A little less strategy, a little more action; why most successful companies fail at strategy
I used to believe that strategy was a necessary component for success in business. We’ve been taught this in 50,000 books about strategy. We’ve looked to the military, been inspired by Sun Tzu, ogled the luminous foresight of Steve Jobs and Elon Musk. We’ve been sold the desirability of disruptive innovation and the lustre of expensive consulting firms. Some of us have attended expensive business schools, and waded through the countless hours of intelligent insight that has been poured into business strategy.
If strategy is worthy of this pedestal, allow me to confront you with a simple question:
If strategy is crucial to the existence of a business, how come so many successful companies are awful at it?
I regularly interview leaders in the businesses that I work with to uncover the good and bad in their organisations. When I ask about their strategy and strategic management processes, the answers are strikingly similar;
“We don’t have a strategy”
“We have a strategy but we never follow it”
“We [the exec team] know what the strategy is, but no-one else in the company does”
“We spend months preparing for a strategic review, yet nothing ever comes of it”
How is it possible that so many companies that claim an absence of strategic leadership can not only survive, but be successful and respected businesses?
The answer that I have arrived at conflicts with everything that I have learned about business. I present the simple and disturbing truth for your consideration; It is possible, and perhaps likely, for companies to succeed in the absence of strategy.
Businesses succeed without strategy
My long-standing belief has been that the ultimate goal for strategic management is the creation of a clear strategic plan that everyone in the business understands, and that plan drives the prioritisation of effort across the company.
I still believe this is true, and that great strategy will meaningfully differentiate those companies that possess it. I defer to the wisdom of those who have inspired strategic management; Collins, Drucker, Welch, Kaplan and even the expensive McKinsey and Bain consultants. I still agree with much of what they say, but I now believe that in many businesses, strategy is simply an expensive exercise in executive distraction.
In each of the businesses that I have worked with, there has always been commitment to the practice of strategic management. Whether it’s an annual strategy retreat or a quarterly executive team meeting, these businesses expend time, effort and ultimately money discussing strategy.
And yet, the results of these efforts never seems to stick. The plans made in these sessions rarely turn into reality.
The two most common outcomes are either that the decisions made in the strategy meeting fail to materialise into activities within the business or that, if a programme of work is agreed, it is quickly derailed by commercial realities or the whims of vocal stakeholders.
Regardless of how the process is run, or how the outcome is disrupted, the learning is two-fold; that these businesses succeed without following a strategy, and that they have wasted considerable time, effort and brain-power on valueless strategy exercises.
An obvious absence of strategy doesn’t mean there is no strategy
Year after year, in business after business, strategic plans fall by the wayside and yet companies still succeed. Despite the absence of strategic leadership, employees continue to deliver outcomes and customers are still satisfied.
Allow me to introduce the concept of de facto strategy. In much the same way that organisational culture is ineffable and rarely aligns with the ‘values’ document created by the business, de facto strategy is the invisible hand which steers a strategy-free business.
In the absence of a clear, well communicated and actively maintained strategy, the business becomes a mix of tactical delivery and long term, directional projects which reflect the culture and personality of the business and its leaders.
Unchecked by a clearly defined plan, every person in the business tries to do their best with the information that they possess. In a strategy vacuum the behaviour of the company is marked by the best endeavours of the capable and engaged, abuse by the disenfranchised and exploitation by the self-interested. In companies where there are mostly capable and engaged employees, the long term outcome for the business can still be overtly positive.
The de facto strategy is the cumulative behaviour of employees, as dictated by organisational norms, culture and the opinions of the powerful. The capability for the organisation to execute, without strategy, is sufficient to enable success.
Business is not warfare
I often draw allusions to the military when talking about strategy. No other type of organisation has such a profound and established history of marshalling diverse resources to the achievement of an ultimate goal. (Incredibly, the oldest, still active, military unit was established in 1248, the first documented war took place in 2025BC)
Yet, while there is much inspiration to be drawn from the leadership and process of the armed forces, business is not warfare. Not only are winner-take-all battles rare in business, but the desired outcome of business and military conflicts are entirely different. A successful military tactician needs to neutralise an opponent with minimal bloodshed and as quickly as possible. Yet, a business is generally not ‘fighting an opponent’, and success is fighting for as long, and as profitably as possible.
Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat
(probably not a Sun Tzu Quote)
As tempting as it is to put the quotes of great generals on the walls of our war-rooms, we should understand that military wisdom is situational.
What we can undeniably learn from the military is a clear approach to the creation of a plan and the disciplined execution of the outcome. In the military, lives are at stake. In business, we’ll probably still make our sales targets without a strategic plan.
We follow orders, son. We follow orders or people die. It’s that simple. Are we clear?
(Colonel Nathan Jessup, a made up US Marine Colonel)
The future is unknowable, and your guesses will be wrong
Soothsaying is an expensive activity to force on busy executives. Most strategic planning exercises encourage individuals to peer into the future and provide estimates for budgets, for headcount growth or for the delivery of expensive projects.
Whilst a good strategy should set a future goal and call out the necessary activities and investment to achieve it, it’s a mistake to believe that future estimates will be accurate.
A large amount of the waste in strategic planning is caused by the demand for overly complex and detailed estimates, which tie executives and analysts up for months in advance of a strategy summit. Simply replacing these expensive exercises with low-high ranges of investment and elapsed time will improve the speed and reduce the cost of strategic planning.
Making the estimation process faster allows a more significant benefit — with less onerous analysis and less costly preparation, strategic planning can happen in shorter, more frequent sessions. Ditching large, formal strategy workshops for quarterly (or even monthly) directional nudges makes it more likely that strategic decisions, rather than tactical reactions, will flow down into the activities of staff in their daily work.
Strategy is the CEO’s responsibility, but it may not be their strength
If responsibility for strategy lies anywhere within an organisation, it’s with the CEO. No other role in the company has such a strong alignment to the overall long term vision, or such a profound view over so much of the business
CEOs vary in skills and competencies. Some CEOs are natural communicators, some happiest in the detail, some visionaries that foresee a better future. However, there’s a good chance that strategic thinking — a skill in its own right — isn’t natural or comfortable for a CEO. While strategic thinking can be learned and improved, it may be unlikely that you will turn your visionary leader or inveterate tinkerer into a strategic planner.
Rather than pushing CEOs to work outside of their natural talents, leadership teams should ensure that the CEO is supported with the right team to provide a strategy.
A greater challenge is for CEOs at a personal level. A CEO must determine when their uniquely powerful position in a company allows them to circumvent strategic planning with their own unchallenged opinions. Of all the sources of distraction from strategic execution, the CEO is arguably the most disruptive and hardest to control.
Stop wasting your time on strategy
Great strategy will differentiate your business, but you can still run a successful business without any strategy at all.
This isn’t the outcome I want you to leave with. While all the evidence points to the fact that strategy is not a necessary condition for success, I can guarantee that good strategy will materially improve your business. Whether it helps a failing business succeed, or contributes to a successful business becoming wildly profitable, great strategic planning does make a meaningful difference.
The question for your business is: does the benefit that comes from your current strategic planning outweigh the value it creates?
Creating a good strategy means stripping the waste and hubris from strategic planning. Come to terms with the fact that your leaders may not be suited to strategic thinking. Make peace with the fact that estimates will be incorrect, and the future volatile. Grasp the painful concept that precision and accuracy are not the same thing. What would really happen to your business if you cancelled those expensive executive away-days?
If your business expends considerable effort preparing for strategy meetings, you are wasting time and money.
If your strategic planning meetings focus more on reporting on performance than making decisions about the future, you are wasting time and money.
If you forecast budgets and projects with any precision greater than 12 months into the future, you are wasting time and money.
If your strategy meetings do not end with a clear set of committed actions, you are wasting time and money.
If few people in your business knows what the strategy is, you are wasting time and money.
If you abandon your strategy based on the opinions of individuals, you are wasting time and money.
Strategic planning should be clear, flexible, understandable and well communicated. Start with a clear and ambitious vision of the future and plot a course by the activities that need to be true to achieve it.
Focus your greatest efforts on the activities no more than three months into the future, with diminishing effort as you cast your eyes 3–5 years into the future.
The balance in effort between strategic thinking and execution is not equal. In fact, it’s more akin to Thomas Edison’s famous quote, “Genius is one percent inspiration, ninety-nine percent perspiration.”
Company success is 1% strategy, 99% execution.