (like Amazon and Wal-Mart). And that strategy had better be credible, and not wishful thinking
2) Strong execution, which in turn requires excellent people, a performance culture and reward system, and well-designed, efficient internal processes. Strong execution transforms the theoretical profitability made possible by your strategy into reality.
Neither of the two is sufficient without the other: You need both, or you’ll be doomed to mediocre or worse profitability, with all that implies for your rewards for shareholders and employees, and for your ability to invest in the future.
To the trained eye, good strategies and execution are distinguishable from bad in a matter of just an hour or two’s exposure to a company. It really is that obvious, and that simple. So when you think about your strategy and execution, cast the complexity aside, ask yourself some straightforward questions, and tell yourself some simple truths. Then don’t rest until you’ve fixed whatever needs fixing.