Perspective | September 2021
Timely execution confers the ultimate competitive advantage:
Consider strengthening your pace of execution.
We have moved into an era where the success of a business strategy depends as much on the speed of execution as in identifying the right strategic direction. Timely execution confers the ultimate competitive advantage to leaders and their organization and is the most powerful predictor of success for any strategic initiative. Ultimately, the timing of execution is a choice by the CEO, controlled entirely within the confines of the organization.
The Value of Timing
Differences in the timing at which companies execute strategy determine differences in competitiveness and profitable growth. Two examples illustrate the concept.
Examples 1: Revenue Growth. Consider competitors X and Y, each with $1,000 million in sales and a margin of $140 million, in a market growing at 7.5% per year (Exhibit 1). Company X grows at 12.5% per year. Thanks to its increase in size, it lowers its prices to gain market share. In five years, the company reaches $1,800 million in sales and a margin of $250 million (at 14% of sales). Conversely, Company Y grows at 7.5% per year. In five years, it reaches $1,436 million in sales; however, it must lower its prices to follow the market leader. As a result, its margin drops to $50 million, i.e., 3% of sales. The net result is a difference in profit in year five of $200 million.
Exhibit 1. Comparative Revenue Growth
Example 2: Cost Reduction. Imagine competitors X and Y, each at $1,000 million in revenue, a margin of $150 million, experiencing declining growth (Exhibit 2). Company X starts an aggressive cost reduction program and decreases cost every year for the next four years. Company Y executes a similar cost reduction program, but starts one year later. The net result is a difference of cumulative profit of $250 million. The relative speed in executing the cost reduction program makes a significant difference.
Exhibit 2. Comparative Cost Reduction
In both examples, timely execution is intrinsic to the value of the strategy. Not only is timing crucial, but so are the strategic levers that become available with timely execution.
The Strategic Leverage
Timely execution confers a wide array of strategic capabilities and competitive advantages to the firm.
Strategic Capabilities: With timely execution, many strategic capabilities become available to the firm, including the following:
Competitive Advantage: Executing a strategy faster than competitors confers various types of competitive advantage as follows:
With timely execution, a company increases the likelihood of success in implementing a strategy and also
gains access to unique strategic levers that competitors don’t have, widening its range of play.
What It Takes
The timing of execution is a management choice and entirely within its control. Activate the following levers to expedite implementation:
Incumbent companies often believe they have more time to execute their strategies than their rivals because of their established position in the market. Nothing could be further from the truth. In today’s markets, data analytics, business intelligence, digital value chains, e-businesses, artificial intelligence, smart products, smart machines, the“internet of things” and cloud software equalize the chances of success for everyone. To keep up, incumbents need to move just as fast as their competitors, big or small.
Timely execution is essential to the success of a strategy. Make it work through focus and simplicity: concentrate on a few initiatives, get the right critical success factors in place, adopt a simple organization, allocate the necessary resources, use explicit accountabilities, and maintain strategic control.
Can you execute your strategy on time?
What is your timing of execution?
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