Root Cause of Strategy Failures

A.T. Kearney recently published the results of a 2014 Strategy Study with over 2,000 global executives on strategy trends, challenges, and opportunities.

Here are some of the key findings about the root cause of strategy failures I think are worth highlighting and commenting on.

1. 46% percent of global strategies fail broadly or don’t deliver
I have heard these kinds of stats for a long time now and I think it requires us to really understand “what is failing!” Many different executives, in many different cultures, define this in many different ways. I think the opportunity here is that strategic outcomes may need to be defined more clearly with success criteria that includes a range of probabilities versus a single point estimate, especially with financial return targets. Think of the global economic drama right now with the price of crude oil falling!

2. 74% are spending more time on strategy development
I am not sure more time is required if you are doing the right kind of planning and engaging the right stakeholders. I have experienced so much wasted time on strategies being formulated that have very little chance of being implemented given the number of people and skill gaps. Other research (outside A.T. Kearney) points to the fact that much more quality planning time needs to be spent in strategic workforce planning for critical positions. A major part of strategy execution is having the right people, with the right skills, working on the right work at the right time. The study states the impact of not doing strategic workforce planning…“This makes for bewildered, disenfranchised, overwhelmed, and under-supported deployments. As one manager admits, We underestimate the combined effects of overlapping initiatives on the same group of people.”

3. The average strategy lifespan is now less than 2 years
This lifespan cycle is getting shorter and shorter due to volatility, uncertainty, complexity and ambiguity (VUCA) and other factors. The impact of this is that you need to keep an eye on long-term patterns/trends more frequently (quarterly) but VUCA requires a whole different set of leadership agility skills and behaviors. The study shows little difference of the success rate (Total Shareholder Returns) between an Ad-Hoc approach to Strategy versus Planned Strategy Cycles for anything less than 5 years. This does not bode well for strategy development consultants!

4. The weak link in strategy is the HANDOVER between formulation and deployment/execution
I began teaching this concept in 2002 at the Stanford University Advanced Project Management Program; the primary risk of execution is a function of the interfaces in a process/system.   Strategy Execution Risk (f) ~ Interface Management. One key process or function that is non-existent in many organizations is the enterprise portfolio office. It may be called other things like the Strategic Management Office or EPMO but the allocation and reallocation of critical resources to the top priorities of an organization needs a portfolio discipline and a resource allocation model. This is probably the hardest thing for senior executives to do and get it right. In the absence of this discipline, disorganized complexity is forced to be worked out by line managers and they, by default, they determine the priorities of the organization – for good or bad!

5. Strategy Deployment Failure = 90% lack of internal understanding of strategy AND 90 % lack of internal capabilities to execute strategy
I am still shocked by this long-standing stat that implies a 90% lack of understanding of a company’s strategy! Given how many books, consultants and academic research goes into this topic, you would think that many more employees would understand their organization’s strategy. Perhaps the quote from the research “Strategic planning quite often occurs in an Ivory Tower by individuals who haven’t a clue about what happens at the implementation level” should include “…and most executives can’t tell a story anyone remembers!” I really need to also question the effectiveness of the mainstream management gurus who talk about this topic because this issue has been around a long time. The concept of Strategy Maps as an effective way to directly transfer “understanding” has some how eluded us.   I have always said that a fool with a tool is still a fool.  Remember, to test coherence and consistency, the acid question to ask a group of employees at the same time is, “What is our strategy?”

But, I think the big OMG moment from the research that executives need to pay attention to is – a major cause of strategy deployment failure is 90% lack of internal capabilities to execute strategy. I have a Strategy Execution Planning Workshop on this very subject in January 2015 in Dubai if you want to learn how to do this. You have to know where to start based on your organization’s current capability maturity, your culture and your actual business model. I believe that this issue is at the root cause of many of the challenges described in the study.

6. VUCA is driving the need for a balance between agility and strategy – the ultimate paradox
We are entering a period of unprecedented change and shift in geo-political, social and economic systems. An organizational system and strategy should be designed to incorporate agility practices as well as traditional strategy planning. Agile planning is more of an ongoing dynamic strategic management process versus a planning event. The ability to stay agile and innovate with a little bit of Ad Hoc capacity and resources and still co-exist with a well-planned strategy is key. You have to know when, where and how to embrace both within an organization.

7. Increased participation = increased success but complexity increases
Strategy Execution is planned and managed better with group collaboration planning processes because the complexity of cross-functional processes and relationships CAN BE FACILITATED! People help support that which they help create and working out all the risks and complexity at the interfaces is key! Success comes with understanding the interdependencies and relationships between the functions and the work that must be executed in the system to deliver results.