Friday, November 30, 2012

Seven Lessons from Strategy Failure & Monitor’s Fall

An insightful post about Monitor’s failure on Steve Denning's Forbes blogs spurred thought-provoking discussion, which means, strategy planning is still one of critical management activities in modern businesses today; also because Monitor is a strategy consulting firm co-founded by strategy master Porter, surely such discussion is not for gossip, but for brainstorming the strategy in strategy making, and learning more from failures with humility.


1.    Strategy Framework is a Tool, not Gospel

There are lots of Strategy Models, some older, some newer. Competitive Strategy (Porter), Core Competencies Strategy, Disruptive Innovation Strategy (Christensen), Blue Ocean Strategy (Chan Kim & Mauborgne), etc. etc.

  • Strategy Framework is like recipe, not a dish, there are two phases in strategy formulation: the first is carpentry: swot, pest, 5F, etc. The output is beautiful reports, bubble charts, trend analysis and fed consultants. Most of the times,  poor understanding of the business ecosystem in strategic perspective results in a plan that is only on the presentations, excel sheets or board discussion points. Such plans seldom result in concrete actionable item,  that is the point when there is no defined process, no step by step recipe to follow. 

  • See Things Differently: Strategy formulation starts with collating all the intelligence through whatever methodology that suits the company best, then identifying patterns within the intelligence, up until this point the approaches are standardized and with the right consultancy it can be done swiftly and properly. Where most organizations struggle is the phase after the analysis where they need to define what to do and what not to do, the lack of innovation, thinking outside the box and coming up with new ideas that challenge the status quo has been the biggest reason why weak strategies are formulated. The inability of today's executives to think in a pioneer way, to see things differently has become the biggest challenge for corporations. To be innovative, you need to understand the model behind your organization, your ecosystem and your customers.
  • The Strategy Formulation methodology depend a lot on the Strategic Maturity Level of each specific organization (management team or wider involvement, as the case may be). It doesn’t mean that frameworks are nonsense, they have a degree of relevance, but they are so remote that you have to bridge them to your circumstances, that bridge is what you call a maturity model.

2. Strategy is not just Hindsight, Foresight is more Crucial

  • Lack of Foresight: From Denning’s posting: "Although Porter’s conceptual framework could help explain excess profits in retrospect, it was almost useless in predicting them in prospect., The strategists theories are 100 percent accurate in hindsight. Yet, when casting their theories into the future, the strategists as a group perform abysmally.. The point is not that the strategists lack clairvoyance; it’s that their theories aren’t really theories— they are ‘just-so’ stories whose only real contribution is to make sense of the past, not to predict the future.' "

  • Past is only part of ingredients, not all: Frameworks have value, but they are also a major roadblock to a successful strategy based on your organization and its context which can never be represented fully by the past. The past is part of the ingredients of a successful strategy, and important ingredient, but it would be a mistake to think past successes can translate into future ones

  • The fundamental flaws of an approach based on pattern analysis and problem recurrence are a) the context and b) the dynamic view, which are both interrelated. In most cases, if not all cases, the context of one business is different from another, in all cases, the dynamic behavior of your organization and consumers will be different than the ones identified in the past. That is when "luck and divine inspiration [are] needed" to succeed.

3. The Root Causes of Strategy Failure

Nine out of ten companies fail to implement strategy, 70% of change efforts fail, etc.

  • Strategies fail because they are conceived in the rarefied air of hierarchical tops and they lack the variety to meet and resolve the complexity of the real world. They lack the depth of understanding that the people who actually deliver value to customers have about the situation. Thus, the strategy fails because of the lack of visibility. Most people consider strategy to be an enigmatic discrete process that only a leader can truly master it. 

  • It becomes just a rhetorical exercise SWOT, PEST, 5 Forces, etc; are often used and documented, and then the executives come up with whatever they had in mind in the first place. It becomes just a rhetorical exercise, really expensive and time consuming exercise, that takes a lot of the planning time and then, the crucial part, formulating the strategy, is rushed or whatever they had before is just rubber stamped. 
  • A strong cause behind this is the lack of a strong strategy. When a company has a true strategy that leverages competences, it has strong fit and makes sense, things usually happen. Disruptive strategies (or strategic models) have their benefit at the right time in a company's life. It is probably true that it better fits the early stages, but can be applied at any point, when the vision and the opportunities (or threats/challenges) push the company in that direction.

  • This question of strategy alignment with organization design opens up a number of possible root causes for strategy failure: Is the strategy realistically given the organization's capabilities? Has the change and implementation effort been properly sized and planned? Often times the focus is on management systems and organization structure but culture, talent and other factors are over-looked.

  • Super egos are behind many ailments in the corporate world, and strategy formulation is no exception. the "ego" and "fear" issue is perhaps a good start to find out the root causes and to develop a strategy for implementing a strategy process. Other factors include silo heads and politics.

  • This outcome has a strong de-motivation effect on the people in charge of the strategy development. Since the executive strategy is not analyzed in detail the implementation of it will be only made partly and the potential outcomes were only a wishful thought.

  • Strategy Formulation is often an analytical exercise too focused on the output contains much of what has been described within (SWOT, etc.) but lacks good structure to implement. The last chapter of a formulation exercise should be Structuring Strategy for Implementation, but most often this is not the case. That's why what's often formulated is usually never implemented.  

  • Five More Reasons Why Strategy Fail: for strategy practitioners, some common pitfalls to cause strategy fall, not because an imperfect framework, but because lack of true strategist, treat framework as strategy, think strategy planning is annual routine, no scientific process, as well as do not think execution as part of strategy

4. Strategy Framework like a Map, need continue to be updated

The strategy framework is like a map, a city map drawn decades ago may not fit in today’s circumstances as small town expands into the metropolitan area or mega-city. It need be updated to adapt to the new normal: 

a)     Market variation: The new economy is more varied than the old. Businesses are competing in a multi-speed world in which variation between countries and sectors has never been greater;

b)     Volatility: Another enduring feature of today’s interconnected market is its volatility. Some are arguing that as the consumers of the rapid-growth markets play a bigger role in the global economy, cyclical volatility has inevitably increased.

c)     Uncertainty: In the past 12 months, any global board looking to manage strategic risk will have increased the weight it attaches to major strategic threats.

d)     Knowledge life cycle is shortened at today's digital era, either frameworks, laws, principles or best practices, all need be continued to be updated in order to adapt to the accelerated changes and the new business/economical circumstances.

The missing factor at both academic and corporate ends is corporate contextual integration of national strategic planning and tactical moves with EMERGING GLOBAL CONTEXTUAL ENVIRONMENT. The push and pull contextual factors invite attention to shift in comparative growth patterns in developed and emerging economies due to rapid in-controllable globalization

Global Contextual Influences visibly and invisibly dis-configure all the carefully planned elements of a well researched strategic plan and its implementation process due to external influences on internal corporate culture, normal practices, tested doing business procedures and expected outcomes.

Therefore, not only the strategy planning need be cascading, but also the framework should be updated. 

5.    Strategy Goes beyond Competition

As Denning put in the article: “The purpose of business is to add value for customers and ultimately society”. The knowledge of competitors is an important component of strategy. But it’s not the whole game. “The essence of strategy, business and business education is not coping with competition. The purpose of a firm is not just to make money for its shareholders”.  

If strategy is only about competition, why not call this trick “the discipline of strategy”? Why not announce that a company occupying a position within a sector that is well protected by structural barriers would have a “sustainable competitive advantage”?

A good strategy should orchestrate all key factors below to make it proactive and practical:

  • People are still strategy master, the biggest responsibility of any leader is to provide clear direction - to ensure that the organization has what it takes to be successful in a future.  Super Big Egos' as the cause of failure in effective strategies

  • Culture Trumps Strategy: Culture eats strategy for lunch! If your culture stifles creativity and innovation, then it's impossible to view your prospective market from virtually all angles to establish the most effective strategy to implement. Keep it simple, take constructive criticism as it comes, streamline your processes, and keep the floor open for fresh ideas. Neither lose focus on the long-term goal(s) by trying to prove dominance nor make others feel as if their opinion does not matter.

  • Other factors can also derail strategy. The nature of core processes, talent, management systems, and organization structure along with culture all equate to the "plumbing" of the organization or the System (large S) design. If your strategic intent is "A" but your System is plumbed to produce outcome "B"...outcome B is most likely.

  • Customer Driven: Many companies are inner directed and lack the keen real-world insights of companies that are truly customer-driven so they make other false assumptions about their SWOT. Trying to develop breakthrough strategy with this myopic view of the world is impossible.
Execution is a part of good strategy. Was Monitor’s main problem operations?

     6. Five Dimensions of Strategy

Outlining the strategic intent and framing the strategy to be understandable and implementable is harder than one might think, as very few people excel at articulating truly leveraging strategy and making it practical so it can be execute.

Sun Tzu’s “Strategy without tactics is the slowest path to victory”: even with a clearly formulated strategy,  companies still fail to deliver appropriate strategy execution, because many companies do not have a good handle on how to implement and deploy their strategy effectively and efficiently. They lack a concise and structured strategy implementation framework and are too focused on organizational silos.

To get stakeholders pulling in the direction of the strategy, five-dimensions (5"C"s) strategy implementation frameworks need to be considered.

(1) Consensus – Deploy the strategy and engage the organization to understand, accept, and stand behind the strategy. This includes the process of business planning to ensure that strategic programs have the funding they require. 

(2) Calibration – Align the business processes to support the strategy (this includes extending capabilities which underpin strategy). 

(3) Coordination - Synchronize business process interaction to minimize cost and maximize efficiency. 

(4) Champions – Maintain a strategy aligned, capable, and motivated workforce. 

(5) Culture – Incorporate successful strategy implementation mentality into corporate culture.

If companies have a framework to engage these 5 dimensions they can swiftly percolate their strategy into appropriate execution.

7.    Failure is not Strategy, but Failure tests Resilience

Failure is not strategy; but we still need some positive thinking about failure: it is not necessarily "celebrate" failure, but tolerate, understand and even "promote" failures: a failed strategist can grow into a true business person, a guru can also become glue to connect past and future, and a strategy is a shareware, not a shelfware. Paradoxically, success is failure inside out.

A true strategy is a combination of key factors and collective effort:

1) Time/effort - developing a good strategy takes time. You have to understand your own organization, its culture, its strengths and do so in the context of your competitors and marketplace trends. This is especially important as your competitors are moving too so you can't just position to where they are now.

2) Skill - the analysis and holistic thinking process that is required to deliver a true strategy is often not sufficiently available.

3). Depth - many strategies are too high level to allow them to be actioned. A strategic roadmap is an integral part of a true strategy.

4). Discipline - many organizations do not have the discipline to hold the organization accountable (and its execs) to executing against the roadmap while adjusting as needed due to changes in the environment.

5). Investment/long term thinking - delivering strategy requires investment in resources and the time to deliver is often long term. Executives are not often rewarded for long term delivery even when it is the "right" answer

It is easy to react or to take tactical steps to address individual opportunities or weaknesses. It is hard to harness the skill and time to do work in sufficient depth and discipline for a long enough term strategy that will allow you to execute. 


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