Where Do We Go Wrong With Strategy?

Many company strategies look good on face value, but that doesn’t necessarily mean they’re effective.

There are heaps of reasons for this, but I want to look at 4 of the more common ones.

The first problem is that most people don’t actually understand strategy… or, at best they don’t share a common language for strategy.

Try this experiment — run a quick straw poll with the people around you, and ask them what they understand by the following common strategy terms:

• Competitive advantage
• Value proposition
• Market segmentation
• Core competency
• Long-term value
• Privileged assets

You’ll notice quickly that there’s very little common ground in the language of strategy. But everyone pretends they understand, because they don’t want to seem as though they don’t know what they’re doing.

The second problem is that Strategy is treated as an annual event.

Companies tend to go through an annual planning cycle, and a strategy refresh is just the first step in a predefined, end-to-end process.

Strategy shouldn’t be something you do for a month or so each year, to fit in with your annual planning process, and then put it back on the shelf.

Let’s face it,  your competitors aren’t going to make their decisions on pricing, marketing, and investment to fit in neatly with your annual planning cycle….

… which is why you need to use your strategic radar to constantly scan the horizon!

The third problem is that many companies develop their strategy at the wrong level — they focus their strategic planning efforts around their business units, not their products.

The thing that aligns most closely with your customers buying decision is the product – and the product is where competition actually plays out. 

Your customers don’t care how your organization is structured… they just know what they can buy with their money. Strategy developed based on BUs almost guarantees disconnection from your customers

The temptation to align your strategic plans to your executive accountabilities makes sense, until you realize that this approach forces the product to play second fiddle.

The fourth stumbling point is the tension between value creation objectives

With any product, you’ll have to make trade-offs between two competing views of value: Customer Value, and Product Value

Customer value is what customers are hoping to maximize, by acquiring the best product for the lowest price… 

So, you have to make sure that your product is competitive, by offering the right combination of benefits for the price you’re asking…

Product value is how much profit you can create from each product, in order to maximize investor returns. This is the value you create for the company and its owners.

Every strategic decision you make will, in some way, tread that line between customer value and product value! 

**********************************************

There are many more issues that can derail your strategy, but even just thinking about these four, it’s no wonder many strategies aren’t fit for purpose…

What’s worse – every error we make in strategy formulation is amplified in execution.

Leaders develop plans for their teams, based on the strategy. This planning work is mostly done in isolation, and no one really thinks about stopping the activity that has already started, regardless of whether or not it creates value.

Is it any wonder that delivering value is sometimes so difficult?