Strategy, or some variant, is often blamed when businesses do not achieve outcomes or deliver on investments. Strategy is always a “hot-topic” subject within any organization. What makes strategy so difficult?
- At the risk of stating the obvious, strategy has to be defined, communicated, executed, and measured.
- Strategy is rarely the result of one person’s efforts or planning. Many seem to skip developing and communicating a strategy, instead moving directly into an ‘execute’ mode.
- Strategy often becomes emotional, as people are impacted (both positively and negatively).
- The development and execution of strategy is frequently inconsistent.
- Sometimes strategy feels uncomfortable and risky, especially when it evolves walking away from a business model that works (perhaps marginally), and enter into new markets.
The one thread that all of these issues have in common? People.
Are People The Problem With Strategy?
The process for executing strategy seems to be consistent from company to company. The steps typically consist of translating strategy to objectives, then cascading those objectives down the organizational hierarchy, measuring progress and rewarding performance.1 This works as long as execution is within a single chain of command. But when execution relies on others – not only does execution usually fall off of the rails, efficiency and effectiveness go by the wayside as well. To compensate, people start doing things that undermine execution. Efforts are duplicated, promises to customers are allowed to slip, or attractive opportunism are passed up.1
What Makes For Good Strategy?
According to Richard Rumelt, a professor at the UCLA Anderson School of Management, good strategies all have a basic underlying structure:2
- A diagnosis: an explanation of the challenge that identifies the critical aspects of the situation
- A guiding policy: the overall approach for dealing with the challenge
- Coherent actions: coordinated steps that support the accomplishment of the guiding policy
Given this list, one can conclude that if an organization does not fully comprehend or can explain the challenges and obstacles faced, their strategy will fail. In other words, without a proper diagnosis, strategy will suffer — bad information in, bad strategy (and execution) out. How can we ensure that we have all of the information needed to form a good strategy?
We Humans Just Ain’t Good at Strategy
Frankly, we humans just aren’t that good at strategy. In fact, McKinsey research states that 70 percent of change efforts fall short of desired results.3
Often failed strategy begins by not making the proper diagnosis needed for defining strategy. A well-known example is International Harvester (IH). In 1979, the company produced a corporate strategic plan which consisted of an individual strategic plan from each of its five operating divisions. The overall strategy was to increase share in each of its markets and cut costs in each of its operating divisions. By doing so, revenues and profits would increase.
What the plan failed to consider was IH’s grossly inefficient production facilities and the fact that IH had the worst labor relations in US industry. IH’s main problem was its inefficient work organization – a problem that would not be solved by increasing market share or investing in new equipment.
After some initial improvements in profit, IH was hit by a six-month labor strike, and the company quickly began to collapse.4
Maybe We Should Have Machines Define Strategy?
Charles Araujo discussed in his article “Machines Want Your Job (and What To Do About It)” how intelligent machines might do a job better, faster, and more reliably than a person. Could this also apply to defining strategy? There are already some companies that are turning to machines to help with the formulation of strategy. IBM Corporation, for example, has begun to use an algorithm rather than just human judgment to evaluate potential acquisition targets. Netflix Inc., uses predictive analytics to help decide what TV programs to produce.5
What Strategy Do We (Humans) Need for Strategy?
In the Fall 2016 edition of the MIT Sloan Management Review e-zine Frontiers5, Thomas Davenport identified what we (humans) need to do – excel at ‘big picture’ thinking. By becoming adept at big picture thinking, we can:
- Decide when automation is appropriate for a decision, and what roles people and machines will play Answer critical questions that will guide their companies’ future: how does the company make money, what is the competition up to, what to customers really want, how
is the economy changing.
Big picture thinking is a skill no machine can master – yet.
1 Homkes, Rebecca, Donald Sull, and Charles Sull. “Why Strategy Execution Unravels-and What to Do About It.” Harvard Business Review. N.p., 16 Nov. 2015. Web. 10 Nov. 2016. https://hbr.org/2015/03/why-strategy-execution-unravelsand-what-to-do-about-it
2 Rumelt, Richard. “The Perils of Bad Strategy.” McKinsey & Company. N.p., June 2011. Web. 10 Nov. 2016, http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-perils-of-bad-strategy
3 Huy, Quy. “Five Reasons Most Companies Fail at Strategy Execution.” INSEAD Knowledge. N.p., 04 Jan. 2016. Web. 10 Nov. 2016. http://knowledge.insead.edu/blog/insead-blog/five-reasons-most-companies-fail-at-strategy-execution-4441
About the Author:
Institute Fellow Alumni
Doug Tedder is the principal of Tedder Consulting LLC. Doug is an accomplished and recognized leader who is equally adept in interactions from senior leadership to day-to-day practitioners. His attention to detail, industry knowledge, emotional intelligence, and the ability to “see the big picture” and make it actionable has resulted in a track record of success in helping IT organizations transform into business partners in value delivery.
Doug holds numerous industry certifications in disciplines ranging from ITIL, COBIT, Lean IT, and Organizational Change Management. An active volunteer within the IT Service Management community, Doug is a frequent speaker and contributor at local industry user group meetings, webinars, and national conventions. Doug is a member, former president, and current board member for itSMF USA as well a member of HDI.