Almost all businesses have corporate, functional, or business-level strategies. Formulating the required strategies requires the allocation of a considerable amount of effort, money, and time. This investment can be wasteful if the implementation of the strategy is ineffective or wrong.
While the objective to define the company’s strategy and pursue it by making the right resource-allocation decisions sounds simple, most companies struggle with execution. However, flawless strategy execution is the critical factor that determines whether a business succeeds or fails.
Why do businesses fail?
A European Commission report indicates that 50 percent of businesses fail within five years, while 82 percent of first-time entrepreneurs fail. Business failure rates are as high as 90 percent in the US, while one-fourth of startups do not make it beyond the first year.
While many factors contribute to a business’s success, the reasons for business failure can also be multiple. Here are the most often cited reasons:
Poor business model and planning – As Benjamin Franklin said, ‘if you fail to plan, you are planning to fail.’ A business plan is a strategic tool and a roadmap that helps entrepreneurs create an action plan necessary to ensure the business idea succeeds.
The business plan gives strategic direction that is then used to communicate with multiple stakeholders, including potential investors, partners, lenders, and associates. Inadequate planning impacts all other functions, including operations, marketing, resource allocation, and performance management.
Most failed founders cite the inability to scale their business model as the top reason for failure.
No market need – A consistent finding in many surveys that looked into business failure causes is lack of market and poor product-market fit. A study found that in 42 percent of cases, the top reason for failure was businesses offering solutions to problems that were interesting to solve instead of serving a market need. Lack of access to real-time, accurate market data results in poor investment decisions.
Cash flow problems – Money and time need to be invested judiciously. While financial difficulties are often cited as a major reason for failure, cash flow problems are usually linked to failed pilots and lack of product-market fit.
Team problems – A business is only as good as its human resources. Lack of business know-how, technical/domain knowledge, and marketing expertise are as detrimental as internal conflicts, behavior problems, lack of motivation, and availability. Siloed units, lack of awareness of strategy, poor coordination, and impaired communication flow between teams and individuals create chaos.
Competition – Ignoring competition or not keeping pace with competitors is often a recipe for failure. A business that has market validation for its product will have to contend with many new entrants in their space typically.
Operational issues – Siloed workflows and administrative hassles, particularly related to managing remote teams, are some of the operational concerns that can plague businesses. Lack of a well-defined organizational structure reflecting a clear division of roles and responsibilities and the absence of an action plan can lead to chaos. Weak or unclear corporate culture can further compound the problem.
While these are some of the commonly cited causes of business failure, poor strategy execution is often the key challenge for business leaders.
The role of strategy execution
Each year, millions of entrepreneurs invest considerable time and energy in creating and refining detailed strategic business plans. While many are good at developing the plan, a 2019 Gartner survey shows that 60 percent of corporate strategists suffer from slow strategy execution, which is the biggest challenge they faced in the year.
Recent studies show that strategy execution is more important than formulating the strategy itself.
However, researchers have also shown that strategy execution can be much more difficult than its formulation because the former is more time-consuming and complicated. A business implementation survey shows that for 50 percent of leaders, implementing the plan is as important as its formulation. A majority of leaders (68 percent) polled also think their organization is good at strategy formulation.
Despite this, leaders invest less energy, resources, and time in the execution process. In the above-mentioned poll, 98 percent of leaders said strategy execution takes more time than formulation. Sixty-one percent of senior executives agree that their companies struggle to align strategy formulation with day-to-day execution.
The paradoxical problem for many businesses is that with their strategic planning lacking coherence, they cannot translate their ideas into functional objectives. These statistics highlight the pain points of organizations related to strategy implementation:
- 33 percent of leaders state that their organization is poor or very poor at strategy implementation
- 67 percent of well-defined strategies failed because of poor execution
- 85 percent are not sure if their operating model aligns with shifting strategic priorities
- Only 29.3 percent of participants in a study correctly identified their company’s business strategy.
What ails strategy execution?
There are many slips between strategy creation and successful execution, from a lack of communication across teams and units to poor strategy execution skills. Here is an overview of barriers to strategy execution:
Ineffective strategy creation – Establishing and articulating the strategic intent and strategy management policy helps energize the organization while inspiring people to work towards the goal. A well-defined execution roadmap tackles wasted effort and inefficiencies while helping optimize resource allocation and decision making.
Growth stalls are often a result of strategies based on inaccurate assumptions about capabilities, competitors, products, and customers. Lack of clarity or data leads to unpleasant surprises during execution while impacting leaders’ ability to respond to uncertainties.
Using the right tools and mechanisms to test assumptions before creating a strategic roadmap can help avoid unanticipated roadblocks in implementation.
Lack of employee awareness – Only 5 percent of employees, as per a survey, understand or are aware of their company’s strategy. This is true of top-performing companies that have clearly defined strategies where 71 percent of employees are unable to identify their company’s strategy.
Poor or zero access to the company’s strategic plan across the organization compounds the problem. A survey shows only 27 percent of employees have access to the strategic plan of their company.
If employees are unable to understand or have no access to their company’s strategic plan, they cannot contribute towards its implementation through their day-to-day work. A shared digital platform can help provide access and visibility for the organization’s strategic plan and projects.
Absence of strategy execution skills – A survey shows about 61 percent of senior executives believe their organizations are ineffective at closing the gap between strategy and its day-to-day implementation. Additionally, only 40 percent of employees feel their manager understands their organization’s goals and strategy fully.
Too many people, including the managers, are not aware of what activities will deliver results.
Without the strategy action plan cascading down from the corporate level to the functional level, its implementation will remain ineffective and uncoordinated. Ensuring everyone is clear about the activity that has to be performed at their level and connecting the activity to the organization’s overall goal is critical for strategy execution.
Poor resource allocation -Effective strategy execution is possible only when adequate resources are allocated in terms of money, people, and assets. Failure to allot resources stems from the absence of a compelling strategic goal and an execution roadmap.
According to Gartner research, 80 percent of strategists cite a lack of skills and tools to carry out their strategic initiatives. Another survey shows only 40 percent of companies linked strategy to their budgets.
Overdependence on strategy creation and planning and poor coordination can reduce the organization’s capacity, resulting in lost strategy execution opportunities.
Ill-defined organizational structure – Many organizations lack formal systems to execute strategy. A survey shows that only 10 percent of businesses succeed in strategy execution. Inflexible or outdated structures and processes make it difficult for organizations to adapt to or delay adaptation to rapidly changing market environments. These structures can be in multiple forms, including line and staff, functional, virtual, matrix, and multidimensional. To execute strategy effectively, executives need to make informed decisions about the structure while developing processes to integrate structural units.
No accountability – One of the key traits of organizations that succeed in strategy execution is that everyone is aware of their company’s strategy and responsibilities regarding actions and decisions. Seventy-two percent of employees, according to a survey, are not aware of their company’s strategy. When employees have no understanding of their contribution towards execution outcomes, the consequence is typically a lack of motivation to perform and succeed.
The blurring of roles tends to occur as a company matures and executives bring in and take away different expectations. Over time, approval processes get murky and convoluted, resulting in an increasing lack of clarity on accountability.
No free flow of communication – When there is a lack of free flow of information across the company, units become siloed, compromising best practices and strategy execution.
A hallmark of strong-execution companies is that important information gets communicated across the organization – and particularly, the headquarters or senior management- quickly. Headquarters can only play a coordinating role, formulate best practices, and make the right decisions throughout their business segments if they have up-to-date and accurate market intelligence. Without critical information, the dangers of creating products and policies that are not aligned with customer interests are real.
Poor performance management – A majority of organizations state they do not track KPIs, while 20 percent review their strategy execution progress only on a monthly basis.
Strategy execution ultimately depends on individual organizational members. Connecting individual performances to strategic success is critical to driving real results. Employees need to be held accountable for their contribution towards strategy execution with appropriate incentives and rewards.
Aligning strategy with training, measuring, monitoring, and rewarding people in your organization are vital for effective strategy execution. While the team and personal objectives need to be in sync, employees need to have a clear understanding of how their work contributes to execution outcomes.
Reward and incentive programs, as well as career paths, need to be developed and articulated clearly to motivate behaviors. Given the ever-changing market dynamics, organizations without an effective performance management system can execute the wrong plan. The right performance management systems and tools with key metric goals can help track performance while providing accountability. Streamlined and automated progress tracking, KPI alignment, and communication schedule help drive strategy execution and a culture of accountability.
Structure, information, motivators, and decision rights are the building blocks for improving strategy execution, and these four are inextricably linked. Unclear decision rights paralyze decision-making while impacting information flow. Blocking information translates to poor decisions, structural siloes, and limited career development and demotivation.
The solution: smart strategy execution tools
Despite strategy execution being more important now than ever, a 2019 Gartner survey reveals slow execution to be the top challenge. As per the poll, a majority of strategists were not confident about optimizing strategy execution. Insufficient visibility of strategy, inadequate control, as well as a ‘firefighting’ mentality where the focus is on putting out fires, are some reasons cited by leaders for strategy execution failure. More importantly, 80 percent of leaders state they lack the necessary tools and skills to execute growth initiatives.
A survey of over 400 global CEOs reveals executional excellence to be the top challenge for corporate leaders, ranking higher than growth, geopolitical instability, and innovation.
In the digital age, strategy execution depends on the right tools that connect the “shared objectives of business strategists and those executing the change.” In other words, what businesses need today are smart SEM (Strategy Execution Management Software) tools.
Strategy planning: The right SEM tool is one that makes strategic planning easy, fast, and seamless. With customizable drag and drop templates, best practice strategy models, and a guided planning process, the Strategy Execution Management Software optimizes strategy planning.
Enhance visibility – Automated visual representation and the ability to sort and group tasks enhances clarity on shared goals. By aligning and linking projects and KPIs to strategic goals, leaders can drive successful execution. More visibility across the organization enables a better understanding of how each department or individual contributes towards common goals.
Enhanced collaboration – While coordination is key to strategy execution, more often than not, companies get it wrong. SEM tools can help collaboration and coordination with real-time updates, shared dashboards, task assignment and user definition. While there is easy access to centralized data, actionable insights, and trends, accurate information can flow vertically and horizontally across the business units to enhance coordination and decision making.
Streamline workflows – Smart SEM tools drive efficiency by streamlining workflows and removing wasteful efforts that impact strategy execution. A single, flexible platform facilitates workflows, collaboration, content management, reports, forms, apps, and projects. With real-time sharing and editing, as well as the ability to automate repetitive tasks and workflows, efforts and energy can be channeled into core tasks.
For instance, IT companies can facilitate data center migrations with automated approvals and alerts, along with improved visibility. The hardware dashboard makes coordinating upgrades, hardware acquisition, and project management seamless and quick.
Monitor performance – Encouraging a ‘performance culture’ is central to strategy execution, and the right SEM tool makes this possible. Strategy Execution Management software makes it easy to track the results of projects and tasks with engaging reports and dashboards while correlating them with the strategy’s overall success. Visual displays of meaningful data on core performance indicators (KPIs) help leaders stay on track. Slice and dice performance data by year, month, or quarter while reviewing the current status of execution by departments and individual contributors.
Product and portfolio management – SEM tools provide comprehensive support to strategic PMO functions with various project and portfolio management tools. Integrated risk management features with heatmaps and risk scores help mitigate risks associated with each task or project.
With full visibility and control of the organization’s projects, teams, and programmes, strategic PMOs can align the execution with strategic objectives to optimize return on investment.
Partner with a strategy consultant
Achieving successful strategy execution and meaningful business transformation necessitates going beyond your existing traditional in-house tools, software solutions, and capabilities. While finding the right SEM tool that fits your organization’s goals is crucial. Holistic results can be achieved by the right mix of internal and external collaboration, gathering the right data and insights, tools, strategy formulation, communication, and execution.
At DeepThink, we offer strategy planning, implementation, and execution software and consulting services. We believe in delivering tangible results with focused expertise in strategic planning and strategy execution across automotive, telecommunications, cybersecurity, and IT industries.
Want to know more about DeepThink and our strategy, innovation, and product portfolio management consulting services? Contact us through our information form or visit our website.