Companies Striking Out on Strategy

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Opinion by Thornton A. May

JUNE 06, 2005 (COMPUTERWORLD) - The process for making and executing strategy in most organizations is broken. Conversations with business school faculty colleagues conducting research on companies based in Canada, Mexico and the U.S. indicate that 70% to 90% of enterprises fail to successfully execute their strategies. The decisions facing executives today truly do matter and will set the course for the next decade. Existing strategy-making and strategy-executing processes appear woefully unsuited to meet the challenge.

The IT Leadership Academy, drawing on research and executive interviews conducted at the CIO Executive Summits in New York and Southern California and at the CIO Boot Camp in Las Vegas, created a strategy diagnostic that parsed the world into four categories of organization:

Right strategy, right execution: 20%
Right strategy, wrong execution (in part): 19%
Wrong strategy, right execution: 29%
Wrong strategy, wrong execution (in part): 32%

This frightening data set motivated us to look closely at the conventional wisdom at work regarding making and executing strategies. The first thing we did was recheck the numbers. Could the practice of strategy truly be as bad as the numbers indicated?

We asked MBA students across the country to describe the strategies in place at a variety of major vendors. Despite the fact that these students were encouragingly smart and hard-working and had recently been exposed to the very best in contemporary thinking about strategy, they were hard-pressed to come up with a consistent description of IT vendor strategy. Strike 1 for strategy occurs when people outside the organization can't figure out what your strategy is.

We asked employees in the CIOs' chains of command whether the stated strategies of their organizations materially affected their day-to-day workplace behaviors. More than 70% said they did not. While the top of the house might be in alignment regarding strategy, the people at the oars frequently are not. Perfect pictures of the future don't do anybody any good if they don't change behaviors. Strike 2 for strategy occurs when the behavior of people inside the organization isn't driven by strategy.

Conventional wisdom (a wonderful phrase first coined by John Kenneth Galbraith in The Affluent Society) has it that strategy and strategists have bounced back from a near-death experience in the 1980s, a coma during the whole dot-com boom-and-bust era, and the recent episode of carnivorous cost control. Strategy is very much back on the executive agenda. Unfortunately, senior executive behaviors regarding strategy-making and strategy-executing are all over the map.

In their very readable Strategy Maps: Converting Intangible Assets Into Tangible Outcomes (Harvard Business School Press, 2004), Robert S. Kaplan (my former professor) and David P. Norton (my former boss) provide a very understandable definition of strategy: "Strategy is based on a differentiated customer value proposition. ... Strategy requires a clear articulation of targeted customer segments and the value proposition required to please them. Clarity of this value proposition is the single most important dimension of strategy." Strike 3 for strategy comes when organizations don't keep this very simple definition in mind.

As a futurist, I believe that all signs indicate that we have emerged into what tomorrow's business historians could term a strategic era, an era when firms have a big choice about their future evolution. Understanding and fixing broken strategy-making and strategy-executing processes will be a big part of determining whether that future is one you will enjoy.

Thornton A. May is a longtime industry observer, management consultant and commentator. Contact him at thorntonamay@aol.com.