5 Reasons Why Strategy Fails Understanding the 'worst' practices helps small businesses do better.
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I've watched strategy being developed within companies like Adobe, Apple, Autodesk, and Nokia. I've seen strategy created by individuals. I've seen the big suits of Bain and McKinsey at work. I've seen it done well, and occasionally I've seen it done poorly. Having read more than 100 books that define the best thinking on strategy, I've noticed that following the existing methods often doesn't yield success.
It's not just the methodology. Here are five reasons strategy fails in small businesses, in midsize businesses, and in large enterprises:
1. The Blame Game
How many times have you seen a strategy move into execution, then fail? Typically, the postmortem involves blame. It was poor leadership. We didn't execute correctly. We had bad market data. Our customers decided they wanted something else. The timing was off. There are hundreds more, and you've heard many of them.
Underneath the failure is something deeper -- a strategy creation process that's gone off the rails.
The problem isn't actually people, management, or other issues. It's what strategy is seen as being and how it's developed within an organization.
When there's a mismatch, people can be fearful and confused if they have information that contradicts the new strategy. When the strategy doesn't gibe with what employees know to be true, they may wonder if they're supposed to speak out or remain silent. Employees wonder if they'll get in trouble if they do, or even if they don't, say anything. They worry about being called "too tactical" or "insubordinate" because their reality-check doesn't match up with what the CEO wants enacted.
When a business reaches this point, the strategy has already failed. In the musical The Wiz, the wicked witch Evillene sings a song titled "Don't Nobody Bring Me No Bad News." If that's your tune, get rid of it. It's a sign of serious structural problems.
2. Lack of Team Involvement
Large companies often see strategy as an annual activity done by an elite group of people who sequester themselves in a conference room. In smaller organizations, it more often comes as an edict from on high delivered to the people on the ground who must enact it.
Strategy is tricky -- it's both a thing and an action.
As a thing, a vision, a direction, everyone in the company owns strategy. As an action, it requires specific people to carry it out within the organization. Lack of such involvement is one of the major predictors of strategy failure. When employees aren't invited -- or even given permission -- to question high-level strategy, watch out. A CEO may miss key questions such as "Is this strategy the best way to achieve our goal?" "Do we even know how to do this?" or "Have we researched this fully?" The team, even if given permission, may not have a formal place to discuss such questions, and organizations don't usually invite conversations of this type.
The solution? Get the conversation going on an internal blog with comments, through a discussion thread, or on a strategy wiki that involves everyone in the organization. You'll be surprised how many times an important piece of knowledge is contributed by someone you thought wouldn't be interested.
3. Here We Are -- But Where Are We?
How did this happen? How did we get here? We need to understand where today's strategy models came from and how they operate. This will show us why the lack of key structural elements can almost always predict failure.
The two basic forms of traditional strategy are predictive and emergent. Both are highly codified and well-documented. They're usually used at the CEO level.
Predictive strategy is top-down and sets a direction based on research predictions about what market conditions are expected to be. The work is quantitative, relying on data, analytics, and expert intelligence to build a picture of an evolving market. It offers tools to design strategies that will succeed in the market as depicted.
Emergent strategy is bottom up and takes a wait-and-see approach. The ideas that catch fire are added to resources that help the whole bear fruit. The focus is on the enablement of the organization to develop competing options that mirror the real-time competition going on in the market. It supports a portfolio approach to an organization's evolving itself into the future.The method you choose depends on the management structure of your organization, the industry the company is in, and the company culture -- among other variables. The emergent model is more flexible, where some might say the predictive model is old school. What causes failure in both is the failure to integrate feedback loops to enable adjustment on the fly.
Popular media has focused on execution for the past five years. The logic was that the problem was that companies simply didn't know how to execute strategy. Titles such as The New Science of Strategy Execution: How Established Firms Become Fast, Sleek Wealth Creators and Execution: How to Break It Down and Get It Done support this notion. This points us in the direction of the results that have been missing, but still misses the mark by suggesting that a systematic approach will guarantee better results.
This is an incomplete idea -- even the idea of "flawless execution" assumes there's a target everyone is aiming toward. When is the last time you saw that level of alignment in any business, regardless of size?
Point being that a process reinforces the ability of people throughout an organization to synchronize, know what to adjust for, make good decisions, and know when to feed information back into the system for fine-tuning.
Tools are just tools. What's important is the way companies make decisions and choose which tools to use, as well as when and how to use them; that determines how effective the tools will be.
In the United States, we're surrounded by overabundance and often don't recognize it. The same thing can happen inside a company regarding the plethora of decisions that need to be made. Poor decision-making can kill a strategy if people in the organization are unable to see it as a source of strategy failure.
Too many goals or conflicting imperatives create a situation where everything is a priority. In that scenario, nothing really gets accomplished. Business owners must know how to select and prioritize, edit, and delete. Given a situation in which you're developing a new line of business, decide how you want to help customers choose, and communicate it clearly within your team and to the company. Make the branding, packaging, sales, and channel shift clean and easy -- including the conversation about compensation and rewards.
Great decisions can be made by teams. But sometimes when decisions are made by teams without broader review, feedback is missed or fails to take into account cross-functional understanding. That person in sales may just hold the key as to how you can better engage the channel. Build in time for review, but make sure you're looking for targeted input. This isn't a consensus-building exercise.
Whether the decision is solo or team-based, it can be a challenge. Make it, move on, and make sure you have installed a process that will provide you with an early-warning signal if you need to revisit what you've decided. The one thing that's always constant in the market and in SMBs is change. It's a given that adjustments will need to be made -- develop the ability to adjust to change smoothly.
Nilofer Merchant, CEO of Rubicon Consulting, is a global high-tech industry thought leader and trusted strategic adviser for companies such as Adobe, Symantec, and VMware. She publishes and speaks frequently on strategy, innovation, and leadership.