As a follow-up to my article on the Power of 5 Sentence Strategy and the Diverse Flavors of Strategy, today I would like to discuss the pandemic of bad strategies (I call them the Losing Strategy in my book, the GOSPEL of Strategy).
Despite the importance of strategy, in most companies, “strategy” doesn’t really matter. Many, if not most, people consider it an expensive, irrelevant, and time-consuming exercise.
Especially in this era of volatility and disruption, who can afford to invest a lot of resources in something long-term that will quickly become irrelevant anyway?
Strategy Tragedy
No wonder many business leaders today question the value of strategy – they say it’s too slow, too impractical, and too useless in today’s fast-changing environment.
For example, a 2019 study by Strategy& (formerly Booz & Co, now part of PwC) of 6,000 corporate leaders revealed the following harrowing statistics:
77% of companies don’t identify unique advantages of their business. How can they even win?
65% of companies think their strategy won’t lead the company to success. Essentially, they are keeping a losing strategy.
63% of companies don’t have a well-defined strategy. While you don’t need a formal strategy, you still need to know what your strategic priorities are.
21% of companies don’t even have a list of strategic priorities. Technically, these companies are adrift and directionless.
Looking at the statistics, it is clear that many business leaders are abandoning strategy. Leaders often believe that strategy is a:
luxury they cannot afford;
useless, abstract thing that is too theoretical;
distraction amid market chaos and urgency to move fast.
But what is the real cost of abandoning strategy? The same study revealed that:
80% of companies don’t know what capabilities are required to win in the market.
74% of companies are only following customer trends and competition – instead of proactively shaping the demand.
63% of companies feel their proposition isn’t very relevant.
63% of companies don’t have a clear sense of where the company is heading.
57% of companies aren’t very clear about how they add value to their customers.
So, it’s really pricey to abandon strategy. If companies don’t differentiate, build long-term advantages, and make big strategic bets, they won’t be able to win and become the leader in their industry.
Personally, I think this is a tragedy. When a business has the potential to be #Great and can serve the community better or make the world a better place, but they squander the potential due to myopic short-term focus… So much #Impact is loss.
Losing Strategy, Winning Strategy
But why are companies abandoning strategy?
The real reason for this is that companies fail to differentiate between Losing Strategy and Winning Strategy (I wrote about these two different types of strategy here).
What most people actually lose confidence in is the impotent Losing Strategy that yields no results.
What companies are trying to abandon is the Losing Strategy that is:
Too abstract and theoretical – when strategy is not translated into real-world plans, actions, programs, and priorities.
Too bureaucratic and draining – when strategy took six months to build with a lot of unnecessary work, long meetings, tons of data requests, and meaningless templates to be filled.
Too disconnected and irrelevant – when strategy is so badly communicated that most people in the company don’t know about it, believe in it, and act upon it.
Winning Strategy, on the other hand, as I proved in the GOSPEL of Strategy, is something that will significantly help you in achieving your strategic goals.
Strategy that is real and translated into your day-to-day management and decision-making.
Strategy that is simple, not complex, and rapid in its development. Depending on the needs and your knowledge, a strategy can be done in an hour (see the 7 Meanings of Strategy), in a day (like the 5-Sentence Strategy), or in six weeks (like the Rapid Strategy Deployment).
Strategy that is easy-to-communicate, easy-to-understand, and easy-to-implement. Read more about why strategy must be simple.
Unfortunately, because the leaders fail to differentiate between losing strategy and winning strategy, they abandon all strategies altogether. I explained the root-causes of this differentiation failure here.
The data show most business leaders struggle to make a connection between their strategy and the actions they do every day (or borrowing the GOSPEL of Strategy terminology, their S is not translated to their P, E, and L).
87% of companies said their day management (budget allocation, people allocation, and other decisions) isn’t related to their strategy. In other words, they might have a paper strategy but not a real strategy.
84% of companies don’t have a program to invest in their most important capabilities. Without your Spear (i.e., your unique advantages), you won’t win the competition.
80% of companies said the people across their organization aren’t aware of their strategy and aren’t bought in. How can the organization execute the strategy if the people from top to bottom don’t even know about the strategy.
Companies need a strategy that works, one that allows them to, using McKinsey’s terminology, “beat the odds” and get ahead of the competition.
Without a strategy, without making tough choices on where to play and how to win, without building a strategic advantage and differentiating capabilities, and without making big commitments, a company has no chance to win.
After all, it will be very difficult to win in a market that others have shaped to their advantage where you are just drifting around.
But the prize of getting a strategy right is high. A study suggested that companies that have a clear focus, clear differentiating capabilities, and clear choice are:
Growing 3.2x faster.
Making 2.1x more profits.
Generating 4.2x more shareholder returns.
Therefore, don’t abandon all strategy. What you must abandon is the losing strategy. And start embracing the winning strategy.
Saving Our Strategy (SOS)
Here are some tips to help you get started:
Identify what truly drives advantage in this hypercompetitive world.
Where the market is heading and what 1-3 things that truly make a difference for the customers.
Which value propositions are likely to succeed now and 5 years or even 10 years down the road.
What capabilities are required to win with each of the value propositions.
Determine how to build the advantage (i.e., Spear building).
How to leverage your current strengths (i.e., things your company is able to do better than anyone else).
Which winning value propositions you can offer today.
How to build your future strengths.
Drive the execution relentlessly.
Translate the strategy into what it means for every part of the organization.
Support the strategy with detailed action plans: Define clear deliverables, deadlines, responsibilities, and budget.
Monitor execution progress and manage the performance effectively.
Ensure the advantage is protected (i.e., sustainable competitive advantage).
How to build on your success and dominate the market.
How to ensure you remain focused during fast-growth (i.e., ensure everything is connected to the core business and coherent).
How to remain cost competitive (by applying strategy-driven cost-cutting instead of mindless cost-cutting).
