To find the right strategy for a business, its managers must understand such general considerations as its competitive situation, the latent needs of customers, capital markets, the regulatory environment, new technology, the structure of its industry, and the strengths and weaknesses of its rivals. Yet the formulation of a truly successful strategy requires managers to ponder not only these primary determinants but also the company’s ability to execute whatever strategy it chooses. Often, however, discussions on strategy ignore the execution factor because managers fail to see it as part of the big picture. Such companies miss the opportunity to make an informed choice between a "second-best" strategy that they can execute well and an ideal strategy that may demand capabilities they simply do not have.

We studied companies in a wide range of industries to learn if success is systematically associated with a strong alignment between the innate abilities of a company and the execution requirements of its strategy, and if failure is systematically associated with the absence of such an alignment. Our research identified industries facing major strategic decisions about such issues as computers, telecommunications, electronics, and transportation. Within these industries, we examined the approaches to execution of...