Poll the more competent employees in Operations and any company is likely to find 20 good ideas for improving efficiency. Do the same thing with senior management and you’ll be lucky to get one. The reason is not that Operations employees are brighter and more innovative, although this is infinitely possible, but that senior managers are much more cognizant of what can be accomplished. They may very well, for instance, have a great idea for tracking revenue but also know that the IT department is either too busy or too incompetent to ever implement it. The CEO responds “Wow, you got 12 months to get that done” and you’re fucked.
The confusion between the brilliance of a strategy and the ability to execute on it is at the heart of every poorly managed company. Far too often, a lack of corporate performance is blamed on a bad strategy when the strategy was perfectly fine. In other words, the architect is always blamed when the house falls collapses but the fault is more likely to lie with the builders. Politically-minded executives (ie all of them) in underperforming companies will furthermore willfully blur the line between strategic design and execution to suit their own agenda.
There is a pervasive myth, propagated rabidly by biz schools and business consultants, that a new “great management paradigm” has just arisen (coughsixsigmacough) that will transform your company into a global behemoth. The truth is that there is no premium on corporate strategy ideas – they are everywhere. The talent that is almost nonexistent is execution.
Jack Welch’s tenure is instructive in this regard. I worked for a manager who hand wrote his Christmas cards because he read that Welch did the same, as if copying Welch’s affectations had anything to do with his management skill. In truth Welch succeeded because he was an absolute ruthless bastard. The strategies he implemented were familiar to any four year old playing with their toys – break the three boring ones and beg for new ones. What Welch actually did in practice was fire entire buildings full of people in underperforming businesses, to the point where he was given the nickname Neutron Jack. Anyone could have come up with the idea of getting rid of poor businesses and focus on their successful counterparts, but it took a singular talent like Welch to execute.
The same phenomenon is eminently present for investment strategy. There are any number of historically profitable stock selection methods across the risk scale, which the majority of individual investors just do not execute well. What Buffett does, for instance, is about as complicated as Welch’s strategy – buy companies with consistent long term ROE assisted by competitive advantage when they are trading, ignored, at lower than historical valuation levels. His execution of the strategy, the unparalleled discipline, is what sets him apart.
All of this is not to say that managing money or global industrial companies is easy. The point is that, while there are multi-bazillion dollar industries trying to convince you otherwise, “The Plan” doesn’t really matter, it’s the person implementing the plan that does.