Strategic Failure, Strategy Design, Strategy to Performance Gap

10 Reasons Why Strategic Plans Fail

Looking at the failure of strategy is the broad basis of my DBA so I am always interested in articles or commentary on this area.  In my personal view there is a serious bias to writing about the positive and ignoring how and why we fail.

Here is an article from Forbes listing the 10 reasons that strategic plans fail.  All 10 are valid though in my experience within Australian companies  1, 3, 4 & 6 are most common.

1. Having a plan simply for plans sake. Some organisations go through the motions of developing a plan simply because common sense says every good organisation must have a plan. Don’t do this. Just like most everything in life, you get out of a plan what you put in. If you’re going to take the time to do it, do it right.

2. Not understanding the environment or focusing on results.Planning teams must pay attention to changes in the business environment, set meaningful priorities, and understand the need to pursue results.

3. Partial commitment. Business owners/CEOs/presidents must be fully committed and fully understand how a strategic plan can improve their enterprise. Without this knowledge, it’s tough to stay committed to the process.

4. Not having the right people involved. Those charged with executing the plan should be involved from the onset. Those involved in creating the plan will be committed to seeing it through execution.

5. Writing the plan and putting it on the shelf. This is as bad as not writing a plan at all. If a plan is to be an effective management tool, it must be used and reviewed continually. Unlike Twinkies or a fine vino, strategic plans don’t have a good shelf life.

6. Unwillingness or inability to change. Your company and your strategic plan must be nimble and able to adapt as market conditions change.

7. Having the wrong people in leadership positions. Management must be willing to make the tough decisions to ensure the right individuals are in the right leadership positions. The “right” individuals include those who will advocate for and champion the strategic plan and keep the company on track.

8. Ignoring marketplace reality, facts, and assumptions. Don’t bury your head in the sand when it comes to marketplace realities, and don’t discount potential problems because they have not had an immediate impact on your business yet. Plan in advance and you’ll be ready when the tide comes in.

9. No accountability or follow through. Be tough once the plan is developed and resources are committed and ensure there are consequences for not delivering on the strategy.

10. Unrealistic goals or lack of focus and resources. Strategic plans must be focused and include a manageable number of goals, objectives, and programs. Fewer and focused is better than numerous and nebulous. Also be prepared to assign adequate resources to accomplish those goals and objectives outlined in the plan.

Business Strategy, Strategic Failure, Strategic Understanding, Strategy to Performance Gap

CEO’s Talk Strategy – 70% of Employees Don’t Understand!

New research conducted through the University of Technology has found that only a small proportion of employees can articulate their organisation’s strategy.

The researchers asked employees of 20 major Australian corporations with clearly articulated public strategies to identify their employer’s strategy from among six choices. Just 29% answered correctly.

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Business Strategy, Strategic Failure, Strategy Implementation, Strategy to Performance Gap

Are you implementing or executing your strategy?

Within your organisation do you implement or execute strategy?  The choice of language can have very different implications on how your staff view both the process and the desired outcomes.

Implementation and execution are often used interchangeably in many organisations and in business articles & books.  However they have two very different connotations especially in terms of strategy.

If a strategy is implemented then it implies that it was not in the business previously i.e. either the business didn’t have a strategy or this is a new strategy.  Also it implies that there will be a ‘start date’ and ‘end date’ of the implementation.  That is, at some point it will be in and working.

Implementing a strategy can also imply that there is an implementation team.  So as an employee I may or may not be involved.  If I am not involved in the implementation then I wait for the team to come and tell me when it is ready.

Execution on the other hand implies task level actions and decisions.   There are many opportunities every day or every hour for an employee to execute the strategy, all staff are involved and responsible for the outcome and there is no end date – we never stop executing our strategy (even though it may change over time).

Having an execution approach means that the emphasis of success has to lie in communicating to the staff not only what the strategy is but also ‘how’ they execute it.  What do they do day-to-day to move the business forward in line with the strategy.

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Business Strategy, Strategy Design, Strategy to Performance Gap

Strategy = How

We are all using the same words but we mean so many different things.

This comes up frequently in my research, my general discussions about my research and in my consulting work.  Whilst I have already written that at the heart of this issue is not the particular jargon but the organisational understanding of the jargon, it is worthwhile to give a simplistic view as a start point.  *What I mean by that comment is that it doesn’t really matter which term you use, what matters is that when you say it that everyone in your organisation associates the same meaning and application as you do.  Beware of assuming that your staff or colleagues  have your exact definition.

So here is the simplistic view;

Mission = Why
Vision = What / Where
Strategy = How

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Business Strategy, Strategic Failure, Strategy Design, Strategy to Performance Gap

Interesting Research on Strategy

In support of my “why does business strategy fail” work here is some research that asks some very direct questions of senior executives about their strategy with disappointing results.

In 2011 Booz & Co conducted a survey of 2,800 executives from companies of various sizes, geographies, and industries. According to this survey, most executives don’t feel their company’s strategy will lead to success, two out of three respondents admit that their company’s capabilities don’t fully support their strategy, only one in five are fully confident they have a right to win, and the majority say their company has too many conflicting priorities.

Executive frustration is unmistakable
The survey results show that setting priorities is a significant challenge for companies — and that linking priorities to decisions is a hurdle that few companies get past. According to the survey:

  • A great majority of executives (64% of survey respondents) say that their biggest frustration factor is “having too many conflicting priorities.”
  • Executives report that their biggest challenges are (a) allocating resources in a way that really supports the strategy (56%) and (b) ensuring that day-to-day decisions are in line with the strategy (55%).
  • Half of the executives (50%) consider setting a clear and differentiating strategy a significant challenge.
  • In fact, most executives (54%) do not feel their company’s strategy will lead to success.
  • Only 20% say their company has a right to win in all the markets in which it competes.
  • Most executives (82%) say growth initiatives lead to waste, at least some of the time.

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Business Strategy, Strategic Failure, Strategy to Performance Gap

Strategy-to-Performance Gap

What is your strategy-to-performance gap?

Written by Mankins & Steele this well cited article published in the Harvard Business Review challenged many senior executives to seriously examine what they were accepting in their business in terms of the year on year performance of their strategic endeavours.

Companies typically realise only about 60% of their strategies’ potential value because of defects and breakdowns in planning and execution.

Mankins & Steele’s survey indicates that, on average, most strategies deliver only 63% of their potential financial performance, and more than one-third of the executives surveyed placed the figure at less than 50%.  Put differently, if management were to realise the full potential of its current strategy, the increase in value could be as much as 60% to 100%!

Why such a low percentage of their promised financial value? Leaders press for better execution when they really need a sounder strategy. Or they craft a new strategy when execution is the true weak spot.

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