Good Strategy, Bad Strategy: Why your Business Strategy will (probably) fail

How companies can rapidly update their strategic business and innovation plans (And why they should bother.)

James is a CEO for a $1bn equipment manufacturer supplying the New Nuclear sector and is charged with building new momentum into the product pipeline in the next 7 years. With the uncertainty surrounding investment and technologies, how can he increase the odds of success?

Caroline is a commercial director in a growing SME in the UK electronics sector and is seeking new growth options, new technologies and applications. Being able to clearly articulate the commercial gains with R&D programmes will help create buy-in from the board.

Roberto is Business Development Director at a mid-sized tier 1 rail rolling stock supplier and wants to jump on the 10%pa growth opportunity. He’s juggling make/buy/acquire decisions which must be made by the next business review in four months.

But, they have a problem…

Only 8% of Business Leaders are good at both strategy formation and its execution according to Paul Leinwand, Cesare Mainardi and Art Kleiner’s article in a recent article for Harvard Business Review [1] with 63% rated as neutral (or worse) on development or execution.

This resonates with me.

I’ve been in my fair share of business strategy meetings in large companies that should have known better. Every year the invited would be subjected to an off-site strategy day to develop or test plans.

The sessions were (mostly) failures - but why?

One problem was that it wasn’t strategy, which is…

“A method or plan chosen to bring about a desired future, such as the achievement of a goal or solution to a problem.”

First, although there was lots of insightful talking by informed people, there was little analysis and no real coordination of execution.

Second, no decisions were made about where resources would be spent and not spent. High on bluster but low on details.

Third, the effect on people of attending these sessions was to demotivate and make it almost certain that strategies would fail. Like Sisyphus, sentenced to continue to roll his rock uphill to no apparent purpose for eternity…

“There is perhaps no process in organizations that is more demanding of human cognition that strategy formation.” (Mintzberg)

An effective strategy is somewhat like the layers of an onion: Business strategy comprises product and technology strategy, manufacturing strategy, marketing strategy, sales and distribution strategy, pricing strategy HR strategy and so on. 

Or, it might be likened to the structure of a spider’s web weaving into and touching every part of the organization one purpose of which helps its people understand what the need to do every day - and stop doing for that matter.

The Strategic Failure Problem

Let's dive a bit deeper for the root-cause reasons strategic failings and Leinwand's article can open up that thinking.

You can see from the graphic below, that it appears most strategy fails to be fully realized. Either it’s the planning that is unsuccessful or it’s the execution or some combination of both. While that's not necessarily a failing, it can be problematic.

I'll put forward that we can categorise several strategy failure “types” depending on a company's strategy development and execution abilities.

• Type A: “The Leaders” – 8% of Execs: Are very effective at both development and execution
• Type B: “The Middling” – 29% of execs: Are at least partially effective in development and execution
• Type C: “The Laggards” – 63% of execs: Are neutral or worse at development or execution.

What’s behind the failure of strategy?

Failing No 1: “I do what my boss showed me; after all it worked for them.” But did it work for them? Most firms are not starting from a zero base and just about everyone has seen or used SWOT, PESTLE or Porter’s 5 Forces. But the full strategic toolkit is rather vast. One study done by Cambridge University identified over 850 strategic “2x2” tools [5]. This is overwhelming and too many to be efficient. Yet by distilling and combining the essence of these we can get most of the outcome with far less effort. And effort there must be…

Failing No 2: “The Absence of Analysis.” We’re creating choices in the strategy development process and you need to know what the options are and have done the hours in research to get under the skin of the information. This was a key failing of those many strategy days. Little, if any, strategic analysis was done to underpin the planning.

Failing No 3: “Lack of Collective Sweat.” There are some consultancies, who parachute in with a small army of analysts that look over the books, remote from the organization, then conduct many interviews (to extract what you already know) and present it all back to you. Does that work? 

Failing No 4: “Failing to Choose.” A good friend of mine first told me about the origination of the word decide… De-Cide… Cide (Latin) to cut off choices by choosing others. When decisions have been made, simplicity dramatically improves. The Complexity problem is a killer as recently discussed in the HBR Ideacast by Chris Zook [4]. 

In innovation management, we use a portfolio and matrices to help reveal the most potent opportunities that are most likely to deliver.

By making deliberate choices, we free the limited, precious resource in our organizations to do their thing which makes the strategy much more likely to succeed.

It’s also fair to point out that strategy is a combination of deliberate a priori choices resulting from analysis – as intended - as well as opportunities that seem to arise – are Emergent. And that’s OK because strategy development is a dynamic process.

But perhaps it’s not surprising: If Henry Minzberg is right, it’s challenging to develop strategy but it's even more challenging to deliver it as intended.

From Mintzberg and Waters

Failing No 5: “Failing to Execute” … and having made those decisions about what to do, and what to stop doing, the hard work starts. Execution projects can be complicated and easily get off track but as we were reminded by the CEO in those strategy sessions, “You gotta execute!”

If you’re not yet convinced, there are other ways of looking at this. Maybe it’s because Leaders do not embody or “operationalise the strategy” and it remains “pie in the sky.” 

A strategy must “translate into daily actions that guide people every day” as Starbucks CEO Howard Schultz puts it in his book Pour Your Heart into It. And sufficient resources must be devoted to the most critical capabilities and the value proposition they support.

There is Another Way…

Alternatively imagine an energizing process which effectively primes your people, gets them to analyze and brings them together in highly engaging workshops where they go to work on challenging problems. 

Participants come up with new ideas and they feel like they’ve been through something together. By going through a well-tested strategy process, that is facilitated, efficient and effective, maybe strategy days can become something people look forward to rather than dread.

And there’s some science behind this.

The Institute for Manufacturing at Cambridge University produced research which identified how strategy becomes “sticky” – the combination of social, cognitive and psychological factors makes for better outcomes [2].

Where to start depends on where you are

In the case business is without any strategy, I advise starting with a business diagnostic to prioritise the strategic options. This can reveal significant holes in their business which need to be attended to at once, even before any strategy is developed.

And in the case where strategy exists but is not firing on all cylinders, we need to take a fresh look at the options and possibilities for the business. Our strategy workshops typically run over 4 – 6 weeks and generate renewed focus and energy for the strategy. 

Situations where the Strategic Toolkit has been used…

1. Organization types: For manufacturing SMEs and SBUs of large organizations.
2. Changes: Manufacturing companies seeking to create growth or respond to new technologies and build capability as part of a critical supply chain.
3. Situations: Where new management requires a rigorous plan for maximizing investment returns, where large important supply chain customers demand some improvement, where companies are looking to sell and want to maximize their premium.

What are the Results?

One result is enhanced engagement and better strategy with greater longevity. And better strategy links directly to better business results at the bottom line with twice as many companies in the best performing categories using strategy tools.

The outcome is that the strategy is more likely to succeed in the long term.

By the design of the strategy process, we get more and better options for using new technologies. 

The process is not an easy ride – it is very much designed to challenge and ultimately get better results and it focuses idea generation on real and tangible opportunities.

Do you need to review your Strategy?

The following questions could be helpful if you are considering a strategic review,

1. Is your strategy hindering progress or giving insufficient clarity about where to place your precious resources?
2. Do you struggle to get buy-in and alignment in the company to new business opportunities?
3. Is the pace of innovation and technology development increasing, creating a danger of being left behind?
4. Do you know where and when the new products will flow out into the market and are they backed up by technology acquisition?
5. Is the R&D well-aligned to your commercial objectives, or does it need better coordination?

Back to our strategy heroes…

For our nuclear sector business leader, James, we helped him design an effective strategic process that brings together scientists and engineers with commercial representatives from his company. With solid preparation, we scoped out the objective and set the exam question and homework for workshop attendees in the weeks in the run-up to the one-day workshops. At the workshop, a skilled facilitator leads the activities for the day by inviting delegates to share their knowledge and experience. Since the strategy toolkit is a highly visual and dynamic process, the delegates can get hands-on, co-creating the options that show where new products and technologies come from and what projects and resources are needed to develop them.

ABOUT

In the last 15 years, the Institute for Manufacturing at Cambridge University has helped hundreds of innovation and strategy leaders from a wide range of companies, industry sectors and government agencies.  It is a worldwide centre of excellence in the theory and practice of roadmapping for strategy and innovation.

Rob Munro delivers strategy services to companies, universities and government agencies.  Please contact him to discuss refreshing your strategy.  

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Email [email protected]

© System Growth Consulting Ltd

REFERENCES

1.      Only 8% of Leaders and Good at Both Strategy and Execution, Paul Leinwand, Cesare Mainardi, Art Kleiner, HBR Blog 2015

2.      Cogitate, articulate, communicate: the psychosocial reality of technology roadmapping and roadmaps, Clive Kerr, Robert Phaal, David Probert, R&D Management 2012

3.      Lean Strategy: Start-ups need both agility and direction, David Collis, HBR 2016

4.      https://hbr.org/ideacast/2016/06/getting-growth-back-at-your-company, HBR 2016, Chris Zook

5.      Technology management tools: concept, development and application, R. Phaal, C.J.P. Farrukh, D.R. Probert, Technovation 26 (3) (2006) 336–344