Wednesday, October 17, 2012

Five Pitfalls for Why Strategy Fails

“You’ve got to think about big things while you’re doing small things so that all the small things go in the right direction.”   ― Alvin Toffler

Crafting a good strategy is more challenging than ever.  In a 2011 survey conducted amongst 140 companies, 54% cited market volatility and 38% mentioned alignment with corporate goals as the leading pressures facing strategic planning. From another cross-industry survey: 65% of organizations have an agreed-upon strategy. 14% of employees understand the organization’s strategy. Less than 10% of all organizations successfully execute the strategy. More specifically, what are pitfalls to cause the majority of strategy fail? Or does strategic planning need a strategy?

1. Not all senior executives have well-developed strategy muscles

 People are the weakest link to craft a good strategy and execute strategy effectively. Many business leaders today are CINO-Chief In Title Only, with the functional silo mindset, only represent their specialized area to compete for the business resource or spend most of the time at the operational level, without taking sufficient energy and time on holistic thinking of business’s long-term strategy and growth.

A good strategy takes 3”C”s: Context, Creativity, and Cascading. When describing particular (cross-cutting) factors/concerns that may be the cause of strategy failure, namely; leadership and culture. There are a number of problems in dealing with intangible factors such as "leadership" and "culture", including deciding "formal" models of representation, and how to diagnose these business problems, how to set up the guidelines on actions, and how to measure result, etc

The remedies for the issues are designing a culture (rather than simply having one by default) and honing leadership effectiveness so as to be better able to craft a good strategy and inspire the team. Both efforts (stronger culture and leadership) also act in harmony to inspire idea sharing, complement multiple points of view, to avoid the blind spot in strategic planning, and the well-defined business strategy will help attract people to the company who are well-aligned with "who" the company is and where the company is heading.

That being said, managers, especially senior executives should exercise their strategy muscles more often. The right way to set strategy effectively during today’s uncertain time is to bring together, much more frequently, the members of the top team, who are uniquely positioned to surface critical issues early, debate their implications and make timely decisions

2. Think Strategy framework as equal to strategy

 Many managers may get training on general strategy frameworks, fit in classical strategic style-—five forces, 7-S Framework, blue ocean, and growth-share matrix analysis are all manifestations of it. 

On the other side, framework alone is not a strategy, the executives need to study, understand, and internalize the economics, science, psychology, enterprise architecture, and laws of their industries, etc so that context can guide them continually.

A good strategy takes vision, some executives explore in depth top ten trends that would shape the industry over the next decade, more time than ever, technology becomes creative disruption in bringing organizations cross-sector both opportunities and risks, strategy makers should discuss both the trends themselves and their implications for the supply and demand, value chain/stream for the organization’s products/services.

Crafting a good strategy also takes courage to shape the business ecosystem, focus beyond the boundaries of their own organization, often by rallying a formidable ecosystem of customers, vendors, and even competitors, more precisely, cooptitors (Cooperators + Competitors),  their cause by defining attractive new markets, standards, technology platforms, new business models, and management practices.

Methodologically, expanding the group of executives with the cognitive difference in strategic dialogue should boost the odds of identifying the company or industry-disrupting changes, follow the trend to catch the wave of next opportunities.

3. Lack of Scientific Process to Do Strategy

 Complexity, uncertainty, disruptive changes, and interdependence are the new normal facing business today. What’s stopping the business executives from making strategy in a way that fits their circumstances? One critical reason is lacking a systematic way to craft it—a strategy and scientific process for making a strategy.

Strategic planning is a management practice, management is both art and science, as technology becomes more pervasive than ever, the strategy has also moved further to become a science. 

A good strategy can be classified into following logic steps:
1)Diagnose the business problems
2) Set up a set of guideline
3) Take a series of Actions
4) Measure the result. 

More analytically, how do you set your strategy planning which constrains the kind of strategy you develop that the most successful are already doing—deploying their unique capabilities and resources to better capture the opportunities available to them, but with barriers for competitors to catch on.

More analysis scenario may include:
--The predictive analysis in strategy: how accurate can you forecast corporate performance, competitive advantage, market expectation, supply chain, and business dynamic., etc?
--Competitive analysis: To what extent can you or your competitors influence such factors?
--Diagnosis Analysis: What are key business problems you need to fix, the leverage and trade off., etc.? 
--Prescriptive Analysis: base on above analysis, how to set up a set of the guideline, and recommend actions for business to execute?

Methodologically, a more adaptive strategy-development process places a premium on effective communications from all the executives participating. Also, convert these initiatives into an operating reality by formally integrating the strategic-management process with financial planning processes, governance processes or other key business processes.   Create a rigorous, ongoing management process for formulating the specific strategic initiative

4. Strategy is an Annual Plan

 More surveys also highlight that while an annual planning rhythm is still dominant, frequent planning processes are becoming popular.

Inflexible annual strategy plan maybe the plan to fail, as in such a fast-moving, reactive environment, when predictions are likely to be wrong and long-term plans are essentially useless, the goal cannot be to optimize business effectiveness and efficiency; rather, the strategy must be to engineer flexibility. Accordingly, planning cycles may shrink to less than a year or even become continual.

 Thus, the starting point is for business leaders to increase the time they spend on strategy together to at least match the time they spend together on operating issues. Involve the top team, and the board, in periodically revisiting corporate strategic planning and making any business transformation in strategy planning.

Increased Frequency of Planning Cycles--A comprehensive approach is required to improve agility in strategic planning. Organizations need to build advanced foresight and scenarios by focusing on key topics. Cycle time needs to be reduced to develop rapid response capabilities across all organizational levels.

 5. Execution is not Part of Strategy

As old saying: strategy without execution is a daydream; execution without strategy is a nightmare.

Regardless of how good a strategy is, unless it gets executed effectively, it will either fail or fall short of its potential. There's a big difference between someone who works just to keep their job and someone who is engaged and enthused. Two important keys to the proper execution of a great strategy are having a strong culture and having inspiring leadership.

Companies in today’s uncertainty need a more adaptive approach, whereby they can constantly refine goals and tactics and shift, acquire, or divest resources smoothly and promptly execute it in cascading format.

Integrating Strategy Formulation and Strategy Execution: at execution stage, the business also should focus on prioritizing a few, not too many key business issues, favor quality over quantity, measure result accordingly. 

Therefore,  the failure in any step of strategy may fail the whole strategy-execution scenario, on the other side, not every failure is made equal, one prefers to fail faster, fail forward, to ensure long-term success when executing strategy holistically.


Thanks for providing the five pitfalls of Strategy. That's very nice one.
CIO strategy

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