The failure of many strategies lies in the failure to understand whom the strategy is for.
Strategy is a subject that people like to refer to, but often they don’t really know what they mean by the word. We should not be surprised that many people find it difficult to actually think strategically when they are unclear about what strategy is all about.
Commonly asked questions include:
- Does our company have a strategy? Is it the right one?
- What exactly do we mean by a strategy?
- How should we go about designing our strategy?
Before talking about the actual ‘doing’ of strategy, let’s be clear about some of the ‘strategy’ issues, and why strategy can go wrong. There is a requirement to do things in a different way from the old way. After all, if you keep doing what you have always done, then you will keep getting the same (not better) results; and to expect a different result from doing the same thing is a definition of insanity!
The main complaints about the strategy process are:
- There is little agreement about what strategy actually is and what it does
- It gets lost, uncoordinated, frustrating, messy and unfinished – there is lack of focus and clarity
- Most people involved either question their own ability to contribute or arrogantly dominate and suffocate the process
- No SMART goals are achieved (SMART is an acronym that is used to remind us that goals should be specific, measurable, attainable, realistic, time-based)
- Fear of the future, combined with fear of failure, makes the team behave like a deer freezing on the road when blinded by the headlights of the oncoming lorry
- Management ‘speaking in tongues’ parading as science – the tools are not helpful – they are superficial, confusing and too theoretical.
In a nutshell there are three reasons why strategy does not work.
WHY STRATEGY DOESN’T WORK
#1 TYPES OF STRATEGIC THINKING
Managers often fail to differentiate between business unit strategy and what is referred to as ‘corporate centre’ strategy. The reason for this is that business schools and consultants normally talk about big business/corporate centre strategy when they are talking about strategy.
Business unit strategy is for single product/market players or ‘strategic business units’ of conglomerates; corporate centre strategy is for conglomerates that are planning the future and the relationships between the centre and its various subsidiaries. The distinction is crucial; this is where so much of the confusion comes from.
To misquote Orwell,
business unit strategy, good; corporate centre strategy, bad.
Business unit strategy, good – it gives you insights into where and how you need to do things differently. It helps you to see the business through the customers’ and through the competitors’ eyes, both today and tomorrow. It shows you your strengths and weaknesses and where and how you should be expending your efforts. We will come back to this later.
There are instances where corporate centre strategy is beneficial. Examples include where there are global economies of scale, brand benefits, regional or global economies of scale, overcoming technological barriers and so forth. You only need to think of Apple, Coca-Cola, Microsoft, Sony and Toshiba. But this type of thinking is pretty irrelevant if you are running your own business, or a business unit employing say 500 people.
Moreover, for the multinational or conglomerate, the ability of the centre to generate strategies that have little to do with the needs of specific business units is awesome. Couple this with the centre’s (and the board’s) lack of contact with the territories and you can see the potential for disastrous decisions. Corporate strategies constantly frustrate and bamboozle the managers of regional business units.
#2 NO CLARITY OF PURPOSE
Put simply, business strategy is planning while being aware of the business environment. So, who should be involved? Consultants? The Senior Team? The Whole Team? Well, this depends on the level (and size) of the organisation that you are talking about.
Strategic thinking is not the same as strategic planning. In fact strategic planning is an oxymoron like ‘friendly fire’, ‘fun run’ or ‘fighting for peace’ – planning and thinking are totally different activities requiring different skills. Strategic thinking is the role of the strategy team – those beneath them should carry out the (strategic) planning.
Strategic thinking must be used to improve understanding of the environment and the options available to the business. Any analysis must help the decision-making process. There is no room for using models that are simply intellectually attractive. The task at hand is to shed light on options and directions and find evidence to support decisions about the future.
#3 THE USE OF TOOLS AND THEORIES
At business unit level, the tools of analysis are relatively straightforward. The only real barriers to a successful strategy are intimidation by the so-called ‘professionals’ and their jargon. Rogue management consultants have been known to blind their clients with science; BCG matrices, Value Chain Analyses and differential equations bully the innocent client into agreeing to a strategy that they may not fully understand or appreciate but are too timid to admit their ignorance. Despite this, the manager may well understand their business and industry with a clarity and perspective that the models are unable to detect.
It is most notably at the corporate centre level that the jargon takes over and so often the process turns into Frankenstein’s monster – you have a much more sophisticated list of tools (product portfolio analyses, discounted cash-flow, BCG matrices, three-dimensional modelling). A whole industry has grown up around corporate strategy – it is here that the business school hype runs amok – ‘Long live the emperor and his new clothes!’
More complex is almost always worse, and yet the corporate centre has a propensity to complicate things!
Most of the models of analysis, some good and some bad, are over thirty years old; few people in business honestly know how to use them effectively and appropriately. For today’s entrepreneurial business, the relevance and value of the models must be questioned.