Formulation vs. execution: a quadrant for the board

When a year's results fall short, the board conversation tends to follow a predictable script. Management explains the context, directors question execution, someone suggests hiring a strategy consultancy. Rarely does anyone ask, explicitly, whether the problem was the choice or the delivery.

The distinction matters because the remedies are opposite. A poorly formulated strategy is fixed with clearer choices, often with fewer initiatives. A poorly executed strategy is fixed with resource allocation, management rituals, and capabilities. Applying one remedy to the other problem usually makes things worse.

What a clear formulation looks like

Collis and Rukstad (2008) proposed a simple test: can the company express its strategy in a short statement, around 35 words, that the entire executive team recognizes? For the authors, the statement must contain three elements: the objective, with a time frame; the scope, which says where the company competes and where it does not; and the advantage, which explains why customers would choose the company over competitors.

The test seems trivial until you apply it. We often ask members of an executive team to write down the company's strategy in a few lines, separately. The versions rarely match on scope and almost never on advantage.

Lafley and Martin (2013) reach a similar place by another route. They describe strategy as an integrated cascade of five choices: what is the winning aspiration, where to play, how to win, which capabilities are required, and which management systems support those capabilities. The key word is choice. A strategy that excludes nothing has not chosen.

What execution capability looks like

On the execution side, the question is whether the organization has mechanisms to turn choices into action: priorities cascaded to areas, a budget consistent with priorities, named owners, follow-up rituals that lead to decisions. Kaplan and Norton (2008) describe this management system as a cycle running from formulation to review and testing of the strategy, through organizational alignment and operational planning.

The quadrant

Crossing the two axes produces four situations. Each calls for a different board conversation.

	Weak execution	Strong execution
Clear formulation	Plan without an engine. The company knows what it wants but does not turn it into action. Focus on cascading, budget, and rituals.	Strategy in operation. The challenge is to revisit assumptions often and avoid the inertia of success.
Fuzzy formulation	Drift. Neither clear choices nor mechanisms. Start with formulation and few priorities.	Efficiency without direction. The machine delivers well, but delivers too many things or the wrong ones. Focus on choices and trade-offs.

The trickiest quadrant is efficiency without direction. Companies in this position usually have a good management reputation, healthy operating indicators, and growing difficulty in growing. Because execution works, the board tends to ask for more of the same. What is missing is a decision about where not to play.

Questions for the next board meeting

To place the company in the quadrant, we suggest the board ask for objective answers to a short set of questions.

• Can management present the strategy in a short statement with objective, scope, and advantage? Do individual versions match?
• Which markets, customers, or products has the company explicitly decided not to serve in the next three years?
• What is the one-paragraph diagnosis of the main obstacle to the objective?
• What share of the capital budget is linked to the declared strategic priorities?
• How many strategic initiatives are active, and how many have a single owner and a quarterly milestone?
• When did a performance review last result in a reallocation of resources?

The first three questions assess formulation. The last three, execution. Vague answers in one block and precise ones in the other already point to the quadrant.

A caution about self-assessment

Executive teams tend to rate themselves higher on formulation than on execution, because formulation is the work they do themselves. Middle management tends toward the opposite: execution seems reasonable and strategy seems confusing. That is why, in our practice, the quadrant position is based on answers from at least three hierarchical levels. The gap between perceptions is often the most useful finding of the exercise, and the one that changes the board agenda fastest.