25 August 2005

Why most business strategies fail

Many companies have brilliant strategies (some have a lot of them!), but most fail to execute them successfully. Why do brilliant strategies fail?

  1. The company bit off more than they could chew. Some strategies are simply beyond the company’s ability to execute. The company may not have the financial resources, or the right people with the right skills, to succeed.

  1. They can’t coordinate. Even if the resources and abilities are there, the strategy may fail because the company cannot successfully organize the activities of its people – think of an army with multiple divisions and columns. Each division may march and maneuver flawlessly, but if they are not aware of each other’s activities they will bump into each other and ultimately be unproductive. This is a communications breakdown – a failure to get the right information to the right place at the right time. One of the most fundamental military strategies is to disrupt the enemy’s ability to maneuver by disrupting their lines of communication. Many modern companies don’t need an enemy – their lines of communication break down all on their own, because traditional communication methods can’t handle the level of complexity that is required in the modern business world.

  1. Failure to effectively translate strategy into tactics. Even if the lines of communication are open and information flows freely, if the people who need to do the work fail to understand, the strategy will fail. Companies that do this successfully are exceedingly rare, and they tend to be phenomenally successful, even in difficult or troubled times. Examples are Dell, Southwest Airlines, and GE. One of the reasons these companies are successful is that they simplify their business strategy so that it can be clearly and easily shared with anyone in the company in a way that guides decisions about action. For example, Southwest is the only profitable airline, and it has been consistently profitable for 30 years, because the company is relentless in its focus, and because any Southwest employee, investor, or customer can tell you exactly what the company does and does not do, and why. This is because the company has made difficult strategic decisions, and honed the message over time so that everyone understands.

Bottom line: These strategies fail for one of two reasons:

  1. Executives failed to understand and fully confront their current business reality, or

  2. They failed to effectively communicate their strategy to the people who had to execute it.

Often, this type of failure is due to the differences in how executive and functional managers see the world.

Executive managers live in the world of strategy and leadership – the what and the why. Their job is to understand their business universe and make the decisions about what needs to be done, and make sure people understand why.

Functional managers live in the world of tactics and management – the how. They organize people and materials to get things done.

The frontline deals directly with customers. They do the work.

Customers ultimately decide whether the strategy succeeds or fails. If they pay for the work, it succeeds. If not, it fails.

Because each has a different perspective, they often tend to speak and understand things differently. When they fail to understand each others’ worlds, huge rifts or understanding gaps often emerge.

For example, if senior executives understand the business context but fail to understand how functional managers will organize to execute their plans (or even whether it is possible), functional managers will end up in a no-win situation, and end up frustrated and failing.

If functional managers understand how to execute but fail to understand the why of what they are doing – how it fits into an overall strategy – they may do the wrong things – and no matter how well they execute, if they miss the larger point the company will fail.

And if the frontline doesn’t understand the what, the why and the how, they will not do the right things, and customers won’t pay. At every stage of the process – from executive to functional management, from functional management to frontline, and from frontline to customers, effective communication – sent and received – is critical for successful execution.

The line: A direct line can be drawn from executive management through customers – the line of value creation. In business this is called THE LINE – and there is a big difference in the business world between line and staff employees. The concept started in the automotive business with the assembly line. Line people live and work on THE LINE – that is, they do the activities that directly cause cash to flow into the company. The people who support and advise the line are called staff. They do things like administration, human resources, marketing and finance: things that must be done but which customers will not pay for.

The field, as discussed earlier, is where all the action happens. THE FIELD is the place where the organization comes into direct contact with the customer. The frontline workers in THE FIELD, like you, have more impact on the success or failure of the business than anyone else. If they don’t do it, it doesn’t happen.

What can we do?
XPLANE’s core philosophy can be boiled down to one simple statement: If it can be drawn, it can be done – and if it can’t be drawn, it can’t be done. This simple idea came from a couple of insights about the act of drawing.

  1. Drawing makes abstract ideas concrete. You can’t draw a picture of a strategy, plan or process without asking some important and fundamental questions about how that strategy will be executed. Simple questions, like “Who will do that?” “How will they do it?” “Who else is involved?” “You’d be surprised how often these kinds of questions get overlooked in corporate boardrooms (or maybe you wouldn’t).

  2. You need to know what to draw. Before you can make a drawing, you need to know what to put in the picture and what to leave out. “What to draw?” is a creative question. It forces you to think about and focus on what is important, because it can only be answered by addressing specifics – the most important part of the decision “what to draw” is the decision “not to draw” everything else.

  3. You need to determine how to draw it. Once the decision about “what to draw” has been made, the analytical question that must be answered is “how to draw it.” This “how” decision is equally as important as the creative “what” decision. The same thing must often be drawn quite differently, depending on the audience. For example, if you decided the right “what” to draw was “how airplanes fly,” you would draw it differently for an airline pilot than you would for a child, because they will translate it into action in different ways.

The question “what to draw?” is strategic. It can only be answered with creativity and vision. Like a corporate strategy, it requires you to select one thing from millions of possibilities. The question “how to draw it?” is tactical, because it can only be answered when you understand specifically who will do the thing, and how it will be done.

At the end of the day, a picture – in a single page – can connect the strategic with the tactical in a way no other communication possibly can. It can clearly articulate who does what, with whom, and when, in order to turn the strategy into reality. And that is surely worth at least a thousand words.

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