Why most strategies fail to deliver

 Before the financial crisis of 2008, the leaders of Royal Bank of Scotland (RBS) claimed that they didn’t need a strategy, as everything they did led to success! Maybe if they’d had a strategy the UK Government wouldn’t have had to inject £45 billion of taxpayers’ money to save the Bank. In reality, RBS did have a strategy, it was reflected in the decisions and actions its leaders took. Whether the outcome of this ‘default’ strategy was the one they intended is a very different question.

The purpose of any strategy should be to change the fortunes of the organisation by putting it on a trajectory that takes it to a different – and improved – future. Developing strategy therefore involves exploring and understanding possible futures and deciding what trajectory to take. Unfortunately, evidence suggests that organisations are not good at strategy, particularly when measured against the outcomes they were intended to deliver. In most cases they are either too complex, or too incoherent, to be understood by those who were not directly involved in their development. As a consequence they tend to have little impact and the organisation continues on its existing path.

There are many reasons why strategies fail: the maturity of the organisation, the industry sector in which it operates and the level of recent success are all contributing factors. However, there are a few common mistakes that organisations and their leaders make, including:

  1. Focusing on means rather than outcomes. It’s natural to think about what actions need to be taken to improve performance, but they are only meaningful if they enable achievement of the target outcomes. Strategies therefore need two components: the outcomes they aim to deliver and the means by which they will be achieved.
  1. Extrapolating the past. While it’s important to understand the past, it does not necessarily mean that future success will be a straight extrapolation of the past. Discontinuities happen and strategies need to be cognisant of what these could be and the impact they could have.
  1. Following the latest management trend. If you look back at corporate history you will see many management trends that organisations have followed, whether it is TQM, Business Reengineering, Core Competencies, LEAN and, more recently, digital transformation. While all these trends were, and are, of benefit to some degree they are not in themselves a strategy.
  1. Pursuing a favoured strategic framework. Here the strategy is based upon either one or more popular strategic frameworks, or one that’s personally preferred by the CEO. Comfort comes from knowing the framework, regardless of whether it’s relevant to the organisation or the context in question.
  1. Focusing on cost not value generation. While cost control is always important, value generation is key to future success. Organisations that succeed in the long run are those that focus on maximising existing sources of value, and generating new ones.
  1. Rolling up divisional and business unit strategies. Very rarely is the strategy for the enterprise the sum of the individual business unit strategies. Or, to put it another way, the strategies aimed at changing individual business unit trajectories are rarely aligned with the strategy needed to change the trajectory of the organisation as a whole.
  1. Relying on execution through targets. Here the strategy for the organisation is broken down into narrow targets for the divisions, business units, and departments. As a consequence, the overall strategic intent is lost and as Peter Drucker once said: ‘People do what is inspected, not expected.’

In our view, the most successful strategies are those that begin with the leadership team confronting the default future of their organisation, and then taking action to put it on a different trajectory. A recent example was when Jeff Immelt of General Electric (GE) recognised that the strategy set by his predecessor Jack Welch was not sustainable and that he needed to put GE on a different trajectory based on a data analytics industrial internet. A further example is Xerox, which in 2000 declared that ‘the company had an unsustainable business model.’ And, in a completely different sector, a medium-sized UK NHS trust concluded that being ‘consultant-centric’ would fail to deliver the patient experience needed.

In these examples, understanding the default future of the current trajectory brought clarity to the decisions and actions that needed to be taken to take the organisation in a different direction.

David Trafford and Peter Boggis help executives and leadership teams deliver successful change, specifically technology-enabled change. They provide thought leadership and thought partnership on all aspects of assessing, developing, and operationalising strategy. They are founding partners of Formicio and authors of the book Beyond Default.

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