Strategic planning is not an exact science and many companies still get it wrong, with over 50% of new businesses failing in the first five years. While such failures are often blamed on external factors, the truth is that a good strategy greatly minimizes the risks. Organizations make easily avoidable mistakes that leave their strategy vulnerable, or destine it to never work at all.
We’ve outlined ten such mistakes.
1. Not Having A Strategy To Translate Your Framework Into Action
In a survey from Strategy&, ’Top Leaders Effectiveness at Strategy Execution and Development’, just 8% of the 700 business leaders who responded said they are confident to say they are effective at both planning and execution, with 63% admitting they are 'neutral or worse.'
Vikram Banerjee, Strategy Lead at Whitbread, agrees that there is too often a discrepancy between plan and action. He notes that:
‘Surprisingly, the biggest mistake I have seen is not actually having a strategy. Lots of leaders and managers I’ve spoken to have a ‘framework’, or a set of principles, but not an actual strategy that allows them to move from this framework into action.’
Remember that a framework is not enough - there also needs to be a plan to put it into action.
2. Not Dealing With Failure
It is never plain sailing in business. In order to be successful, you have to take risks on a regular basis - whether this is by allocating precious resources to a new product or venturing into new markets. These will not work out all of the time, and companies must react to small failures in the right way or they will snowball. For example, firing an employee for taking a risk will prevent anyone else from doing the same, even though it may have worked out. If a team does all it can to make something succeed, they shouldn’t be punished for being unable to make it work.
Equally, companies need to ensure they learn from failures and integrate the lessons learnt into their strategy. Whether it was arrogance or poor information, mistakes are understandable the first time, but inexcusable the second time around.
3. Not Accounting For Risks
As important as it is to take risks, you need to ensure that you understand exactly what these risks are so you can properly mitigate against them.
Lillian Bautista, Director of Strategy at Adidas, notes that, ’Blind spots can be critical threats to strategy – these can take many forms, for example, being blind to market realities or not seeing their consequences all the way through, new entrants to your industry, and underestimating competitive situations. It’s important that when creating a strategy, you kick the tires and road-test assumptions with critically constructive colleagues across functions. Only then you can truly see the broad landscape of the future from different perspectives, and craft a strategy with those considerations in mind.’
Be sure to perform a risk analysis to identify internal and external threats and operational vulnerabilities that could cause disruptions to the critical processes of your strategy.
4. Not maintaining and reviewing plans regularly.
Keep your strategy up-to-date by reviewing it as frequently as possible against your KPIs and adjusting it accordingly. However, be careful. If these changes are not communicated then they will not be implemented, and if you’re constantly updating your strategy it will cause chaos. How agile your strategy is can be really dependent on the size of your company, so be sure that you set it for appropriate time periods and do not drown your staff.
It’s not just a case of keeping employees informed though, also be sure to involve them in the process as often as possible. Bill Gardner, Noetic Outcomes Consulting, LLC, notes that:
‘Not only should they be told, they should be actively encouraged to contribute ideas as to how the strategy could be improved upon. They must then work to distill the plan to a story that can be embraced by all employees. These CEOs know how to tell the strategy story in an understandable, exciting, hopeful and authentic way that creates excitement and alignment among the employees at all levels.’
5. Overestimating Organizational Strengths
A strategic plan must have the capabilities of the company at its core. This means that the CEO must make strides to identify the company’s strengths and weaknesses and plan appropriately. When senior management overplays how well their company is doing, it risks complacency. As J. Evelyn Orr, director of intellectual property research and development, notes, ‘when all things are equal, self-awareness is a key trait that explains why some business leaders succeed when others derail. Self-awareness is knowing your strengths and limitations, the willingness to seek and act on feedback, the ability to admit mistakes, and the tendency to reflect and apply personal insights.’ Simply put, if you can’t identify areas where you are weak, you will not be able to strengthen them.
6. Forgetting Why People Come To You
You go to the Empire State Building for the view, not to be inside the Empire State Building - if you black out the windows and start selling candy corn inside, people are going to stop coming. Blockbusters is a textbook example of a company that forgot what it was, diversifying its in-store experience rather than building up its mail order section, Blockbuster Total Access, as the likes of Netflix ate into their revenues. While many enjoyed the experience of going into a store on a Friday evening and browsing the shelves, the majority just wanted the video and to get hold of it in the most convenient way possible. Blockbuster Total Access was more convenient than Netflix as a mail order company, and would likely have outstripped it within the year. It is likely that as online streaming exploded, they would have largely remained with the platform. Having a large selection of movies to choose from was important - it wasn’t the act of walking into a store. Nobody likes going to stores, it’s exhausting.