All financial services companies have a strategy, either by design or default. Some organizations spend considerable time, money, and resources analyzing opportunities, assessing competitive position, and developing comprehensive strategic plans. Others engage in less formal activities that establish core principles to help define how and where the company will compete. Still, others have no process at all, relying on an institutional understanding of what the company is and focusing exclusively on managing day-to-day results against established budgets.
It is not the process that determines strategic excellence, but the degree to which there is alignment between strategy, execution, and performance. At the end of the day, a company's strategy is determined by the sum total of the decisions management makes on a daily basis. It is not what management says, but what it does that defines strategy. Strong performers make decisions consistently within a solid framework – whether that framework was established as part of a comprehensive planning process or an innate (and intelligent) sense of "this is how we do things". Weak performers lack this discipline, making decisions randomly and, certainly, independently of any overriding strategic principles. The result is often a hodgepodge of marginal businesses, disparate positions in disparate markets, inefficient operating environments, internal conflict, higher risk profiles, and a lack of any real competitive differentiation.
Strategies are not inherently "good" or "bad". Many can and do work. Rather the definition of a good strategy is one that is appropriate for a particular institution's market position, financial structure, risk parameters, and, most importantly, ability to execute against key strategic principles and imperatives. In our view, there are five important components of successful strategic performance.
In our view, companies that create the proper linkage between strategy and execution by developing focused and adaptable organizations, aligning capabilities both vertically and horizontally, and creating clear, meaningful brand positions will outperform their peers consistently over time.
Rolland Johannsen is a Senior Consulting Associate and Mary Beth Sullivan is the Managing Partner at Capital Performance Group, a management consulting firm based in Washington, DC. They can be reached at firstname.lastname@example.org and email@example.com.