Approximately 85% of organisations (globally) undertake some form of formal strategic planning. Results of an economist intelligence unit survey show however that “only 11% of executives are highly satisfied that (strategic planning) is worth the effort”.
So, what’s wrong with strategy? The Strategic Management Institute has identified seven inconvenient truths that contribute to underwhelming results from strategy.
Seven inconvenient truths
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1. Relevance: The familiarity and structure of the entrenched 1960s “planning” regime dominates strategy processes, which are still used by as many as 76% of organisations today.
Consequence: A propensity to rely on tools and techniques that are of most relevance in certain and predictable environments as opposed to the more advanced tools better suited to dynamic and less certain, unpredictable environments.
2. Structure: Unlike accounting and law, strategy has evolved into various forms and formats. Each one is independently valid but many exist in a state of contradiction and conflict with another.
Consequence: The paradoxical nature of strategy practices results in a reliance on low value, albeit easy to use tools, a propensity to leave significant “gaps” in content, overzealous use of “flavour of the month” tools.
3. Process: There is a fatal flaw in accepted strategy theory. Strategy formulation is a system, not a process; it exists as an iterative program of learning. Strategy implementation is a process.
Consequence: A lack of understanding of the “flow” of strategy systems/processes and structure leads to poor practices, inefficient allocation of resources, potentially poor strategy content and often underwhelming results.
4. Evaluation: When assessing strategy effectiveness, the primary focus is always on outcomes, as opposed to the “causal” factors, assumptions and “guesstimates” that were inevitably made about an unknown future, when the strategy was first developed.
Consequence: An absence of evaluation means there is no procedure:
- to prevent continued investment in invalid strategies;
- provoke/generate content contributing to instigation of continual “strategic” renewal; or
- providing sufficient “depth” and insight providing content for the short-term/annual strategic plan.
5. Implementation: Strategy execution is notoriously unsuccessful. Our research shows that as many as 72% of organisations would like to implement strategy more effectively.
Consequence: Our research also shows that only 38% of managers consider that their strategy was fully understood and owned by everyone in the organisation, a mere 15% agreed their strategy was fully understood by customers.
6. Alignment: Strategy processes lack alignment in:
- the overall framework (from envisioning to formulation; evaluation; implementation and integration with operations);
- other support systems, eg. innovation, knowledge, business intelligence, etc.
Consequence: A lack of alignment causes strategic disconnect which:
- devalues the value of the strategic activities;
- compromises governance and heightens risk;
- reduces the ability to get all employees aligned around a commonsense of purpose and direction; and
- reduces the likelihood of successful implementation.
7. Influences: Strategising is dominated by an individual’s subconscious preferences and the often destructive “interactivity” of teams.
Consequence: Strategy tensions (influences from subconscious preferences) act as a source of discontent that creates conflict and ultimately sub-optimal strategic outcomes.