Only 20%-30% of corporate and business unit strategies successfully deliver expected results. That is a bold statement. However, this statistic has been reported in many studies from reputable firms and publications and mirrors much of what I have observed and experienced during my career.
Despite awareness of the problem, the statistic itself has not really changed much in the last 20 years. What never ceases to amaze me is why people continue doing something that failed to work 80% of the time. Why is this myopia, this herd mentality, and this rationalization of mediocrity so prevalent? Our observations and experience indicate that:
- Less than half of all current strategic initiatives are aligned with company strategy
- Only 1 in 7 strategic initiatives add value beyond “break-even”
- The ROI on Strategy delivers 80% less than plan
- Companies invest billions every year on strategies that don’t improve business results or increase the value of the company
- Average CEO tenure is less than 4 years
So what’s the answer? I believe the answer is three-fold; we must begin to address unprepared leaders, flawed/ outdated processes, and people who are not made ready for change.
Let’s look at each of these as “3 legs” of a stool that must be present to support the weight (development and execution) of your company strategy.
1. Leadership– Too many leaders approach strategy development and execution with the wrong mindset and have not developed the skills required to lead change. These leaders tend to think of their role in this process to be primarily about strategy development and deciding what their organizations must do to succeed. Execution in their thinking and/or their lack of skills is to be delegated to others and does not require much (or in some cases any) personal involvement on their part.
Their mindset is related to a concept I call installation vs. realization. Installation is putting something new in place. Realization is fully achieving the results expected. Installation is the “field of dreams” approach to strategy; build it and they will come. This “installation” mindset is much too common. This way of thinking is based on a leap of faith resting on an assumption that “installing” or going live (i.e. communicating the strategy) is sufficient to fully achieve expected results. As a consequence, many strategies and supporting strategic initiatives are planned and resourced to “install” with the expectation that installation = realization of results. Disappointment in this scenario is inescapable. It is nothing short of an exercise in frivolity.
Having a good or even great strategy is only part of the challenge. Execution is the other (and I think more difficult) part of the challenge, and leaders that have succeeded understand this from the beginning. They understand that they must begin with the end in mind, that a clear line of sight of, and to the future must be created along with ambitious and measurable goals. They engage people across their organization, design strategy for execution, and their mindset from the beginning of the strategy process is on realizing their vision, with a focus on the who, what, where, why, and how that leads to success.
2. Process– Strategy was recognized in the latter part of the last century as a legitimate management discipline. Much of what we know today about managing strategy was developed in the ’80s and ’90s. Since that time little has fundamentally changed about how Strategy is developed and managed. Participation in the strategic management process continues to be limited to executive management, and most of the work is done by a handful of consulting firms. The process looks at customer needs, competition, economies, politics, regulations, technology, and internal strengths and weaknesses. And from this information a strategy is formulated, goals established, actions identified and all of it is tied up into a nice professionally done document. Presentations are made to the Board and Executive Management and the strategy is approved. The strategy is reviewed and “refreshed” on an annual basis.
So what is wrong with that you might be asking? Well, at least a few things I can think of. The typical process requires limited involvement from the Board, CEO, and Executive Management so it does not create real ownership and commitment from the top. The process requires little or no involvement from the other 99% of the organization so no commitment is built there either. It is slow and expensive. It is based on assumptions of business that are outdated and have not kept pace with the acceleration of change. It relies too much on external expertise instead of building internal capability. It is not integrated vertically and horizontally across the organization, it does not result in most cases in the reallocation of resources (money and people) in alignment with the strategy, it does not link to day to day operations, is not developed for execution, and is not actionable. Other than that, no problems it works just fine. You get a very expensive but really nice document to put on the bookshelf in the Board Room.
Seriously though, if you want to increase your success rate try a different process. I think you will find that the 20-30% that do succeed leverage an agile and effective strategy development and execution process that has a relentless focus on speed and results. A “strategy realization” process that incorporates and integrates next practices to strategy and change (I will write more about these “next practices” in future blogs). They consistently follow a strategy process that begins with the end in mind and designs strategy to be executed with clear expectations and accountability for achieving breakthrough business results. And finally, they believe in a process that recognizes no strategy will be successful without people who are ready to execute said strategy.
3. People– One of the biggest contributors to failure is the lack of priority, linkage, and integration with people development programs. You don’t give the keys to a Harley Davidson to a kid who only knows how to ride a bicycle and expect him or her to ride it and survive. Typical strategy development identifies big changes and then puts a priority on a new product, service, and customer initiatives. These are usually the first strategic initiatives funded and launched to execute strategy. Here are the keys to the Harley, good luck kid.
My experience has shown this approach to be seriously flawed. Without the right leadership capabilities, talent, organizational design, and culture, chances are that the enterprise does not have the human capabilities necessary to execute, realize, and sustain results. Priority should be given to and strategy integrated with Leadership Development Programs that are designed specifically to execute and sustain the organization’s strategy, lead change, and manage key strategic initiatives. Similarly, the strategy should include, inform, and integrate with talent management, culture development, and organization design. The first set of initiatives to execute strategy successfully should be in these areas that prepare people for the changes required to create value and be successful in the future.
One last thought here… you can’t have a discussion about strategy and not mention technology. There are many apps and technologies to support the development and execution of strategy. And many to run your future state business. Technology however is an enabler (for the most part) and should be harnessed therefore to support your strategy, strategic objectives, and business processes. It should not be the other way around unless of course, your business is selling technology.
In summary, strategy realization is hard. If it was easy there would be more winners than losers. But it is not impossible, we don’t have to live with the lack of results from the past. I hope you are like me, in that you would not continue to do something that only works 20%-30% of the time. You know what you must do differently. You just have to muster the courage to defy convention and act. I am very sure that if you can do better in the areas of leadership, process, and people you will dramatically increase your success and that of your organization.
Thoughts?
