Why corporate strategies fail

Why corporate strategies fail

One of the business world’s favourite cliches is that “culture eats strategy for breakfast”. While recognition of the former’s importance has grown in recent years, no company can exist, much less compete, without a strategy.

Research clearly demonstrates though that many organisations struggle to successfully implement their strategy. A study carried out by the Economist Intelligence Unit (EIU) finds that only one in 10 organisations can deliver on all their strategic goals. Similarly, only eight per cent of business leaders quizzed by Rialto Consultancy agree that their previous collaborations achieved three key performance metrics: on-time, on-budget and on-benefit.

So what typically stands in the way of achieving them?

Reasons for failure

Rialto has unearthed several factors that lie at the root cause of failed business strategies. Our work has shown that when organisations develop strategies, they typically fail to gather the most exhaustive and complete intelligence to inform the strategy at the outset.

This means the process is flawed before it gets underway and mistakes and wrong assumptions inherent at the start are compounded the further the organisation progresses the strategy.

All too often businesses will focus on the outcome they want the strategy to achieve and work towards that. Discussion around this may have been confined to a small group of stakeholders who each have their own set opinions, objectives, motivations and even biases. As informed as these people may be in their respective areas, this approach is too limited to arrive at an appropriate strategy.

Our work has shown that when organisations develop strategies, they typically fail to gather the most exhaustive and complete intelligence to inform the strategy at the outset

Another mistake is to assume leaders and senior managers know what the customer wants. Our work and research found that there is often a disconnect between what senior leaders think and what end-users expect and want.

A disconnect or gap can also exist between the strategy itself and implementation. The reality is that organisations can have what sounds like a great strategy but there are a variety of obstacles that stand in the way of putting it in place such as a lack of alignment or agreement on the detail.

In other cases, strategies fail because they are not actually a strategy in the first place. Leaders may have taken decisions and arrived at a set of actions they believe is required to bring about an outcome. Closer inspection, however, reveals it is, indeed, just a set of choices, organisational priorities or goals rather than a well thought through strategy.

A process in itself

Precisely how a strategy is created is crucial to its subsequent implementation and success and devising it is a process in itself. And remember that success must also be defined at the start. For instance, if the strategy aims to deliver cost, productivity and customer benefits, it can only be judged successful if it does all three on-time and on-budget.

It is vital to gather all relevant information required to inform the strategy, such as anonymised customer data, market information, competitor intelligence and more. The information must be accurate, up-to-date and comprehensive and this will reduce the risk of errors, misconceptions, wrong assumptions creeping in and later being compounded.

Overall, organisations need to take a far more collaborative and outward-looking approach to strategy

As well as intelligence, it is also important to garner a broad set of opinions and views from both internal and external stakeholders. Overall, organisations need to take a far more collaborative and outward-looking approach to strategy. As well as fostering a spirit of collaboration they must also ensure diversity of thought. All opinions and views must be heard and taken into account – even the controversial ones that may initially delay decision-making and progress. But ultimately, if these are not dealt with early on, they may be a factor in derailing the strategy further down the line.

Having done everything possible to accurately inform the strategy and collaborate with all relevant parties, it is then time to move into what Rialto calls the “alignment cycle”. This is where the group of individuals charged with developing the strategy ensure they are aligned with it. It can be a challenging stage. Our work with clients has demonstrated that one individual will typically share 20 opinions on just one topic and reconciling a broad set of views can be difficult.

Work carried out with leadership teams by Rialto Consultancy has focused on surfacing non-alignment within the group so it can be reconciled. Much of this is done using our Augmented Intelligence Consulting (AI-C) methodology, which helps teams solve business issues and agree a course of action using decision-making models developed from Harvard academics Professor Thomas Schelling (Game Theory) and Professor Chris Argyris (Action Science) and SchellingPoint’s applied research into collaboration dynamics. It can be an invaluable tool to help the team progress through the alignment cycle.

As stated, a successful strategy depends on a wide range of factors and there is no doubt that investing time and effort at the development stage reduces the risk of failure.

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