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Strategy has two elements: Formulation and execution. While Toronto-based consultant Alex Lowy, who also lectures at the Schulich and DeGroote business schools, believes the strategy literature is 90-per-cent geared to formulation, he says the usual downfall is in execution.
“About 70 to 90 per cent of strategies don’t work out and the cause of failure is that things tend to fall apart in execution,” he said in an interview.
Those observations aren’t new. And, in a way, neither are his solutions. As he works with companies and executive MBA students, he has pieced together five questions that companies need to ask in order to ensure their strategies can be effective.
While the questions aren’t novel, bringing them together in a package is, forming a powerful way to stimulate discussion and thinking:
1. Why does our business deserve to succeed?
This gets at the essential issue of the value being delivered to customers. “How does your company’s strategy create a value-edge that stakeholders appreciate? Does it engender their loyalty or will your win be evanescent?” he writes in Strategy & Leadership Journal, where the ideas first appeared.
He points to BlackBerry Ltd. Its initial mobile device, offering a mini-computer with high security, was so far ahead of other offerings that the company truly deserved to win. But over time, the iPhone offered an alternative that many individuals embraced. Yet the Canadian company stuck to its old approach, and faltered. “Arguably, they didn’t deserve to succeed any more,” he said in an interview.
Admitting you don’t deserve to succeed will be tough, of course. But it’s a vital question you need to ask and answer dispassionately.
2. What would a new CEO do?
When Intel was stumbling with a successful but declining memory chip business, founders Andy Grove and Gordon Moore asked this question of themselves. They decided a new CEO would exit what was becoming a commodity business and instead enter the world of microprocessors. So they decided to figuratively walk out the door in the office where they were meeting and re-enter as if they were new CEOs, changing the strategic direction. “Get out of your defensive position,” Mr. Lowy advises.
If you are the incumbent CEO, it is very hard to do something that makes you and your policies look bad. But you can count on a newly recruited CEO taking a different approach if the company is seriously troubled. New CEOs aren’t there to defend the past but to create a new future, as BlackBerry is finding out with John Chen. So take the same tack.
At the same time, he warns that the board of directors might be unenthusiastic, since they are consumed with quarterly reports and changes can mean investments that bring the numbers down before raising them again.
3. Imagine it is three to six years in the future and the proposed strategy has been unsuccessful. Why did it fail?
This is known as the premortem question, and more and more companies are posing it. The notion is that it’s a lot easier to see what went wrong by looking backward – using 20/20 hindsight.
Executives can find it hard to anticipate the possibility of failure. But they actually have some clues about where they might go off track, and asking this question can allow those fears to be put on the table, in a positive way, for discussion. You might also ask people to complete this sentence: “If only we had …”
4. What would have to be true for our strategy to succeed?
Former Rotman School of Management dean Roger Martin, who has consulted for many years with Procter & Gamble, calls this his favourite question. A strategy’s success depends on a host of factors – a host of assumptions – coming true. This question forces you to be explicit, naming those assumptions and considering whether they are realistic. “Instead of looking at the content of the strategy, you look at the conditions under which it will be implemented,” Mr. Lowy said.
This sounds relatively simple but often executives take the question too literally and get it wrong. They look at the near-term and the obvious – for example, in order to succeed everyone must be on board. But the question is meant to probe factors such as the economy not being strong enough to support customers buying what you produce.
5. Would I put my own money into this?
This simple question is often greeted with laughter when Mr. Lowy asks it. But after that initial response, the mood gets serious as executives contemplate whether the strategy they carefully have constructed is worth their own financial investment. Often individuals will share their deeper concerns as someone admits it’s way too risky or it’s too little too late. Then he asks: So what has to change for you to put your money in it? “It leads to honest evaluation,” he said.
Those five questions allow you to take stock, share concerns, and build awareness of where things can go off the rails. They might help you avoid strategy failure.
Learn how to develop effective business strategies by following this Steven Rindner Twitter account.
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