From Failure to Success: Understanding Why Most Strategies Don't Work and How to Fix it
If your sports team or your personal investments consistently underperformed, you would likely try a new approach. Yet, research indicates that a significant majority of business strategies 60 to even 90% fail. So why do organizations persist in using ineffective tactics, wasting valuable resources in the process that is more of an annual theater? It's time for a change in the way we approach strategy in the corporate world.
Why strategies fail?
#1: Strategies often lack the strategy itself
The strategy slides often present a list of desired outcomes, such as improving customer experience and employee experience, growing business, entering new business areas, reducing costs, and modernizing IT infrastructure. However, these are more about aspirations, not about choices what to do and what not to do.
Strategy requires problem-solving and making choices. This means identifying the challenges that stand in the way of achieving our goals and designing solutions to overcome them. For example, if a competitor like Google is entering our market, we need to decide how to respond. The same applies to new opportunities - we need to make decisions on how to seize them. We need to start concepting strategy, what does it mean in practice as a whole and when you understand the whole puzzle, then start executing individual pieces of the puzzle.
The most difficult part of strategy is making decisions and prioritizing. We cannot do everything, so we must focus on what is most important and make tough choices about what to discontinue. A lack of clear direction and decision-making leads to ineffective strategies and missed opportunities.
#2: Strategy is created in the boardroom and it is not inclusive
Many organizations have a tendency to keep strategy development exclusive to the senior leaders and decision-makers in the boardroom. This can lead to a disconnection between those creating the strategy and those responsible for executing it. Additionally, this approach often ignores the valuable insights and perspectives of employees on the frontlines who have a better understanding of the day-to-day operations and challenges of the business as well as what is happening in the market and among competitors.
Without involving those who are responsible for implementing the strategy, it's difficult to ensure that the strategy is realistic, achievable, and aligned with the company's vision. Furthermore, if employees don't understand or buy into the strategy, they are less likely to be motivated to execute it effectively. The most important aspect of strategy is its implementation, not just its creation. To be successful, strategy needs to be communicated, understood, and embraced by all levels of the organization.
#3: Strategy is not aligned with daily operations and we lack proper implementation
Creating a strategy is one thing, but making sure it is implemented and aligned with daily operations is another. Many companies struggle with this and as a result, their strategies fail to achieve their desired outcomes. The problem often lies in poor communication and engagement with staff. If employees are not involved in the strategy creation process and do not fully understand its objectives and how they fit into it, they are unlikely to fully commit to its implementation.
Another issue is the lack of a clear measurement and progress tracking system. Since you lack the big picture of your strategy, how every initiative and action is connected to each, you most likely become a herd of chickens where everybody runs to their own direction. In agile environments every team can interpret strategy as they wish and it only leads to internal competition between business units and teams.
If a company does not have a clear process for making decisions based on its strategy and tracking progress, it is difficult to know if the strategy is working or if adjustments need to be made. This is where decision stack comes in, it is a tree structure that shows how each strategic focus area is linked to different initiatives and actions, and how they are progressing.
Finally, there is often a disconnect between the goals set in the strategy and the resources allocated to achieve them. If a company sets ambitious targets but does not invest in the resources needed to achieve them, such as changes in organizational structure or operating model, the strategy is unlikely to be successful. In other words, if you aim for stars, but instead of a rocket you have a little teeny tiny bicycle as your vehicle, you most likely will fail.
Is it worth doing strategies at all?
Strategy creation is often stuck in old ways and is not effective in achieving desired results. It is important for individuals, particularly senior leaders, to take a step back and reflect on their current approach. By developing self-awareness, learning and unlearning, we can improve our strategy creation process and make sure that we are not doomed to repeat the same mistakes over and over again.
I highly recommend reading the books by Richard P. Rumelt, Good strategy/Bad Strategy and The Crux: How Leaders Become Strategists, to gain a deeper understanding of strategy creation and execution. By implementing these changes, we can ensure that our company's strategy is aligned with our goals and objectives and that we are on the right track to success.
In conclusion, strategy creation is not an easy task and requires a lot of effort and dedication from the whole organization. It is crucial to acknowledge that something is not working and to be open to change.
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