According to Hammond, there is a recent trend when it comes to the obsession with operational effectiveness over strategy. The difficulty in analyzing this problem stems from the fact that there can be different interpretations when it comes to operational effectiveness and strategy. Thus, the best way to start is to figure out what the author meant by operational effectiveness and strategy, then proceed to the discussion of why the art of formulating strategy must be revived in the 21st century. Hammonds pointed out management practices popularized by Japanese firms – such as total quality, just-in-time inventory, and reengineering – as the main culprit why many companies tend to put more value on operational effectiveness. But he went on to argue that this is something that every business is supposed to be doing.
It has to be clarified that not everyone is an expert when it comes to operational effectiveness, and unless managers or CEO experienced success in this regard, then they will always spend a lot of time and resources to improve their supply chain management and other aspects of their operations. I believe Hammond does not want companies to neglect operational effectiveness. What he wants to say is to prioritize strategy over efficiency. For him, the strategy will determine the success or failure of the firm. It is therefore important to first clarify what strategy is all about. And although there can be many different opinions, the author suggested that strategy is about making choices and trade-offs that will determine the path for the organization.
If a CEO or business leader is able to set the correct strategy, then the company can differentiate itself from its competitors. A good strategist will be able to focus on markets where his company has a clear competitive advantage. In other words, he can position the company where the customers are and where competitors do not have a strong presence or preferably none at all. A good strategy will also steer the company away from a head-on collision with the much dreaded “industry giant” and therefore thrive with a healthy ROE. But strategy, no matter how perfectly conceived, is worthless without execution. If the strategy cannot be implemented and if the employees will not rally around that strategy, then it is merely a brilliant idea that will not work.
Hammonds suggested that strategic execution is made possible by making people in the organization understand the core strategy. This is, in turn, made possible by having a leader, preferably a CEO, who can teach the strategy to all his subordinates so that they will know how and why they must be different from others. The leader must also make them understand that strategy is all about making tough decisions. They have to choose a certain path and follow it no matter what the competition tries to do next. In this way, they can better execute their strategy, and that is all that matters.
The query regarding the importance of excellent strategic execution can only be understood if there is a clear idea of what strategy is all about. Hammond was able to do this by identifying a management theme that has been in the spotlight for many years – operational effectiveness – the mindset of creating better products and services. Hammond asserted that business leaders should be wary of simply improving their products and services. A correct perspective with regards to strategy will allow business leaders to offer a distinct product or service that will help them achieve a competitive advantage. After leaders make the commitment that they will have to tailor-make a strategy for their respective organizations, the next step to do is to be able to execute. Without excellent strategic execution, there is no difference between a CEO and a daydreamer.