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Why Do Strategies Fail?

Posted by Ted Sehl on February 1, 2011 at 12:26 PM

Why do most strategies fail? Many of us assume it is because the wrong strategy was chosen and that the secret is picking the “winning formula” for the industry.  My experience is that this is seldom the case.  Lou Gerstner said fixing IBM “was all about execution”.  His claim was that at the end of the day their might be four to seven strategies that could be chosen for a specific industry, so it all came down to execution.  So strategy success or failure is not often determined from the corner office but rather on the plant floor or elsewhere in the front lines.

 

If we chose the correct strategy why do we fail?

 

The two most common reasons are the inability of the corporation to execute and the timeliness of the implementation.

 

Companies often fail to execute because they have overestimated their capabilities and resources. This is the hard part of strategy – knowing whether or not your organization can pull it off. Unfortunately, entrepreneurs are by their nature optimists and tend to thinkt heir organizations are world class and can accomplish anything.

 

Care must be taken when planning the execution of a strategy to insure that all members of the team are realistic about their capabilitiesand resources. Strategies should always be over resourced.  When I was working in the restaurant industry, you deliberately overstaffed for the first three months of operation of a new location.  You wanted to give your customers exceptional service right from the start, otherwise they may never return.  Only after you developed that exceptional service did you consider optimizing your staffing levels.  This resource loading is part of the cost of implementing a strategy – do not assume that everyone will be able to fit thenew strategy within their current workday

 

Because entrepreneurs are often overly optimistic about their organizations ability, the resources are often not adequate to carry out the strategy.  As a result, the strategy gets implemented unevenly and not as quickly as expected.  This leads to the second type of failure which is the timeliness of the implementation. Long implementations can lead to organizational fatigue, brand confusion and missed windows of opportunity.  If your strategy is to move part of your manufacturing to a low wage country, you may not have time to do in-depth site analysis and build your own site.  Rather, it may be prudent to lease a site and get the benefits of the low cost wages now and then optimize the site selection at a later date.

 

If you have done your strategy right, you will have picked the correct strategy, you will have carefully planned the resources and timelines and you will have insured that your organization is prepared for the challenge.  Taking the time up front to plan and having milestones for strategy checkups will help your organization out execute its’ competition.

 

 


Categories: Risk, Governance, Strategy

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