As Mike Tyson said, “Everyone has a plan until they get punched in the mouth.”
There are two main categories of reasons why strategies and plans fail–internal roadblocks and external issues. Externally, the three areas that account for strategic failure are insufficient knowledge about the environment, changes in the environment, and competitive actions.
EXTERNAL REASONS FOR STRATEGY FAIL
1. Not understanding the environment.
A strategy that does not match the realities of the environment is bound to fail, yet many companies do not invest sufficiently to learn about customer needs, competitor capabilities, potential new entrants, or emerging social and technological trends.
JC Penney’s former CEO Ron Johnson learned this when his “Everyday Low Prices” approach for turning around the retailer failed to resonate with the company’s customers. As a result, he was let go and a new CEO brought in. Any strategy that is built upon misconceptions of the market environment is doomed to fail.
2. Changes in the environment.
Although several warning signs were apparent in retrospect, the 2008 financial crisis took many companies by surprise. Yet unforeseen events happen frequently and include macro events such as the Arab Spring and the Eurozone Crisis as well as industry-specific changes, such as new technologies appearing on the scene or rapid changes occurring in material costs. These can wreak havoc on a company’s strategy.
3. Competitive Actions
In the military there is a saying about why plans must evolve–“the enemy has a vote.” The same is true in business. CNN was the preeminent source for continuous news and information back in the day but failed to respond effectively to the challenge Fox News presented. No matter what your political leanings, it is clear from the ratings and recent shake-ups at CNN that the latter has fallen far behind. Not being prepared for competitors’ moves can doom any strategic plan.
Beyond the external hazards there are many ways a company’s own internal approach may lead to defeat.
INTERNAL CAUSES FOR A STRATEGY FAIL
1. Unrealistic or overly ambitious goals
Big, Hairy, Audacious Goals (or BHAGs) are great, but only if you put the resources and plans in place to achieve them. Otherwise they will never be achieved and only serve to demoralize employees.
How many of us have been in companies that put objectives and targets in place but do not provide the money, time or people to accomplish them? Unfortunately, it’s a too common occurrence.
2. Overly complex plans/continually changing plans
Leonardo da Vinci said, “Simplicity is the ultimate sophistication.” A simple plan is easily understood and has fewer moving parts that may end up breaking down. When I worked at Lenovo the strategy was quite simple, “Protect and Attack.” We would protect markets in which we were strong–such as China and global accounts–and attack markets that were fast growing, such as emerging markets or mobile technology. This made it easy to understand and communicate, not to mention execute.
Simplicity is the ultimate sophistication.
While it’s important to adjust the strategy to respond to events, constantly changing the strategy such that it never is finalized is the path to ruin. It can be hard for executives and planners to avoid tinkering (especially with new product introductions) but it must be done. Employees cannot be expected to follow directions if the map itself keeps changing.
3. People don’t buy into the strategy or know it
If you want leaders in the company not to execute your strategy, the best way to ensure it is to not include them in developing it. Not Involving them is also a good method of ensuring you lack key information about your company’s and your competitors’ abilities. Obviously, it’s something you want to avoid. If the team doesn’t know the play being called they certainly won’t be able to execute it effectively.
What makes the simplest things difficult are things like miscommunication, organizational politics, errors, stress, and confusion. These types of things combine to form what Prussian military theorist Carl von Clausewitz called “friction.” Friction is composed of the unforeseen but inevitable difficulties. Present in war, sadly they also abound in corporations and make the a good plan on paper unable to be executed on the ground.
As the above illustrates is that there are many ways a strategy may end up not achieving fruition. To avoid such a calamity here are some methods you can use.
HOW TO AVOID A STRATEGY FAIL
1. Understand the Environment
In a sense this is basic blocking and tackling–you must invest the time and money into research and analysis on customer needs, competitive capabilities, and political, economic, social and technological trends. But to be really useful you need to get to a higher plane by structuring your research to uncover insights that provide real competitive advantage.
2. Scenario Planning and Wargaming
A great way to deal with unforeseen changes in the environment is through scenario planning. This involves creating different future “worlds” based on how important trends play out and then testing the viability your strategy in those worlds.
To predict potential future competitor moves one might want to do some wargaming. This concept also comes from the Prussian Army. First developed in 1812, the Kriegsspiel (German for wargame) was used to prepare officers for battle by setting up Prussian forces against the armies of potential enemies and playing out “the game.” The Kriegsspiel could performed inside on a special table or outside via “staff rides” on potential battlefields.
Modern business leaders now use a similar method to play out how competitors might respond to their strategies. The benefits are many:
Wargaming lets you anticipate your opponent’s moves by looking at things from their point of view
The are risk-free: no resources or prestige has been committed to these hypothetical moves and
By actually simulating a situation, a wargame provides participants “experiential learning,” which is the most powerful type or learning and is retained the longest.
3. Be Disciplined in Planning
Building strategies that are overly complex, have unrealistic goals or are never solidified are all signs of a strategy process that is out of control. It’s crucial to build a workplan calendar and stick to it, focus on keeping the plan be kept as simple as possible and demand that the executive team put their money where the mouth is when it comes to matching resources to objectives.
And to avoid major last minute changes, it’s wise to institute a “GICO date.” This is a “Good Idea Cut-Off Date,” a date after which no ideas, no matter how appealing, will be allowed to change the strategy. They can still be captured and studied but need to be put in next year’s plan or set aside as a special project.
4. Develop Your Strategy Strategically
Building the plan is only half the challenge. The other half is getting it executed. To improve the odds the first thing you need to do is ensure key stakeholders are involved in its creation. Only if they have input will you get their output. They need to be made part of the strategy process, in the collection of views on the environment, ideas for strategic moves and finalizing the strategy. This will produce a better plan that has greater odds of being executed.
Step two is making sure everyone in the organization knows it at a level that enables it to guide their work and trade-offs. A good strategy is one that allows employees to work within its context and use it to inform their priorities, allocate resources and determine what they should and should not do.
5. Minimize the Friction
Friction can never be totally eliminated – it is the nature of the organizational beast. However, it can be minimized by a positive culture, strong communications, clear responsibilities and constant repetition of the strategy. While these things won’t make executing the strategy easy, they will go a long way to making it less difficult…and that can mean the difference between success and failure.
By utilizing the right approach to formulating, optimizing and implementing your plans you can ensure that your strategy will be the exception, not the rule.