Every business leader and every executive in the strategy room understands the importance of strategy in achieving the company’s goals. However, despite the prevalence of strategic planning, many companies still struggle to create and execute an effective strategy. Research has identified several common problems companies face when developing and implementing strategic plans. Some of the most important are lack of focus, ineffective implementation, insufficient resources, and failure to adapt.
Lack of Focus
One of the most common problems is a lack of focus. Companies that fail to identify and work on their core competencies and focus on their strengths often spread themselves too thin. This leads to an inefficient allocation of resources, which usually undermines their competitive position. A study by Bain & Company found that companies with a focused strategy had higher revenue growth and profitability than their less focused peers (Zook, Allen, Romney,2001).
Ineffective Implementation
Another common problem is ineffective implementation, in other words, strategy execution. Even the best strategy is worthless if it is not executed correctly. Research has shown that only about 10% of strategies are successfully executed (Rumelt,2011). This is often due to a lack of clear direction, poor communication, and insufficient resources. Companies that struggle with implementation can benefit from investing in project management and performance measurement systems.
Strategy execution is a broad topic itself and will be examined in a separate article.
Insufficient Resources
Companies may also face strategic problems due to a lack of resources. This can include financial resources, skilled employees, or technological capabilities. Under-resourced companies usually cannot pursue growth opportunities or compete effectively in the marketplace. A study by Deloitte found that companies with more than enough resources were 2.4 times more likely to have a successful strategic transformation than those with insufficient resources (Deloitte,2023).
Personal experience shows an interrelationship between objectives and resources; one affects the other. A company can not set high goals without having the resources needed or a plan for gaining these resources. Conversely, current resources determine the objectives’ height and how far a company can navigate the strategic horizon.
Moreover, the evaluation of resources plays a vital role. Underestimating or overestimating current resources usually leads to faulty strategic decisions that can harm the company.
Failure to Adapt
Finally, companies that fail to adapt to changing market conditions or customer preferences may struggle to achieve their strategic objectives. Research has shown that companies that embrace change and innovation are more likely to achieve long-term success (Foster, Kaplan,2011). This requires a willingness to take calculated risks and invest in new technologies and capabilities.
Calculated risk is crucial for the strategic decisions executives and strategists take. Research by Jim Collins (Collins,2011) reveals that companies that exhibit long-term success are more disciplined, empirical, and sensitive concerning risk-taking and dangers.
Big companies taking big risks is just a myth.
Conclusion
In conclusion, research has identified several common problems companies face when developing and implementing strategic plans. These include a lack of focus, ineffective implementation, insufficient resources, and failure to adapt. Companies that address these issues and focus on creating and executing effective strategies will likely achieve long-term success.
References
Collins Jim, “Great by choice,” Harper Collins, 2011, page 9
Chris Zook, James Allen, and James Romney, “Profit from the Core: Growth Strategy in an Era of Turbulence,” Harvard Business Review, September 2001.
Richard P. Rumelt, “Good Strategy/Bad Strategy: The Difference and Why It Matters,” Crown Business, 2011.
“Strategy and the Role of Resources,” Deloitte, https://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/gx-strategy-and-the-role-of-resources.pdf, accessed March 13, 2023.
Richard Foster and Sarah Kaplan, “Creative Destruction Whips through Corporate America,” Harvard Business Review, March 2011.
