Business Strategy is a hard problem. By recognising what can go wrong your company can navigate the channel to strategic success.
“There is perhaps no process in organizations that is more demanding of human cognition than strategy formation.”
- Michael is MD for a £1bn equipment manufacturer supplying the Nuclear power sector wants to inject new momentum into the services space. With the uncertainty surrounding the investment environment and multiple technology platforms, how can he increase the odds of success?
- Soni is a commercial director in a growth medical tech sector and is seeking new product options and new technologies. Being able to communicate the commercial narrative will help create buy-in from the board.
- Jeremy is Financial Director at a tier 1 rail rolling stock supplier and wants to jump on the 10%pa growth opportunity. He wants to bring together the senior management team to create and agree on a future which must be decided by the next business review in four months.
They all have a problem that swims below the surface…
What is a business strategy? How do you Develop business strategy?
Only 8% of Business Leaders are effective at both business strategy formulation and its delivery summarised by Paul Leinwand in HBR . This might surprise you. It might resonate with you.
“A method or plan chosen to bring about a desired future, such as the achievement of a goal or solution to a problem.”
Think about a time when you have been called to a business strategy event. You may have had lots of insightful talking by informed people. But it can fall short if there is little analysis if decision-making in the process is weak about where resources would be spent and not spent. High on bluster but low on details. And after the planning in execution, a strategy can fall in the coordination of execution.
The effect on the people attending these sessions might be short term motivation but in the long term, it can demotivate making it almost certain that strategies would fail. Like Sisyphus, sentenced to continue to roll the rock uphill to no apparent purpose for eternity…
The Roots of Business Strategy Failure
We can dive deeper for the root-cause reasons strategic failings in the article.
The graphic below plots the ability of a leader to undertake a strategy development against their ability to execute it as planned. The strategy can be a good one through to a poor one and execution runs from delivering as designed through to completely losing control.
In the first dimension, the quality of the business strategy depends on factors such as how it is run, the attention it receives, the rigour in analysis, the creativity of the senior team and critical decision-making.
On the second dimension, the ability to execute as planned. This might be about the appropriate level of control the executive provides. But it might also be that stuff happens; the competitor changes track, the market turns down unexpectedly. After all the business environment can be a highly dynamic even chaotic scene. Henry Mintzberg teaches us about Emergent Strategy, something different from plan and not necessarily a bad result.
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 developing business strategy and execution
- Type B: “The Middling” – 29% of execs: Are at least partially effective in developing business strategy and execution
- Type C: “The Laggards” – 63% of execs: Are neutral or worse at developing business strategy or execution.
Can you recognise these types in situations you have experienced?
The top 5 causes of failure of business strategy
Fail No 1: Poor Toolset. A rigorous strategic analysis needs to combine multiple perspectives. The external view of the firm, the internal view of its resources and capabilities and the overall dynamics of the business situation. To do this there are a vast array of strategic analysis and thinking tools. One study done by Cambridge University identified over 850 strategic “2×2” tools . This is overwhelming and too many to be efficient. Yet by carefully selecting and analysing the business situation thoroughly, we can get most of a good quality answer with far less effort. But effort, there must be.
Fail No 2: The Absence of Analysis. This failure can be rooted in poor data or sloppy application to the business situation. Good analyses are the foundations of good option generation and strategic decision-making. We’re creating choices in the business 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.
Fail No 3: Lack of Collective Sweat. There are some consultancies, who bring a small army of analysts and operate remotely from the organization conducting many interviews only to reply to a familiar story. The fresh pair of eyes can be useful, but aren’t you in the best place to be making decisions with your team?
Fail No 4: Failing to Choose. A friend of mine first told me about the origination of the word decide… De-Cide… Cide (Latin) to cut off by making choices. When decisions have been made a whole new set of options that appeared to be stuck open up. The Complexity problem is a killer as outlined in the HBR Ideacast by Chris Zook . Making choices frees the precious resource in our organizations and make the strategy more likely to succeed.
We should note that strategy is a combination of deliberate choices resulting from analysis – as intended – as well as opportunities that seem to arise – that Emerge.
Fail No 5: Failure to Execute. Is the decision the hard part or is it the execution? Execution projects can get off track but as we were reminded by one CEO in business strategy sessions, “You gotta execute!” There are other ways of looking at this. Leaders need to embody or operationalise the strategy to provide energy and care about it. As Starbucks CEO Howard Schultz put it in his book Pour Your Heart into It – translate into daily actions that guide people every day.
How to develop a business strategy
Imagine a business strategy process that engages your senior team in time-efficient but rigorous workshops where they work on challenging problems. Consider a well-tested strategy process, that is facilitated, efficient and effective, maybe strategy days can become something people look forward to rather than dread. Working on Fail No 3 (lack of collective sweat) your senior people come up with new ideas and they feel like they’ve been through a process adding value together.
In the case where a business is without any strategy, it is wise to start with a business diagnostic to prioritise problematic areas. A business diagnostic reveals the holes in a business which need to be attended to at once before any strategy is developed.
In the case where business strategy exists but needs a review, a business strategy refresh is a way to go taking a fresh look at the options for the company.
What are the Results of better business strategy?
- You can expect to have enhanced engagement and better strategy drives better business results at the top and the bottom line. Twice as many companies in the best performing categories are using strategy tools.
- The outcome is that the strategy is more likely to succeed in the long term.
- Enjoy more and better options for using new technologies.
The questions to help you initiate a business strategy review
The following questions could be helpful if you are considering a strategic review,
- Is your strategy hindering progress or giving insufficient clarity about where to place your precious resources?
- Do you struggle to get buy-in and alignment in the company to new business opportunities?
- Is the pace of innovation and technology development increasing, creating a danger of being left behind?
- Do you know where and when the new products will flow out into the market and are they backed up by technology acquisition?
- Is the R&D well-aligned to your commercial objectives, or does it need better coordination?
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Rob Munro is an innovation strategist and consultant focussing on improving innovation results for organisations. Please contact me at firstname.lastname@example.org to discuss ways to bring greater effectiveness to your innovation processes.
Read more about my service to organisations for Business Strategy in improving business results.
- Only 8% of Leaders and Good at Both Strategy and Execution,Paul Leinwand, Cesare Mainardi, Art Kleiner, HBR Blog 2015
- Cogitate, articulate, communicate: the psychosocial reality of technology roadmapping and roadmaps,Clive Kerr, Robert Phaal, David Probert, R&D Management 2012
- Lean Strategy: Start-ups need both agility and direction, David Collis, HBR 2016
- https://hbr.org/ideacast/2016/06/getting-growth-back-at-your-company, HBR 2016, Chris Zook
- Technology management tools: concept, development and application, R. Phaal, C.J.P. Farrukh, D.R. Probert, Technovation 26 (3) (2006) 336–344