Hidden reasons behind strategy failure
WE are in the season for strategic planning retreats. Many organisations in Zimbabwe go for strategic planning retreats this part of the year until early 2024.
While this should bring tangible progress in achieving the visions for many of these organisations, that is not case in most instances. Strategic planning sessions have become a ritual without tangible results for many reasons.
Research shows that well-conceived strategies bring immense value to the business, including improved financial performance. The challenge is that what many organisations call strategies are not strategies but plans. The strategy involves choosing what to do and what not to do. This should be supported by a plan to win in those areas where the organisation has made choices.
Strategy failure can be attributed to various factors, including poor strategy formulation, ineffective implementation, and the inability to adapt to unforeseen changes.
When a strategy is not well-conceived or aligned with an organisation's capabilities and resources, it becomes more likely to fail. Even a well-formulated strategy can falter if it is not implemented effectively due to poor communication or resistance to change.
Additionally, the dynamic nature of the business environment necessitates the ability to adapt strategies as unforeseen changes occur. To mitigate the risk of strategy failure, organisations should focus on developing sound strategies, ensuring efficient execution, and maintaining flexibility in response to evolving circumstances.
The evidence presented in several research papers suggests that the success rate of strategy implementation is generally low. Norton and Kaplan claim that the failure rate of strategy execution is 90%, meaning only one in ten organizations can implement their strategy.
According to Hillerström (2014), the success rate of strategy implementation ranges from 10-30%. Mankins (2005) reported that companies, on average, only achieve 63% of the financial performance promised by their strategies.
Franken (2009) highlighted that seven out of 10 organisations fail to execute their strategies. Cândido (2008) emphasised that while it is widely recognised that implementing a new strategy can be challenging, the exact rate of implementation failure remains uncertain.
These findings indicate that strategy implementation often falls short of expectations, and organisations encounter significant difficulties in effectively executing their strategies.
Research suggests that organisations often struggle to implement strategies due to various factors. Twum (2021) emphasises the significance of strategy implementation for organisational success, yet it is frequently overlooked compared to strategy formulation.
Barriers to successful strategy implementation include limited employee involvement, communication challenges, inadequate resources, insufficient leadership capacity, and ineffective monitoring and evaluation practices.
Krishnakumar (2015) adds that failed strategy implementation can be attributed to resistance to change, resource constraints, poor planning, organisational politics, and premature discontinuation of strategies.
Pellegrinelli (1994) underscores the importance of adopting a project and programme-oriented approach to ensure successful strategy implementation.
Lastly, Liviu (2013) highlights that resistance to change, particularly from employees, can hinder strategy implementation. There is a need to develop a supportive organisational culture. These papers shed light on organisations' multiple obstacles when implementing their strategies.
In some instances, the way strategies are formulated leads to failure. One of my favourite authors, Roger Martin, says strategy is about making choices. A strategy involves choosing where an organisation will compete (where to play) and how it will differentiate itself and achieve success in those chosen markets (how to win).
By effectively addressing these two elements, organisations can develop a clear strategic direction that guides their actions and sets them up for long-term success.
Most of what organisations call strategy are just plans with no choices on where to play and how to win. For that reason, you will find that the document does not impact how the organisation performs.
According to Roger Martin's “Playing to Win” model, strategy formulation involves answering five key questions. These questions include defining the organisation's winning aspiration, identifying the specific markets and customer segments in which it will compete, determining how it will win through a unique value proposition and competitive advantage, identifying the critical capabilities required for success, and establishing the necessary management systems.
This process helps organisations develop a clear strategy that aligns with their goals and sets them up for success.
Once the strategy has been formulated, strategic planning comes into play. Strategic planning involves translating the strategy into actionable plans by addressing three additional questions.
These questions include determining the actions needed for implementation, allocating the necessary resources to support execution, and establishing metrics to measure success.
Organisations need to harness the collective ideas of their workforce in formulating and developing a corporate strategy for several compelling reasons.
Firstly, employees at all levels deeply understand the organisation's operations, customers, and competitors. This knowledge is invaluable when developing a realistic and achievable strategy. The current model of putting executives at some resort for two days is a quick way towards strategic failure.
By involving employees in the strategy development process, organisations can tap into the diverse perspectives and insights from different roles and experiences within the company.
This collaborative approach ensures the strategy considers various viewpoints, leading to more comprehensive and well-rounded decision-making.
When employees have a hand in creating the strategy, they are more likely to be committed to its success. Employees develop a sense of ownership and investment in the plan by actively participating in the strategy development process. This sense of ownership translates into increased motivation and dedication towards achieving the strategic goals.
Furthermore, involving employees in strategy development can help identify potential risks and challenges early on.
Employees directly involved in day-to-day operations often have valuable insights into potential obstacles or opportunities that may not be apparent to executives alone. By tapping into their expertise, organisations can proactively address these risks and challenges, saving time and money in the long run.
Organisations must re-evaluate their approach to strategy conceptualisation to ensure that strategic planning sessions are not merely ritualistic and provide tangible benefits.
Additionally, organisations must have a well-defined execution plan once the strategy has been formulated. Before the strategy session, significant groundwork must be done by gathering information from employees and other stakeholders.
The traditional approach of relying solely on a few executives for strategy formulation is no longer sufficient. This approach often leads to biased views being brought into the strategy session, resulting in poor strategies that may be impractical implement.
Organisations should adopt a more inclusive and collaborative approach to strategy formulation to address these challenges. Involve diverse individuals from different levels and departments within the organisation.
By doing so, organisations can tap into a wider pool of perspectives and expertise, leading to more comprehensive and effective strategies.
Furthermore, organisations should actively seek input from employees and stakeholders before the strategy session. Get someone to gather information through surveys, interviews, focus groups, or other feedback methods.
By involving these key stakeholders early on, organisations can gain valuable insights and ensure that the resulting strategies align with the needs and aspirations of those responsible for their implementation. or impossible to
Nguwi is an occupational psychologist, data scientist, speaker and managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and HR consulting firm. https://www. linkedin.com/in/memorynguwi/ Phone +263 24 248 1 946-48/ 2290 0276, cell number +263 772 356 361 or e-mail: mnguwi@ipcconsultants.com or visit ipcconsultants.com.