Unless it is properly planned and carefully executed, a business strategy is a waste of time.
There are over 125,000 business strategy books available on Amazon and yet, 70 per cent of strategies fail to deliver the intended outcomes. Is the problem that leaders haven’t read the right research? Are the books not focusing on the right areas, or is it an application issue? No doubt it can be a combination of all these things, but more often than not, application of the key principles of strategy execution is the main problem.
So why is getting strategy right so important?
If a business gets it wrong, there can be huge ramifications. Research on 750 bankruptcies over a 25-year period showed that the number one factor behind these bankruptcies was poor strategy. On the flipside, there can be tremendous benefits if strategy is executed well. A ten year study by Harvard Business School showed that businesses with clearly defined and well-articulated strategies on average outperformed competitors by 332 per cent in sales, 304 per cent in profits and 883 per cent in total shareholder returns.
Here are some key areas where businesses get it wrong
Lack of understanding of the key business issues and opportunities:
Imagine trying to build a house on a sand base. It wouldn’t work too well would it? Yet, a number of businesses develop plans built on a very fragile foundation. So what does a solid foundation look like when it comes to developing a strategy? Firstly and most importantly, the leadership team needs to reflect on the right questions to answer before developing the strategy. Where and how do you and others in the industry make money? What will the future marketplace look like? How well do you understand your competitive landscape? Adequate time for conversations around the insights by the executive team is crucial. Insights for each question should be based on reliable, meaningful data.
Too many priorities leading to a lack of focus on what’s important:
100 Watts of power in a lightbulb will light a room. 100 Watts in a laser beam will cut through steel. The difference? It is directed, focused power. A big part of a successful strategy is making clear choices. This is as much about choosing what not to do as it is about choosing critical focus areas for the business. Too many priorities dilute focus and draw valuable resources away from what matters most.
Lack of commitment to the plan from leaders entrusted with executing it:
A strategy without commitment is like a new car without wheels. It might look good, but it won’t get you very far. It’s amazing how many strategies are built with very little involvement from key leaders responsible for delivering it. Some businesses get these leaders involved, but in the wrong way or at the wrong time. For any plan to be successful, people need to understand the choices that have been made (even if they don’t agree with them) and commit to doing their part in the achievement of the goals.
Lack of alignment:
There are 640 muscles in the human body and researchers suggest that if you had all of those muscles pulling in the same direction you could lift twenty-five tonnes! There is tremendous power in alignment of focus and effort, but not many businesses achieve this on a consistent basis. Many businesses seriously underperform because they don’t properly align resources to achieve their strategic plan. Research by Harvard Business Review demonstrates that only 9 per cent of 7,600 managers surveyed say they can rely on their co-workers in other business units and functions all of the time, and only half can rely on them even some of the time. When asked what the single greatest challenge to executing a company’s strategy, almost a third cited failure to coordinate across business units. Functional and business unit silos happen more than we like to admit and can have a substantial impact on the achievement of strategic plans. The best businesses properly align both vertically and horizontally across business units and functions and ensure that team and individual KPIs support the achievement of the overall company goals.
Poor execution of the strategic plan is the Achilles heel of many businesses. It can be disheartening when a plan that promises so much, delivers so little. And then, to compound the situation further, the excuse and blame game can rear its ugly head as leaders deflect accountability to others. Effective project management, adaptive resource allocation, and strong leadership are vital for success. Equally important is having the right, timely conversations around performance that lead to course-corrective action when needed.
Research on 750 bankruptcies over a 25-year period showed that the number one factor behind these bankruptcies was poor strategy
Every business has strengths and weaknesses in how it develops and implements strategy. But not enough businesses really understand their key improvement opportunities let alone take positive action to address them. No matter where your business is on the journey, addressing these key Strategy Execution principles will help you achieve greater results.