If you knew the US$500,000 strategy you’d just signed off on had a 60 percent chance of failure, would you still go ahead? Most business leaders wouldn’t. Now, imagine being told that the execution of your strategy is guaranteed and you only pay when it delivers a defined outcome.

It sounds too good to be true, yet it’s entirely possible when organizations stop paying for documents and start paying for outcomes. This is the execution gap: the gulf between a smart strategy on paper and real results in your profit and loss statement.

The truth is, most strategies are actually pretty good. They’re well-researched, presented in slick decks and endorsed by smart people, yet around 60 percent still fail at the execution stage.

The real issue is that strategy is often created in isolation from the organism responsible for delivering it: the business itself, in all its messy, human reality. Culture, unwritten rules, legacy processes, capability gaps, technology constraints, patchwork systems and overstretched leaders and teams all collide with the neat logic of a new plan and a ‘pretty good’ strategy.

It is incredibly hard for businesses to change strategy from within without a significant catalyst for change. Even a significant investment in new capability will still come up against the inertia of the organization.

The missing link: capability

Most strategies don’t fail because they’re wrong. They fail because the organization didn’t have the business capability and culture to prioritize the right initiatives, drive change or fix legacy ways of working.

A business might be exceptional at the small list of capabilities that make it great (manufacturing, marketing or innovation) but struggle with capabilities that are essential for ongoing operations (IT, customer service or insights). And it’s this disparity that creates the organizational inertia.

We’re quick to blame resistance to change or market conditions, but more often it’s simpler than that: A team was asked to execute a strategy they weren’t equipped to deliver.

If you don’t have the capabilities and culture, you don’t get the outcomes. It really is that simple.

Pay for success, not for slideware

So how do you close the execution gap? You change what you pay for.

Instead of hiring people or consultants to slowly build capability over years, you outsource the capability itself and only pay when it delivers an outcome.

This is similar to the ‘capability as a service’, which has been used in digital and IT transformations applied across the broader business and linked to performance.

Rather than saying, “Let’s hire a head of X and three specialists and hope they transform this area,” you shift to, “Let’s buy the capability we need, at the level we need it, for as long as we need it, with fees aligned to the outcome it delivers.”

What does this look like in practice?

Fractional capability: You don’t need a full-time senior team for every problem; you need the right expertise at the right moments.

Outcomes thinking: The goal isn’t to develop a strategy; it’s to move metrics like revenue, margin, cost, churn and productivity.

Aligned incentives: Partners succeed when your business improves, not when they create a new deck or bill more hours.

This allows you to double down and invest in your distinctive capabilities and minimize your costs on other capabilities.

You might be doing this already in outsourcing or offshoring parts of your IT or finance teams. Or when you hire a specialist creative or performance marketing agency. But are you linking this to an outcome and aligned incentives?

Recently, McKinsey announced that it was moving to an outcomes-based pricing model (increasingly shaped by AI-driven transformation work) to better align incentives and outcomes. A quarter of its fees are now driven by outcomes-based pricing.

And this is the model Ranged uses for some of Australia’s most exciting fast-moving consumer goods brands. Ranged’s brand partners get access to specialist talent, deep data and insights and market access to Australia’s largest grocery, P&C, pharmacy channels. Incentives are linked to the outcomes of the performance of sales and category management capability.

The hidden power (and danger) of rewards

Of course, there’s a catch. Rewards are powerful. If you get them wrong, though, they distort behavior fast.

Consider some familiar incentive traps.

Reward cost-cutting alone, and people will cut too deeply, stripping muscle as well as fat. Eighteen months later, you’ll be left wondering why service has collapsed and customers are leaving.

Reward volume growth alone, and teams will chase any revenue at any price, inflating the top line while margins quietly erode.

This is why incentive design matters. Point the reward system at the wrong target, and it will optimize for exactly that, even if it harms the business.

Done well, outcome-based incentives align everyone around what really counts: sustainable, profitable growth.

The solution: Focus on these three things

Closing the execution gap means doing three things well.

• Know your unique competitive advantage and the distinctive capabilities required, then ruthlessly consider what other capabilities you can buy as a service?

• Buy the best capability you can and fractionalize, not one expensive full-time role and not a carousel of juniors.

• Align rewards with real outcomes, then structure incentives so that everyone (internal teams and external partners) wins when the business wins.

When you do that, your strategies stop dying in execution.

Opinions expressed by The CEO Magazine contributors are their own.