Business strategies often fail. Studies show that about 60-90% of strategic plans are never fully started. The causes of derailment are many and varied, but execution is consistently responsible. That could and probably is a fair diagnosis, but it’s not the whole story. Strategy design itself can be the real problem, but it can be hard to admit. I can’t.
Consider the following scenario. Hundreds of hours spent building a comprehensive strategy followed by a series of presentations, status meetings and progress reports. As the initial momentum and excitement wears off, organizational commitment begins to wane. Teams produce perfunctory behavior to satisfy their leadership. Leadership begins to question the sustainability and viability of the plan. Strategy is quietly abandoned and the cycle reset.
Was it due to improper execution? Maybe. But strategies can come with fatal flaws that become apparent only during execution. Without knowing if there is a problem with the plan itself, the true point of failure is debatable.
Let’s take a more concrete example. One of our clients had an ambitious strategy that articulated the goal of becoming the Tesla of the industry. This strategy was backed up by market research and justified by customer feedback, but the organization was unable to achieve it. The company was in the dark ages of technology, and the team suffered from a lack of resources, talent and capabilities. Culturally conservative, the organization was very risk-averse and cost-controlled. In its current state, this leap is incredible at best and impossible at worst.
Such strategic problems emerge when leadership focuses too much on the external landscape and leaves the internal terrain unexplored. Arriving. The problem is the map, not the territory. In other words, strategy is disconnected from reality. This creates uncertainty and stops action.
Instead of reacting to failures during implementation, leaders should examine whether the strategy was on solid ground in the first place. This requires removing assumptions to avoid her four fundamental errors that can lead to strategy failure.
Error #1: I don’t understand the problem.
The PR crisis may not just be a branding issue. It can also be a leadership issue. Differentiation issues can be not just product development issues, but positioning issues as well. The same goes for strategy. The entry of new competitors, dramatic declines in sales, or technological disruption may be viewed as reasons for new strategies. However, each of these presents unique challenges and may or may not require a major overhaul.
It is imperative to deeply consider under what circumstances a complete cataclysm is needed and whether refinements to the current strategy are needed. Often it’s the latter. Suppose a large company feels intense pressure from its competitors. Their aggressive marketing strategy eats into the company’s bottom line. In response, leadership determines that a new strategy is appropriate.
However, competitors’ heavy marketing investments do not cover all causes of revenue loss. The reasons can be much simpler, such as an outdated pricing model. Competitive pressure is visible, but may not be the main reason for the decline in sales. Conversely, the development of new strategies may be unnecessary.
Error #2: You don’t understand your organization’s capabilities.
Strategy is often the product of leadership collectively participating in its design. However, most organizations do not consistently practice strategy development. After all, according to Harvard Business School, 85% of his executive leadership team spends less than an hour a month discussing strategy, and 50% spend no time at all. Hmm. Creating effective and actionable strategies is a cultivated skill. Leaders who are immersed in day-to-day tactics throughout the year are often ill-equipped to create strategy when it comes time to plan.
Moreover, having an experienced leadership team alone does not guarantee an organization’s ability to develop a strategic plan. The CEO recently shared her unwavering confidence in her organization’s ability to execute. But leadership struggled for months when trying to formulate a strategy. They applied a variety of best practices through dozens of meetings, but they created the plan only to create a wish list of lofty goals, not strategy. It was assumed to be equivalent to knowledge.
Leaders who excel in strategic roles often have a strong track record in executing pre-determined projects. These things usually don’t require long-term thinking. That’s the strategic plan. As a result, they don’t really know where to start and end up focusing on execution by default. Without consistently immersing the leadership team in strategy and long-term thinking, their strategic capabilities will never be fully developed, resulting in marginally effective planning.
Error #3: Not understanding immovable pressure.
Every organization has ongoing operational activities that keep the company running. In fact, many existing initiatives compete for employee time, making it very difficult to dedicate time to strategic planning, let alone execution. A recent survey found that he 76% of employees spend less than three hours of hers per week on strategic work.
Compounding this pressure is that many leaders are also incumbent managers and are expected to perform oversight duties at the same time. Organizations take pride in having it, fostering a norm that no one is special if they don’t share their workload. Employees often have limited bandwidth to contribute to their success.
Strategies designed without considering these contexts and the resources they consume leave routine work on the back burner. Employees who are already at full capacity tend to work on the easy and familiar rather than brand new initiatives that require more time and mental energy.
Error 4: Not understanding the cultural landscape.
The organization’s past situation provides employees with guidelines for determining whether new strategic plans are effective. The multi-billion dollar companies we worked with had a culture of developing what they called “flavor of the month” initiatives. These strategies often launched with great fanfare, but within weeks lost their luster and new strategies took their place.
New strategies introduced exist in the context of previous plans. Therefore, its design should consider precedents that establish perceived success or failure. Culturally speaking, strategy can be seen as temporary or permanent on the front line, and organizations respond accordingly despite management pressure.
Leaders should assess how company culture can affect strategy and account for these internal barriers as part of the rollout process. This includes positioning, messaging, and packaging, but more importantly behavior. The leadership team must openly address previous issues with past initiatives and use their actions to shape key elements of the new strategy. For example, by consistently emphasizing the voice of the customer in support of a service-centric strategy.
When strategy execution loses momentum, it is the result of uncertainty. Stanley McChrystal, his retired four-star general, said when asked about his views on strategy: it is not achievable. So they hesitate. They become tentative, focused on getting more and more information to remove uncertainty from the situation, and they stop acting. ”
Successful execution is a product of the precision of the plan itself. Just because a strategy has been formulated does not mean it is ready to be handed over to the front lines for execution. It is a situation of increasing uncertainty, so find out if your strategy takes into account the circumstances under which it must be implemented, and proactively address those potential pitfalls. This gives teams the tools to deliver the desired results.
Disclosure: Several years ago the author worked as an external consultant for EY sponsoring this Setting Your Corporate Strategy series. She had no affiliation with the company while writing this article.