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Why your Business Strategy will (probably) fail

Strategy 1

Rob Munro, Senior industrial fellow at Boost & Co member, The Institute for Manufacturing at the University of Cambridge, looks at the different uses of business strategy.

James is a CEO for a £18m equipment manufacturer supplying the New Nuclear sector and is charged with creating new momentum into its product pipeline. With the uncertainty surrounding investment and technologies, how can he increase the chances of success?

Caroline is an entrepreneur owner of a growth SME in the UK electronics sector and is planning to launch new satellite tracking technology for driver-less vehicles. Being able to clearly articulate the commercial gains to investors will help secure the funding she needs to go live in 12 months.

 David is Business Development Director at a SME tier 1 rolling stock supplier to rail and wants to jump on the 10%pa growth opportunity. He’s juggling make / buy / acquire decisions which must be made in the next 4 months.

What do they have in common? Too many businesses have a weak business strategy that may well lead them to failure. Only 8% of business leaders are good at both strategy formation and its execution - at least according to Paul Leinwand’s article in a recent piece for Harvard Business Review. And most - 63% - were rated as neutral (or worse) on developing or executing business strategy.

This resonates with me. I’ve been in my fair share of “business strategy” meetings in companies that should have known better. Every year the invited would be subjected to an off-site strategy day to develop or test plans. These events were unfocussed, without process and lacking real energy. How much does anyone really want to be in those kinds of meeting?

 Too many companies think they are running a strategy process when in fact they are not. Let’s unpack what can go wrong and discover the root failures of strategy. First, although there was lots of intelligent sounding talk by and among clever people, there was little analysis and no real coordination of execution. Second, no decisions were made about where resources would be spent (or not).

High on bluster - but low on details. Third, the effect of people attending after three years of these was to demotivate and make it almost certain that strategies would fail. Like Sisyphus, sentenced for eternity to continue to roll his rock up and down the hill with no purpose.

 Let’s start at the beginning – what exactly is a strategy? You can define a strategy as “a method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem.” But another problem that comes with creating and delivering strategy, is that it can involve significant effort.

Henry Mintzberg, one of the fathers of strategic thinking put it like this - “There is perhaps no process in organizations that is more demanding of human cognition that strategy formation.”

What does strategy need to contain or think about? Effective strategy is rather like layers of an onion: Business strategy comprises product and technology strategy, manufacturing strategy, marketing strategy, sales and distribution strategy, HR strategy the basis of competition and so on. Or, like the structure of a spider’s web, it weaves and touches every part of the organization and should help its people understand what the need to do every day - and stop doing for that matter. 

The Strategic Failure Problem It’s been quite a few years since those strategy meetings. And so, let’s dive a bit deeper for the root-cause reasons strategy failings. You can see from the graphic below, that it appears that most strategy is not fully realized. Either it’s the planning that is unsuccessful or it’s the execution, or some combination of both.

There are three strategy failure “types” – those that can be characterized by their strategy development / execution abilities.

  • Type A: “The Leaders” – 8% of Execs: Are very effective at both development and execution 
  • Type B: “The Middling” – 29% of execs: Are at least partially effective in development and execution 

Type C: “The Laggards” – 63% of execs: Are neutral or worse at development or execution. But perhaps it’s not surprising: If Henry Minzberg is right – it’s challenging to create strategy and its arguably more challenging to deliver it as intended! So, what’s behind the failure of strategy?

  •  Failing No 1: “I do what my boss showed me; after all it worked for them.” But did it really work for them? So you’re not starting from a zero base and just about everyone has used a SWOT or PESTLE analysis and maybe used Porter’s 5 Forces. The full strategic toolkit is rather vast; one study done by Cambridge University identified over 850 strategic “2x2” tools, which is both overwhelming and clearly too many to be efficient.

    Yet by distilling and combining the essence of these tools we can get most of the insights they provide with far less effort.
  • Failing No 2: “The Absence of Analysis.” In strategy formulation, we’re creating choices and you need to know what the options are and have done the hours of proper research to really get under the skin of the information. This was a failing I’ve seen in many strategy processes: little, if any real analysis done to underpin the choices.
  • Failing No 3: “Lack of Collective Sweat.” There are some consultants who parachute in to look over the books, remote from the organization, then conduct many interviews (to extract what you already know) and present it all back to you.

    Does that work? Alternatively imagine an energizing process which effectively primes your people to do the homework before hand and brings them together in highly engaging workshops where they go to work on challenging strategic problems. What if participants come up with new ideas and they feel like they’ve been through something together? By going through a well-tested strategy process, that is facilitated, efficient and effective, maybe strategy days can become something people look forward to rather than dread!? There’s some science behind this.

    The Institute for Manufacturing produced research which identified the ways in which strategy becomes “sticky” – the combination of social factors, cognitive and psychological factors that make for better outcomes.
  • Failing No 4: “Failing to Choose.” A good friend of mine first told me about the origination of the word decide… De-Cide… Cide (latin) or to deliberately cut off choices. When decisions have been made, simplicity dramatically improves.

    In innovation management, we use portfolio techniques to help reveal the most potent opportunities that are most likely to deliver. By making deliberate choices, we free the limited, precious resource in our organizations to do their thing which makes the strategy much more likely to succeed.

    But it’s also fair to point out that strategy is both a combination of deliberate choices resulting from analysis (Intended) as well as opportunities that seems to arise (Emergent). And that’s OK, because strategy is a dynamic process. Failing No 5: “Failing to Execute” … and having made those decisions about what to do, and what to stop doing, the hard work starts. Execution projects can be complicated and easily get off track but as we were reminded by the CEO in those strategy sessions, “You gotta execute!” If you’re not yet convinced, there are other ways of looking at this.

 

Maybe it’s because Leaders do not embody or “operationalise the strategy” and it remains “pie in the sky.” Strategy must “translate into daily actions that guide people every day” as Starbucks CEO Howard Schultz puts it in his book Pour Your Heart into It. And sufficient resources must be devoted to the most critical capabilities and the value proposition they support.

There is Another Way… What if you could engage your business team in a lean and effective business strategy process that is rigorous and rapid? And what if it was much more likely to stick, embed and succeed.

We also need to recognise that businesses are in different places when it comes to their business strategy. Some may have no strategy at all. Or they might have a strategy but it’s not effective for them and lets down the potential of the company. Some companies may have a decent strategy, but time moves on and business conditions and technologies change.

We need a solution. The Institute for Manufacturing at Cambridge University have developed solutions for each of these situations. In the first case, the business without strategy, we advise starting with a business diagnostic to prioritise the strategic options. This can reveal significant holes in their business which need to be attended to at once, even before any strategy is developed.

In the case where strategy exists, but is not firing on all cylinders, we need to take a fresh look at the options and possibilities for the business. Our strategy workshops typically run over 4 – 6 weeks and generate renewed focus and energy for the strategy.

The IfM’s approach to strategy development is academically underpinned and rigorous with no waste of time, effort and energy. In the case of the company where no strategy exists, after the prioritization diagnostic is done, we facilitate several designed workshops to engage the strategic players in the company. This creates a tight and well-underpinned rationale of investment in highly defined strategic projects. The outcome is that the strategy is “stickier” and more likely to succeed in the long term.

Situations where the Strategic Toolkit has been used…

  1.  Organization types: For manufacturing SMEs and SBUs of large organizations.
  2. Drivers: Manufacturing companies seeking to create growth or respond to new technologies and build capability as part of a critical supply chain.
  3. Situations: Where new management requires a rigorous plan for maximizing investment returns, where large important supply chain customers demand some improvement, where companies are looking to sell and want to maximize their premium.

What are the Results? A result is enhanced engagement and better strategy with greater longevity. And better strategy links directly to better business results at the bottom line with twice as many companies in the best performing categories using strategy tools.

By the design of the strategy process, we get more and better options for using new technologies. The process is not an easy ride – it is very much designed to challenge and ultimately get better results and it focuses idea generation on real and tangible opportunities.

 Do you need to review your Strategy?

The following questions could be helpful if you are considering a strategic review,

  1. Is your strategy hindering progress or giving insufficient clarity about where to place your precious resources?
  2. Do you struggle to get buy-in and alignment in the company to new business opportunities?
  3. Is the pace of innovation and technology development increasing, creating a danger of being left behind?
  4. Do you know where and when the new products will flow out into the market and are they backed up by technology acquisition?
  5. Is the R&D well-aligned to your commercial objectives, or does it need better coordination? 

Boost Business Lancashire has a wide range of support programmes available for businesses looking to grow. To discuss any of these programmes further, contact us on 0800 488 0057. 

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