Why the strategy is not being implemented and up to 90 of % strategies fail?
Why even 90 % and the peer-reviewed - Journal of Management & Organizations in 2015 by Candidos and Santos - research on average 50 of % strategies fail? One reason is unclear communication. So let's define the terms strategy and tragedy in the title. Strategy = plan about making, to achieve a long-term or ultimate goal. Tragedy = a tragedy in which people meet a tragic fate. Statistical evidence suggests that a strategy, or the strategy that emerges from it, seems to meet two sides of a coin with a 50-50 probability. If you want to be among the winners of the strategy lottery, read on.
Roots of the strategy's failure
The causes of strategy failure can be broadly divided into four categories of root causes: 1) Communication, 2) Lack of clarity about objectives and results, 3) Action or lack of action, 4) Leadership problems.
1. Communication
Communication problems start from the fact that communication is unclear and one-sided - top-down command and control. The key to success is to achieve genuine interaction and to involve the whole organisation from the early stages of strategy formulation. In the case of a real tragedy at work, there is no communication at all, which in turn leads to a lack of commitment.
What does a lack of communication look like in everyday life? A few years ago, I had a conversation with an Otaniemi graduate CEO - who gave me permission to share this story. He lamented “when the strategy doesn't really take off”. I asked how the strategy was developed and communicated. He told me: “The CFO and I spent a weekend working on the strategy 6 months ago, as instructed by the board, and on Monday we immediately distributed the slides by email. Now six months have passed and nothing has happened. Soon the board will start asking questions.” While the previous example may bring a small mocking smile to the lips of an enlightened reader like you, in numerous organisations, both large and small, the situation is exactly the same, or at least almost. How is your strategy designed and communicated? Do you remember your strategy? What about your people? So... well onwards!
2.Lack of clarity on objectives and results
A key reason for the failure of a strategy is that there is in fact no strategy and the objectives are either unclear, contradictory or non-existent. When objectives are unclear or non-existent, it is also almost impossible to monitor results. The great strategy and management writer Peter Drucker already knew this. Sometimes objectives are clear, but they are not prioritised. The result is that nothing gets done, budgets are exceeded and no results are achieved. In larger groups with multiple business units, too often people get lost in competition with each other and sub-optimise their own goals and results at the expense of others. In the worst cases, this internal competition prevents the strategy from being implemented and competitors are rapidly overtaken.
In everyday life, ambiguity about objectives and results can arise for a number of reasons. Empirical evidence suggests that ambiguity in objectives can even be driven by different owners' wishes for the company. In such cases, it is very difficult for the effective management to operate or drive the business in any direction in the absence of a clear mandate from the owners and/or the board of directors on the direction to take. Often, the (CEO) manager finds that when you bow to the father, you bow to the son.
Another equally common challenge of unclear targets and results - especially in large organisations - is that although the money from customers that comes in as a result of value creation ends up in the same OP or Nordea bank account, the heads of the profit units spend several days a month to ensure in internal reports a “fair” distribution of profits and correct transfer pricing. This in itself is perfectly understandable, as in many cases the bread and butter (bonuses) of people in their personal and business areas depend on these internal Excel reports. However, as a man or woman of the exact euro, the reader of this text will surely understand that endless sub-optimisation eventually leads to a bread-less table, when the customer is forgotten and the ability to generate value is eroded in a constant internal struggle. The surest remedy to achieve better results is to play as one team, with one goal. Not me and my goals, but us and our goals!
If you want to set better targets, Google “SMART model”. If you just don't want to or don't have the energy toto the matter at hand, give us a call and we'll help you set better goals in just 5 minutes. Guaranteed!
3.Doing and not doing
One of the main causes of strategy failure is the failure to identify key actions that lead to the achievement of strategic objectives. Many things can be done in an organisation, but they are wrong or serve only a particular organisational ”silo”. Another challenge is doing nothing. This complete inertia may result from a lack of resources or skills to ensure that the strategy is implemented at the doing level.
Everyday life has shown me, at least as a leader, that wisdom does not live in us (leaders) or in the corner office campaigners. Often the best solutions for doing the right thing and prioritising what needs to be done can be found where your slippers meet the factory floor or your fingertips meet the keyboard of your laptop. So get your people involved and everyday miracles start to happen. If things are not moving forward because you don't have enough time, are too busy or people just have too much to do in relation to their own capacity to cope, it's time to stop. Often less is much more. For more tips on prioritisation, check out the Eisenhower Matrix. If everyday life is too stressful without studying, we'll give you a 5-minute way to identify and prioritise what's most important.things to do.
4. Leadership and leadership problems
There's an old joke that the fault is always in the management. One key leadership gap is that strategy is not updated often enough to reflect major changes in the environment, such as a pandemic, war or energy crisis. In an increasingly fast-changing world, this “this is how we have always done it before” mindset is a sure path from (coronary) chasm, through a bitter conflict, to bankruptcy. When I was CEO at the start of the interest rate crisis, one key customer segment lost about 90 % of its own business, and the investments already agreed were no longer viable. The marketing and sales focus then had to be turned around almost 180 degrees and the B2B strategy had to be changed to a B2C-driven approach. Of course, the B2B strategy was left in place, but pending the return of the market and investment. People and the most important business were directed to where the cash flows were still moving even before the pandemic started. Management undoubtedly plays a crucial role in the implementation of the strategy, although no one can fight the windmills alone or even together. Don Quixote has already shown this. Sometimes circumstances are such that, as a leader or as an organisation, one's own stamina, skills or available chips are not enough to implement a strategy. It is not a question of being a bad leader or a bad first person, but of not being in a situation that is best suited to you. In many cases, these situations also involve outright conflicts of values. A growth manager rarely makes a good renovator and a renovator hardly ever makes a growth manager.
On the other hand, it could also be that situational information is not being passed from middle to top management because of the built-in cultural leakage. A good Finnish example of the impact of this culture on strategy failure can be found, for example, in Risto Siilasmaa's book Paranoidi Optimisti.
If you want your strategy to succeed and avoid tragedy, let us help. Let's do it together and make it understandable!
