I recently had a conversation with a colleague about business strategy. We both have many years of experience working with organizations formulating and implementing business strategies, and the gist of the conversation was why some organizations can formulate and execute a clear business strategy and other organizations never get there.
In my experience, these are the top seven reasons that organizations either fail to formulate a successful business strategy or fail to execute the strategy effectively.
1. Lack of senior involvement in execution. The CEO and/or key senior level executive are not involved in formulating the strategy. It is Change Management 101 that they need to be involved in the execution, but some senior executives do not make the time to participate in strategy formulation. This sounds obvious, but it happens. If senior leadership is not involved, then they will not be committed to the strategy formulated by the other team members. They have given themselves an “out” through a lack of commitment.
2. Sandbagging by the executive team. I will explain what that means. Some leadership teams formulate a strategic vision that they know they can achieve within the near future. They are hedging their bets by creating five-year goals which likely will be achieved within two years. They receive their incentives for reaching targets, but, in reality, the organizations could have achieved much more, and may now have been bypassed by a range of competitors.
3. Unclear implementation plan. The work is done to formulate the strategy, but the implementation plan is not clear, and projects to achieve the goals are not identified. People cannot be held accountable for unclear action plans, and the lack of a plan leads to indecision and inaction.
4. No accountability. A well-formulated strategic plan can quickly become irrelevant if people are not held accountable for executing the plan. As key timelines start to slip, and no one is held accountable, the plan becomes irrelevant and gathers dust on the shelf. And there is always a long list of excuses presented at the next strategic planning session as to why timelines slipped and targets were not met.
5. Inaccurate assumptions. Incorrect, or inaccurate external environment assumptions lead to a faulty strategy. A range of data is a key element in informing strategy formulation. Inaccurate assumptions often lead to developing an unworkable business strategy. Poor quality market condition, competitor activity, social and political analysis, and/or erroneous customer data, can all lead to incorrect assumptions, and gaps in critical thinking.
6. Market changes. The ability to adapt to changes in market conditions is essential. The business strategy may be well informed and well structured with clear plans, projects, and accountability, but strategies must be adaptable to changes in the marketplace. A competitor may create a product or service that creates a leap forward in the market, environmental conditions may change quickly, or other scenarios could occur that make parts of a business strategy obsolete. Sometimes these changes require an organization to go back to the boardroom to develop a new strategy, but a well-formulated strategy can allow an organization to adapt and evolve the existing strategy and stay on track.
7. Lack of change management process. There should be no need to explain this one, but organizations often do not ensure there is a change management process in place to support elements of the plan that require change. I won’t go too deep into the change management element of strategy execution as that is a topic for another day.
The Kepner-Tregoe strategy formulation and implementation model has five key elements that assist companies in avoiding these challenges to formulating and executing a successful strategy: Intelligence gathering and analysis – Strategy Formulation – Strategic Master Project Planning – Implementation – Monitoring, Reviewing and Updating
Whether an organization is a multinational giant or a small regional player, the fundamentals remain the same. Follow the process; get the right people involved; and find the data you need to inform your thinking.
There are other reasons that business strategies go nowhere, so it would be good to hear some additional thoughts.