What is a bad strategy?
Whether your strategy is a good one or a bad one comes down to many factors, however, there are some starting points, and approaches, to strategy development that make strategies bad from the start. Not all of these are going to sink the company, but they don’t give the lift in outcomes either. If we were to give them a rating it would be “could do better”.
All these bad strategies happen at organisational levels, but they are also very much in play at the departmental or business unit level. I’m sure there are more, but here are my top 9 (I would have preferred to make this a top 10, so please let me know if you can find a 10th).
- A plan but with the word “strategic” in front of it.
We do this because it’s easier than doing the thinking required to create a strategy. There is nothing wrong with having a plan but don’t expect it to get you anything more than you have already got. Unless your market stays exactly the same then you can expect to lose ground…because while you do planning at least one of your competitors is doing strategy.
A plan doesn’t leverage core capabilities and systems, it’s just a series of activities with budget, and timelines, attached. This makes it extremely easy for a competitor to copy.
A better way is to look at focusing your organisation’s resources on an explicit set of choices that add exponentially increased value to your current customers or create new customers, then back these up with core competencies and systems.
2. A vision/mission or purpose statement.
This is just about the opposite of the point above. It’s when we describe the future in such a way that it’s not actionable, it’s too aspirational and high-level. It reflects a lack of clear choices. I think it comes about when a leader doesn’t want to make the tough calls about what an organisation will (and therefore will not) be doing going forward. It might seem like a way to avoid getting it wrong: you can’t get it wrong if it was never clear what you were trying to do. Unfortunately, this approach leaves the whole organisation unclear about what choices to make, so it breeds indecision and silos as different departments come up with their own interpretations of what they need to be focussed on.
A better approach is to go for radical clarity. A strategy is a clear statement of intent about where you are going and clearly articulated choices on how you will get there. This clarity enables all areas of the business to move forward and make their own clear choices in an aligned way.
3. Just doing what the competition are doing
This strategy is often a bit more elaborate, it’s something like “doing what the competition are doing but a bit better/faster/cheaper/higher quality” (fill in as needed). As a strategy, it only works if the market is new and fast-growing, for example when there is more demand than can be filled by the current players. But at some point that stops, because more players enter the market. Now you have to compete for customers. At this point having a strategy of “doing what the competition are doing” is risky. That’s because your competition are doing what they do based on their unique set of business model, competencies and systems that make it an excellent choice for them. They have created a system of competitive advantage that works uniquely for them. If you just copy this then you end up with a higher cost structure than they do but not offering your customers any increased value, and at some point that will hurt you.
What to do? Discover a way to compete that maximises your own organisation’s core strengths and set up systems and processes that leverage these to create step-change increases in value for customers. If you don’t see a way to leverage your core strengths then think about what would be considered a step-change in value for customers and design the new core competencies (or business model) you need to profitably deliver this.
4. No strategic choices – doing everything.
This is a version of having no strategy. It’s when an organisation does everything it can do. No choices have been made, therefore there is no focus. With a lack of focus, it’s not only difficult for customers to know who you are and what you offer, but it also doesn’t give you a competitive edge. With a lack of focus, you risk losing out to more strategic competitors who are channelling energy, resources and time into unique choices that deliver on customer needs and reduce their cost base. Doing everything has the potential to let your costs spiral out. People don’t know where to spend their time and often organisational initiatives will pull in opposite directions due to a lack of connected thinking, and just waste time, money and effort.
5. No strategy – just reacting.
When things are changing rapidly some leaders opt for a reactionary strategy. This is when the organisation is just reacting to events as they unfold. A leader might claim they don’t have time for strategy or that strategy is too long-term and therefore irrelevant. This is often the view of a leader who enjoys fire-fighting. The result is a strategy of small reactionary decisions with little thought of how they coordinate with each other. There is no visibility of the impact of the decisions as they each follow each other in quick succession. It’s an adrenaline strategy.
The alternative is to have a view of what would be the organisation’s best moves, in a coordinated fashion, be clear on what would need to be true for this to be a great strategy, execute it and constantly measure if the assumptions are true. The reactionary leader can then enjoy being agile and adaptive but from a data-driven long-term perspective.
6. A strategy to just compete for more market share.
Any new industry starts with a player and, as the attractiveness of the industry becomes apparent, more players join. They offer similar things and tend to compete in similar ways. Then a few break away and start to differentiate themselves, usually as a luxury/quality high price, a mid-range, and a low cost/basic level offering.
Look at almost any industry and you will see these 3 segments. If you consider how the industry competes you will see they pretty much all compete on the same factors, with all players in each segment doing the same thing. Unless you are the undisputed market leader (and there is only one of them per market segment) then you are pouring effort and resources into keeping up with the market leader and trying to take market share. This is not a winning strategy. A better use of time and resources is to create your own new market. One where you are now the market leader….because it’s your market.
7. An aggregated plan of each function’s to-do list.
A strategy that is based on each function just rolling up their list of very important things they need/want to do is not effective. It doesn’t contain the logic of why you are doing these things and not other things. Often pet projects get rolled into this too. It stems from an executive team that are trying to be inclusive by including each function in the strategy, but the reality is some functions are supporting the strategy and some are leading it. Be inclusive by making all executive team members involved in the strategy as team members, not as functional leaders.
8. A stretch goal (“doing x% more than last year”).
Your customers don’t care that you want to grow your business by x%. Honestly, most of your employers don’t either. But customers do care that you are going to solve problems for them. Employees care about that too. To get your customers and employees on board with your growth objectives it needs to be about solving problems, not just increasing revenue (or cutting costs, or growing market share). Setting a stretch goal doesn’t give any indication of why it’s achievable, there is no logic behind the calculation other than getting your people to work harder than they did last year or ride the wave of a growing market. Achievement of a stretch goal is just an outcome of a good strategy, it’s not the strategy.
9. Doing the same as we have always done.
This is where organisations base future success on past success. Having great success can be a hindrance to creating a good strategy. When an organisation has a few great products that bring in a decent profit it’s easy to sit back and assume the future will be a replica of the past.
But we know that’s not true. If your market is as attractive as you think it is, then there are many competitors about to enter it, you just don’t see them yet. So, it’s unlikely that the future will be the same as the past if the past was a great success.
As soon as those competitors do enter you will be forced to spend resources on defending your market share or prepare to lose some.
What’s a better approach? Map out the current and expected future revenue of all your products, with clear articulation of your reasoning. Then you can see where you need to future-proof your revenues with the introduction of new innovations that will capture new markets and new customers.
With so many ways to create a bad strategy, it’s easy to see why there are so many poor strategies around. However, creating a great strategy is just a matter of putting in the effort to work through a structured process of imagination and logic. A great strategy doesn’t guarantee success, but it gives you a much better chance of success than a bad strategy will.
For workshops and coaching to support you or your team in strategy development contact me at Sarah Robertson Consulting or book a discovery call.
