Why Do 50-90% of Strategic Initiatives Fail?
It’s speculated, according to the world of academia, that 50-90% of strategic initiatives fail, which is apparently a controversial range. It’s because this range is based on a large accumulated body of research that has varying definitions of failure across differing types of strategies, such a business start-up strategy or a large enterprise overlaying a modified strategy on an existing strategy, Source: Strategy Implementation: What is the Failure Rate?, Cândido & Santos 2015.
Regardless of accuracy, even at the lower end of 50% this range does raise an interesting question. Why does the execution of strategy have such a high failure rate?
Let’s explore this now.
Strategy
The model below is based on a matrix by Professor Tim Knoster, who discovered the correlation between the components of strategy and human fallout, which ultimately determine the level of success or failure in any endeavour. I’ve modified it considerably for a business context, however this is a valid model for any individual, team or organisation in pursuit of a specific outcome. This can be anything from delivering a career defining presentation to leading an organisational transformation in a large enterprise. To me, this is the number one leadership skill. You cannot lead people if you have nothing to lead them to.
As you can see each level of strategy correlates with some form of human fallout when a level is missing or populated incorrectly.
Confusion: People pulling in different directions, circuitous conversations & head scratching.
Sabotage: Deliberately or unintentionally undermining your own or each others efforts.
Resistance: Covert or overt opposition to suggested or required courses of action.
Anxiety: Unable to figure out how to manage a particular person, problem or task.
False Starts: Frequently jumping from task to task, unsure of priorities, completing some, if any.
Frustration: Inability to move anything forward regardless of how much effort is employed.
Leaders are responsible for creating the organisational vision, setting a mission, and so on, populating all six levels. Everyone else simply takes their cues from it, demonstrating that culture is created at the top and cascades down. These six levels essentially combine to form the blueprint of your culture, i.e. your ways of working, from an individual to an entire organisation.
However, in every project I have ever been involved in I’ve found strategy to be something that is very poorly understood, which includes those in six-figure leadership roles. I’m convinced this is due to the focus on technical expertise in selection processes rather than the ability to strategise and organise people, which is fine if all your ever want is monkey see monkey do. However it creates a weak and incompetent organisation unable to deal with sudden and dramatic changes in the market. As an objective observer and ex-Paratrooper I find this utterly fascinating as strategy and tactics are our bread and butter.
Let me give you an example: A few years ago I was supporting the CFO of a small to medium enterprise (SME), headcount around 50, with difficulties in the operational side of the business. On face value it appeared as though manufacturing were solely responsible for all the failings in the organisation at that time. However this was merely a symptom of a much larger issue.
The overarching company strategy was incomplete to the degree that senior leadership had unwittingly set up their respective areas of responsibility to undermine each others efforts. For instance the sales team were incentivised in such a way that timeframes promised to customers upfront conflicted with the fixed timeframes it took to manufacture physical products.
Manufacturing, while doing the best they could, were continually abandoning their agreed ways of working in order to meet unachievable deadlines. This resulted in all kinds of manufacturing errors in the form of wasted raw materials, recurring faulty goods and inevitable costly delays. The lack of strategic thinking and influencing skills in the manufacturing leadership team meant there was no big picture feedback loop, hence the endless repetition of poor practice. For more on this phenomenon do read Culture: Excellence vs Innovation and Leadership: The Side No-One Talks About.
Coming back to face value, what appeared at first to be manifesting as operational issues were actually significant strategic issues that lay at the feet of senior leadership. The lack of strategic thinking at senior level not only resulted in failed cross-functional ways of working, they unknowingly operated in direct opposition.
Impact on Organisation
The model below is based on a matrix created by Professor of Psychology, Mihaly Csikszentmihalyi who was first to formally investigate the traits associated with high performance, which he collectively called Flow. I have modified it for a business context to correlate a leadership style with its organisational impact by looking at the relationship between Challenge, defined as: Degree of difficulty to be overcome, and Support, defined as: Available resources. Four organisational states emerge:
These four states correlate with specific behaviours that can be measured in any individual, team or organisation.
Anxiety: Missed deadlines, avoidance of interaction, negatively impacts employee sickness absence.
Apathy: Absence of enthusiasm or presence of indifference, negatively impacts employee retention.
Comfort: Lack of activity and accountability, negatively impacts employee productivity.
Flow: Pro-active, self-directed, emphasis on personal responsibility, positively impacts all of the above.
Your skills and style as a leader determine which of these four quadrants you, your team or organisation will predominantly operate in. Obviously the goal is to operate in flow as often as possible, though you will inevitably bounce around. Your understanding of strategy is key in determining the degree to which you mitigate bouncing around, ensuring that you and everyone one else understand the end in mind, their role in achieving it and how to get there, i.e. You are all on the same page.
I’m not going in to leadership styles in detail as the focus of this article is strategy. If you wish to learn more about leadership styles and their impact on culture and business outcomes then do read: Leadership: Styles, Cause & Effect and Leadership: Sympathy vs Empathy.
To continue with our example: Our operations team were very much the Anxiety quadrant. To tip the organisation into flow more often I worked with the senior leaders, middle managers and team leaders responsible for operations to unpick their issues using the first model and create a cohesive strategy for the whole of department. This ensured their ways of working were robust in comparison to previous. We then created a “Russian Doll Strategy” in that we again used the first model to create individual strategies for each of the 5 areas within operations derived from the operational strategy. This achieved 3 things:
Each area had their own vision, mission and measures of success, providing clarity for themselves and their peers.
Operations now had all the data they needed to push back on other departments when the finger pointing began.
All senior leaders were forced to address the now evidence based failings in their areas of responsibility.
If you want to learn more about the correlation between confidence and anxiety, and how to leverage them as a force for good then please do read: High Performance: Confidence vs Anxiety.
Impact on Business
The model below is based on a decision matrix the US Navy SEALs use for leadership selection. For the purpose of this article I have swapped Low Trust for Inefficient and High Trust for Efficient, efficiency is defined as: Best use of resources. I have also swapped Low Performance for Ineffective and High Performance for Effective, effectiveness, defined as: Degree of mission success. We can now correlate the impact of organisational state on business outcomes:
The previous four organisational states correlate with specific business outcomes that can be measured to determine their level of success
High Cost/High Yield: Exhausts resources to achieve a great result, which is expensive and short lived.
High Cost/Low Yield: Exhausts resources to achieve a poor result, which is just expensive.
Low Cost/Low Yield: Barely moves the needle, useless if you want progress or change.
Low Cost/High Yield: Optimises available resources to achieve sustainable results.
To reiterate: Your skills and style as a leader determine which of these four quadrants you, your team or organisation will predominantly operate in and your understanding of strategy and how to create common purpose is key to this.
The operations department in our example not only successfully pushed back on other areas of the business, which initially was not well received, but the evidence based conclusions were inescapable. We also discovered far more cost effective ways of operating, one example was outsourced product testing. Originally this made sense when the company had first formed, however we discovered it would now be far cheaper to buy the equipment and execute in house due to the substantial time savings. This drastically shortened OTIF timescales. These tests were also niche, with few providers in the market, creating the opportunity to offer testing as a service to generate a new revenue stream.
If you want learn more about this phenomenon then please do read: Culture: Digital Transformation & Organisational Readiness.
Conclusion
A coherent strategy creates common purpose and gets everyone on the same page regardless of their role. You are the example to those in your charge of how to apply the right thinking to right skills to the right things at the right time to get the right results. Your ability to think strategically directly impacts how well thought out your strategy is and whether or not it can be delivered, which is compounded when several leaders have to collaborate on the same strategy.
I’m sure as you read through you placed people you know in different quadrants. Now that you’ve assessed everyone else, might it be worth assessing yourself against these models?
Determine when and how you tip in and out of the 6 different levels of strategy.
Ask those around you for feedback.
Take note of what you are doing well.
Take note of what needs work.
Set some next steps to up your game accordingly.
If you would benefit from support to set you and your organisation up for success, ensuring you take a strategic approach, then please do schedule a call with me by putting a 60mins in my diary at a time that suits you. We can discuss your situation and options over an eCoffee. I also offer a live online 90 min module using the first model in this case study to Create Common Purpose, for suitable dates and times check here, you can check out useful resources below and even sign up for my newsletter.
Best Wishes
Kenny
