Why Strategy Execution Fails

Why Strategy Execution Fails

An article in the Harvard Business Review titled, Why Strategy Execution Unravels – and What to Do About It, states while leaders have a pretty good idea of what the strategy means, unfortunately, they know a lot less about translating strategy into results.

A survey of more than 400 global CEOs found that business execution was the number one challenge facing corporate leaders in Asia, Europe, and the United States, ranking as their highest concern from a list of 80 other issues, including innovation and revenue growth.

Figuring out your long term strategic moves is the important first step, but let’s face it, executing your strategy is the hard part.

I have a saying: Successful Business Execution is 20% giving people clarity about what needs to be done, and 80% following up to make sure it actually gets done”

The research looked at the business execution practices of 7600 managers, from 262 companies in 30 different industries. The study is ongoing but has already produced valuable insights. Here is my take on some of the key findings:

Coordination between functions is crucial.

Research on strategic alignment began in the 1950s with Peter Drucker’s work on management by objectives. Companies are now using software dashboards to cascade strategic goals down the organization, which greatly aids alignment.

Unfortunately, while 84% of managers say they can rely on their own team to execute, only 9% say they can rely on their colleagues in other functional areas. Commitments from colleagues in other functional areas are perceived as no more reliable than promises made by external partners, such as distributors and suppliers.

When asked to identify the single greatest challenge to business execution, 30% of managers claim that it is a failure to coordinate and collaborate across functional units. This is an area that requires closer scrutiny from senior leaders.

You need to build a team that can execute.

Many CEO’s want to oversee and control decisions at an operational level. Getting involved may boost performance in the short term, but micromanaging degrades an organization’s ability to execute over the long term. If the CEO insists on making all the important decisions it stifles their middle managers’ decision-making skills, initiative, ownership of results, and overall motivation.

Frequent and direct intervention from the CEO trains middle managers to bring all their problems and decisions to the CEO. I have written about this concept in an article called, “The GROW method for coaching your people”. The manager (or employee) closest to the situation is the one best positioned to make the decisions, and they should be given the authority and encouragement to do so.

Middle Managers drive business execution

Business execution lives and dies with your distributed leaders, which includes not only your middle managers who run your business units and functions but also the domain experts who get things done. Execution needs to be “driven from the middle, and guided from the top”.

Rather than micromanaging and making all the decisions, CEO’s can add more value by creating structured processes and using collaboration tools that facilitate coordination and teamwork across functions and business units.

Be “Smart Agile”.

Here is a quote from General Dwight Eisenhower I have always liked: “In preparing for battle I have always found that plans are useless, but planning is indispensable”.

No matter how carefully you scope out your strategic projects and their related tasks at the beginning of the period, nothing ever goes exactly to plan. “Stuff happens”. No Gantt chart survives contact with reality.

Nearly one-third of managers doubt their company’s ability to adapt to changing circumstances. Dealing with change requires firms to be agile, but managers should not invoke agility as an excuse to chase every opportunity that crosses their path.

In my view, you need to be smart agile, that is, agile enough to address threats, or pursue promising opportunities that support your strategic plan, but disciplined and focused enough so that you do not end up “chasing squirrels”, lurching from one idea to the next while you lose sight of your original strategic intentions.

Winner companies vs. Losing companies.

Other research conducted in published in Strategy+Business looked at “winning companies” – companies that had a reputation for being consistently successful, and “losing companies” – companies that experienced significant drops in their valuations over a 10 year period, to try to understand the lessons that could be gleaned.

To deal with the increasing rate of change, conventional wisdom suggests that companies need to become more “agile” and move quickly to deal with threats, or to pursue attractive opportunities. However, the research findings were counter-intuitive. The winning companies weren’t more agile than the losers, in the sense of them being able to respond faster to changes in their industry environment. The winning companies were proactive in their strategic moves, but more importantly, they were very measured and consistent in the big, strategic choices they made.

The research found that 80 percent of the value destruction in the losing firms was because of “strategic blunders”. It was the poor strategic decisions made by the losers that brought about their decline. Changing fast to chase after opportunities is not a recipe for success. It’s a recipe for strategic incoherence and volatile performance. A winning strategy is not about being agile, it’s about being “smart agile”. In other words, the winning companies won because they made wise strategic choices, not because they moved fast.

Prune the rose bush.

8 out of 10 managers say their companies fail to quit declining business lines or kill off unsuccessful projects quickly enough. Managers waste time and money on projects that never seem to work out or burn themselves out trying to save business units and product lines that should have been shut down or sold years earlier. This wastes resources that could be redeployed elsewhere.

Peter Drucker wrote about the importance of “purposeful abandonment”. He said, “The temptation of business is always to feed yesterday and starve tomorrow.”

Strategy Execution requires courage. Your “stop doing” decisions are where you demonstrate true strategic leadership. It is easy to keep adding products, services, and new projects. It takes real courage to say, “No”.

I have a saying, “You have to constantly prune the rose bush to create beautiful blooms.”

That’s not easy, and it goes against the grain for many business leaders, but it’s one of the keys to strategy execution. We are conditioned to want to fix and grow things. It’s hard to pull the plug on initiatives that are no longer working, or pursuits that added value in the past but are not part of the company you need to become in order to be successful in the future.

Do it 100% or not at all.

Only 11% of managers believe their company’s strategic projects have been allocated the financial and human resources needed to succeed. Or to flip it around, 9 out of 10 managers expect their strategic projects to fail because they are not properly resourced. That’s woeful.

Budgeting the level of funding, staffing, and managerial oversight you need to execute your strategy is not a one-time decision, It requires ongoing adjustment.

Resources are often trapped in unproductive areas (see “prune the rose bush above). Fewer than one-third of managers believe that their organizations reallocate funds to the right projects quickly enough to be effective. The reallocation of people is even worse. Only 20% of managers say their organizations do a good job of shifting people and their time allocation to support the strategic priorities.

Stronger focus on strategic priorities.

Tragically, when asked. only 55% of the middle managers could name even one of their company’s top five strategic projects.

Much of this is caused by senior leaders who undermine their strategy by giving people too many other things to do. Constant distractions and flip-flopping all serve to undermine strategy alignment and execution.

Less is more” when it comes to strategy execution. I recommend that you whittle your wishlist down to the 3 strategic projects that will have the greatest impact on your future success, and say “No” to everything else.

Get everyone “on the same page” with a one-page strategic plan. A complex, multi-page document or slide deck is unlikely to be read or understood by everyone in your company. It is also highly unlikely to be looked at frequently.

The one-page strategic plan can be shared with every employee. It’s not just a management cliche. With a one page strategic plan you can literally “get everyone on the same page” by having a unifying document that clearly and simply informs your people about:

  • Who we are as a company
  • Where we are going
  • How we plan to get there

By virtue of limited space (you have only one page to work with after all), a one-page strategic plan forces you to identify and capture only the things that are truly important. This helps to keep everyone focused on your strategic priorities.

Need help? Contact me to discuss your strategic planning needs.

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Until next time…
Stephen

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