Strategy Fails Because Companies Don’t Do It. And Companies Don’t Do It Because They Don’t Know How. Until They Go Outside.
I’ve lived in my own companies, large public and private companies, the venture world, start-ups, not-for-profit companies, consulted to tons more and spent lots of time in academia, and have observed something: no one strategizes. They all talk a good game, but they can’t articulate strategies when you ask the leaders to do so. Don’t misunderstand, they’re really good at abstractions about strategic goals. They can talk about their innovative missions and how they aspire to become industry leaders, to increase market share, to compete. But how they plan to modify, automate or add business processes and business models with new products and services seldom gets described. Why? Because they cannot describe new products and services that haven’t been imagined, let alone designed. Worse, they’re not enthusiastic about horizon thinking: five years out is a mystery to most executives who are way too comfortable with baby steps into the future. They fear being wrong, they fear they might lose money and power, and they fear for their balance sheets if they invest too much in the future (where most of them don’t plan to be, anyway, at least not in their current roles).
Anecdotal data aside, survey and case study research reveals the same thing. Sometimes the excuse is “no time.” Sometimes it’s about the lack of talent, and sometimes it’s about industries just too volatile too predict. All just excuses. Innovation – a strategic prerequisite – is collateral damage of strategic vacuums, which is acceptable because most companies fail to innovate as well, even when – in rare instances – there’s a strategic outcome the innovation is intended to enable. (Innovation without strategic purpose can be fun, though expensive, and can actually lead to strategic options, though without a strategic context can confuse companies about who and what they are.)
A study in the Harvard Business Review – “Executives Fail to Execute Strategy Because They’re Too Internally Focused” – gets right to the point:
“Many executives say they weren’t prepared for the strategic challenges they faced upon being appointed to senior leadership roles. Often, these leaders fail because they lack depth in their competitive context. Their focus is on internal issues: resolv-ing conflicts, reconciling budgets, managing performance. Consequently, they pay less attention to external strategic issues like competitor moves, customer needs, or technology trends. Too many executives are naive about the trade-offs they need to make in order to execute the company’s strategy, overestimating the capacity of their organizations under the ruse of “stretch goals” or “challenge assignments.” For many leaders, the only organizational lever they know to pull is the org chart. They shift pieces of the hierarchy around as if that could shift performance. And while some executives thrive on the challenges inherent in the trailblazing work of stra-tegy, many collapse under the emotional toll it takes. If organizations actually invested in preparing executives for the real requirements of these roles, we would see failure rates decline and companies more consistently adapt and thrive.”
So companies are too busy to strategize, don’t know how to strategize, and are too internally focused to even think about strategy. This research – and there’s much more – describes the elephant in the room: companies don’t strategize.
Strategy is complex, especially in volatile industries. But it’s necessary, especially in volatile industries where new entrants appear almost daily. Healthcare is a good example, where wearables and apps embedded in smartphones are changing healthcare. The combination of IOT (Internet of Things), analytics and AI are redefining healthcare monitoring and diagnostics. But other industries are slow to abandon their tried-and-tried content and delivery models: how does the practice of driving to a showroom to buy a car from a “salesperson” even exist? Other industries, like insurance and education, are content to move incrementally to new business processes – but not whole new business models. But they all need strategies to keep them competitive.
First, executives must admit there’s a problem – which is the most difficult challenge they face. Why so difficult? Because it’s an admission of failure. Because it threatens especially insecure executives’ hold on power, and because it’s an uncomfortable journey from a place reasonably well-understood to an uncertain destination. In other words, it’s scary, and to many executives, unnecessary, especially when incremental steps satisfy the strategic appetites of stakeholders. But if no one admits there’s a problem, there will never be real strategy.
When executives admit they have a problem and need some help, they should look outside – not inside – their companies for help. Insiders are just that – conditioned to resist change for many of the same reasons executives fight truly strategic initiatives. The assumption that executives and managers can innovate products and services in ways that define a corporate strategy is flawed. How often have we seen executives and managers pivot in realtime (except when there’s a financial gun to their head)? If “slow strategy” is deemed acceptable then the team can be brought along over some period of time. But we also know that many team members have professional vested interests in the status quo, and if strategy hasn’t been a priority, the assumption that insiders know how to strategize is also flawed.
But which outsiders? It’s imperative to find and engage consultants who have no vested interests in the outcome of their strategic recommendations, which is harder to find than you might imagine. The mainstays – Accenture, PWC, Bain, Deloitte, Cap Gemini, BCG, McKinsey, etc. – want to move in. They want long-term relationships so will temper their recommendations accordingly. Alternatively, try hiring two or three of the usual suspects on a short-term basis – like 6 months – to extract the best of their thinking (assuming they have deep domain expertise). These fixed-price contracts should have clear tasks, milestones and deliverables. No scope creep allowed – no matter what. Another approach is to hire independent consultants on a short-term basis to strategize. Relationships with universities can also help, though some of the strategic research may be too theoretical to be useful. Boards of Advisors can help too. But beware of Boards of Directors comprised of C-Suite friends and associates unwilling to speak truth-to-power – which many of them are. The key is to build a network of strategists free to express their analyses and recommendations without recrimination or personal financial loss.
Let’s stay contrarian. In addition to outside strategists, companies should also consider outsiders to pilot new products and services. Perhaps not permanently, outsiders with long resumes in prototype development and deployment should be engaged to launch phase 1 prototypes designed to determine if a new product or service should scale. Once that assessment is made, then companies can assess how they want to execute their strategies as they move across the launch phases.
I’ve written about strategy before arguing that the only kind of strategy companies should consider – since they’re so bad at longer-term strategic thinking – is incremental “strategy.” Companies that fail to admit they have a strategy problem, should proceed incrementally – baby steps is all they can take. Will that get them to the promised land? No. It will be expensive and may or may not feed a sub-optimal strategic direction, which is all baby steps can do.
But neighbors can move faster than family. They’re unconstrained by relationships and vested interests. Vendors can ramp up quickly and budgets can be de-scrutinized under categories like “strategy” and “innovation.” While outside-vs-inside strategy makes sense for strategic design when there’s no strategy, companies should rethink their sourcing strategy when they actually have developed a coherent business-technology strategy. But when they’ve failed to do so, outsiders make much more sense.
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