Why Good Strategies Fail And How To Avoid That Yours Does Too

Shockingly, 1 out of 3 business strategies fails and only about 50% of strategic initiatives are considered successful. This is a massive waste of resources and could sink a business. So why do so many strategies fail and what can you do to avoid the same fate?

According to studies by Forbes Insights and EIU, business strategies fail because of lack of leadership attention, changes in the external environment, lack of the right capabilities and resources, lack of understanding, and a lack of tracking and accountability. In other words, the main reasons why strategies fail are lack of leadership and execution.

Many of the reasons why strategies fail are preventable. In this article, I will describe six key principles and four success factors that lead to strategy success. But first let’s understand better why good strategies fail. 

How good strategies fail

Allow me to take you on a journey. Imagine you were in a strategy meeting. You discussed the future direction of the business. You analyzed the external market environment and identified opportunities for growth. You debated internal strengths and weaknesses and defined core capabilities. With a match between core strengths and market opportunities, you decided on ambitious objectives and goals and laid out an exciting strategic plan. 

There was great euphoria in the room about what it would feel like to reach your vision and deliver such ambitious results. You felt good about yourself and about your chances of success. And then the meeting ended and everyone went back to work. One month, two months, three months passed and nothing had changed. Instead reality happened and the exciting plan was still that – just a plan. But no worries, you thought, the meeting organizer was surely still working on the follow up actions and soon something would happen. But nothing did happen. 

Nine months later, the great unveiling. The strategy was communicated with a massive Powerpoint deck. Senior leadership was excited and explained with great fanfare how this strategy would change everything. Now things would be clear and better times were ahead. However, what was described seemed old, outdated and in some parts different from was discussed previously. You feel like you were teleported back to a time 9 months ago, when market realities were different. 

Meanwhile, the world had turned about 270 times. The strategy meeting was long ago. The euphoria was a distant memory. Competitors had already made their move and put pressure on prices. You had meanwhile slugged out the day-to-day and moved on. You wondered what had happened and if the objectives and goals which once seemed so exciting were now still attainable…

If this sounds familiar, you are not alone. This story is not hypothetical. It has actually happened to me and it felt deflating and demotivating. All the work we had done a year prior in analyzing the market and understanding our own competitive position was basically outdated – and in retrospect a waste of time. And the worst part – I later learned – the delay of 9 months was due to our own internal processes and entirely avoidable. Had we moved faster to implement our strategy, we would have been 1 year ahead and 1 year closer to reaching our objective. Instead we were spinning the hamster wheel, running in place. But what had happened? 

Instead of moving straight into execution after the strategy workshop, when information was up-to-date and motivation was highest, a long process of documentation and alignment ensued. This is what happened:

After the strategy workshop had ended, the facilitators began typing down the flip charts. Some action items on the flip charts were not clearly legible and had to be clarified. Unfortunately, the person who wrote the notes was on vacation and couldn’t be reached for two weeks. The business leader was meanwhile traveling and insisted on reviewing the strategy documentation. By now a month had passed.

Before anything was shared the business leader wanted to present the workshop findings in an upcoming leadership meeting to get the leadership’s blessing before giving the green light.

At the leadership meeting however, doubt was uttered whether the strategic goals were realistic. It was also revealed that the business division was slated for a larger strategic review with corporate. Since the larger review would take place over the next six months, it was decided to hold the strategic implementation until the divisional strategy was reviewed. Eight months later, during the great unveiling, the original strategy seemed no longer relevant. The implementation that ensued was haphazard and largely ineffective.

Reasons for failure

Unfortunately, the story above is not a seldom occurrence in large corporations. Also small businesses are not immune from strategy failure. In the story, there were a number of things that went wrong: 

• Slow follow-up: it took way too long to move from plan to action. So long in fact that momentum fizzled and the original strategy was no longer implemented.
• Lack of leadership support: the business leader sought buy-in from the next level leadership team only after the strategy meeting. Support was not immediately received and leadership alignment took another 8 months.
• Changes in the market: While the company was conducting another strategic review, competitors had already moved-in and occupied the position the company had sought to obtain.
• Strategy itself was flawed: when the strategy was finally rolled out as part of the division’s strategic plan, the strategy was altered and no longer timely. The original strategic intent had changed.
• The team no longer believed in the strategy: the strategy which was finally presented barely resembled the strategy which the team had originally prepared. Even though it was a great idea to initially involve the team in strategy development, the team later felt it was no longer their strategy. The team was disengaged and not motivated to drive implementation.

Studies confirm why good strategies fail

A survey¹ of 163 CEOs, senior strategists and communications professionals conducted by Forbes Insights and FD in conjunction with the Association for Strategic Planning and the Council of Public Relations Firms in 2009 revealed that about one-third of strategies fail. And the reasons for failure are mainly five-fold:  

• Unforeseen external circumstances (24%) refer to changes in the external environment or economic downturns
• Lack of understanding (19%) among the team involved in developing the strategy and about what they need to do to make it successful
• Incorrect strategy (18%) means the strategy itself is flawed
• Poor match between the strategy and the core competencies of the organization (16%), i.e. the business does not have the capabilities needed to succeed
• Lack of tracking, accountability and holding the team responsible (13%)
• Others (11%)

A report² by The Economist Intelligence Unit published in 2013 largely confirmed these findings and added an important further insight: the role of leadership. On behalf of the Project Management Institute, EIU surveyed 587 senior executives globally and further conducted in-depth interviews with the following findings: 

• Importance of strategy implementation recognized, but efforts often fall short
  • 88% of respondents said executing strategic initiatives successfully will be essential or very important for their organization’s competitiveness
  • 61% acknowledge that their firms struggle to turn strategy formulation into day-to-day implementation
  • Only 56% of strategic initiatives considered successful in previous 3 years
  • Companies whose business model is poorly aligned with strategy report weaker financial results than their peers.
• Leadership often missing in action
  • Leadership buy-in and support considered number one reason for success of strategic initiatives
  • Only 50% of respondents said strategy implementation received appropriate senior leadership attention
  • 28% admit that individual strategy implementation projects do not obtain necessary senior leadership support
• Majority of companies lack the skills or failed to deploy necessary personnel 
  • Only 41% of respondents said their companies provide sufficiently skilled personnel
  • Only 18% said hiring of people with necessary skills or leadership talent to implement strategy was a very high priority at their firms
  • Only 11% said developing those skills among existing team was a priority
  • Companies that hired and developed the needed skills succeeded in 62% of strategic initiatives.

So when summarizing the two studies and reflecting on my own 15-year business experience, the primary reasons why good strategies fail are a lack of leadership and a lack of execution. 

Business leaders have to lead from the front and spearhead both the strategy formulation and the strategy implementation. It is not sufficient to sponsor strategies when they are developed and communicated and then not drive the organizational change required for implementation.

When strategies fail, senior management is responsible. In small businesses that’s the owner or the managing direction and the most senior team. In larger corporations that the C-suite all the way to divisional heads and to team supervisors. 

Business leaders are responsible for making realistic assessments of organizational capabilities and to either build or hire the skills and knowledge needed to succeed. Business leaders are also responsible for making available the resources needed to succeed. This may be human resources or funds for capital investments.

Senior leadership support is the single most important factor in successful strategy execution. But that alone is not sufficient. In the following, I’ll detail six principles needed to avoid strategies from failing. 

How to avoid strategies from failing

Apply the following six principles during your strategic planning and implementation to avoid your strategy from failing. This is how you become part of the two-thirds who succeed. 

• 1. Structured process
  • Whether you are in a large company or a small business, a disciplined strategic planning process is critical to success
  • Be deliberate about strategy development and implementation
  • As the leader, make sure the business has the time and the space to conduct a proper strategic review
  • Follow a strategic process such as our 6-step process to create business strategies that deliver results. 

• 2. Engagement
  • If you have a team, involve your employees in the strategic planning and the implementation process
  • Involving your team not only sends a clear message of appreciation, but also helps with anticipating potential obstacles and preparing accordingly
  • Your team knows the day-to-day challenges and help with a realistic assessment of opportunities and capabilities.
  • Involvement creates buy-in and buy-in creates engagement. Engaged teams create better results.
• 3. Buy-In & Alignment
  • Seek three kinds of alignment: vertically, horizontally, and the strategy itself.
  • First, when developing your strategy, make sure your objectives, goals, strategies, and measures are congruent with each other. Check whether strategies and measures are sufficient to achieve the objective and goals. 
  • Second, seek systematic buy-in and alignment of objectives and strategies across functions of your organization. Make sure each function is involved and understands what it takes to be successful. Make sure each function has the resources and capabilities to support the strategy. Only if the entire organization is aligned, can you successfully execute and achieve the desired results.
  • Third, systematically break down objective and goals and cascade them throughout the organization. Ensure that every level in the organization is aligned, empowered and pulls in the same direction. 
• 4. Communication
  • Clarity about objective, goals and strategic priorities is of utmost importance. You cannot execute a strategy you do not understand. 
  • Build communication as an integral part into strategy formulation and execution. 
  • When it comes to strategy, you cannot over-communicate. Consistently explain how initiatives and actions fit with the overall strategy and how they help to achieve the objective and goals. 
  • Communication is an important responsibility of the business leader. But also team leaders and communication professionals need to consistently beat the drum.
• 5. Accountability
  • While the business leader is ultimately accountable for success or failure of the strategy, the strategic plan must be the common objective for the entire business
  • Set clear expectations for each function and team and clarify how each contributes to moving the business in the right direction and delivering results. 
  • Hold people responsible for implementing strategic initiatives and delivering expected results
  • Be a cheerleader for your team and allow no excuses 
• 6. Execution
  • Implementation must be considered a strategic initiative, not an operational task
  • Install a clear cadence when reviews take place and what actions have to be completed by whom and by when
  • Ensure that key initiatives are prioritized and resourced appropriately with the needed manpower and skills

What are success factors for business strategies? 

In their excellent book “Execution: The Discipline Of Getting Things Done”, Larry Bossidy and Ram Charan describe what it takes to be successful in leading a business and implementing strategy. And – spoiler alert – it is execution!

In order to understand execution, Bossidy and Charan recommend to keep three things in mind: 

• Execution is a discipline and integral to strategy
  • When planning the strategy, the organization’s ability to execute it must already be taken into account
  • During execution, constantly and systematically expose internal and external realities and act on them. 
• Execution is the major job of the business leader
  • The leader must be immersed in the company and in charge of execution
  • Leaders run 3 core processes: picking other leaders, setting the strategic direction, and conducting operations
  • Leaders must be intimately and intensely involved with their people and operations. They know the realities and talk about them. They know the details and are excited about what they’re doing. They are passionate about getting results. 
• Execution must be a core element of the organization’s culture. 
  • Dialogue is the core of culture and the basic unit of work. How people talk to each other determines how well the organization functions
  • Leaders who execute set the tone for the rest of the organization – they lead by example
  • Leaders who execute assemble an architecture of execution including processes for execution and promoting people who get things done
  • Leaders who execute look for gaps between desired and actual outcomes and work to close the gap and raise the bar higher still. 

All this is a tall order but by executing and getting things done, strategies get implemented and results are achieved. 

As such, I see these three elements as key success factors for implementing strategy and delivering results and would add a fourth.

Here are my four key success factors: 

How do I drive strategy execution without micromanaging?

When leaders are deeply involved in strategy execution what do they actually do? And how do they keep from micromanaging and getting caught up in daily firefighting? 

Focus your leadership attention on the right initiatives. Areas in which senior leaders have the most impact are general oversight and management of execution, communication and support for strategic initiatives, and providing concerted focus for key activities.

Speak with your team, ask tough questions and expect candid answers. Do this not only while chairing business reviews and regular implementation review meetings but also in between. Go see your team, be available to them, know what’s going on. Help the team reflect where most of the attention is needed. Support action and swift decision-making, remove obstacles and help the team succeed.

Focus on your team members. Make sure that the right type and amount of resources are available to successfully implement the key initiatives. Reward the doers and achievers. Coach the ones who fall behind.

Driving strategy execution is the full-time job of the business leader. Do not delegate this responsibility. As the business leader, it’s your job to show up and lead from the front. 

Conclusion

Many reasons why strategies fail are preventable. Most commonly strategies fail due to a lack of leadership and lack of execution. 

Businesses can avoid this fate by following six key principles and paying attention to four success factors. 

What is your experience with good strategies that fail? If you have any questions or comments, why not leave us a reply below? We’d love to hear from you.

References

1) “The Powerful Convergence Of Strategy, Leadership, and Communications: Getting It Right” by Forbes Insights and FD, 2009. https://www.forbes.com/forbesinsights/FDStrategy/index.html

2) “Why Good Strategies Fail – Lessons for the C-Suite” by The Economist Intelligence Unit, 2013. https://www.pmi.org/-/media/pmi/documents/public/pdf/learning/thought-leadership/why-good-strategies-fail-report.pdf

3) Bossidy, L., Charan, R. (2002). Execution: The Discipline Of Getting Things Done. New York: Crown Business.