Top 10 Strategy Challenges

During the past decade, while leading strategic thinking workshops around the world, I’ve recorded a list of nearly 40 challenges that managers have said prevent them from effectively developing, communicating, and executing strategy. Honing my study down to 25 companies and the responses of more than 500 managers, the top 10 strategy challenges and the frequency of each challenge by company are listed in Table I.1.

Table I.1 Strategy Challenges

Challenge

Percentage of Organizations

1. Time

96

2. Commitment (buy-in)

72

3. Lack of priorities

60

4. Status quo

56

5. Not understanding what strategy is

48

6. Lack of training/tools for thinking strategically

48

7. Lack of alignment

48

8. Firefighting (being reactive)

44

9. Lack of quality/timely data and information

36

10. Unclear company direction

32

  • 1. Time (96 percent). The most commonly cited strategy challenge is time. With more responsibilities and fewer people to handle them, many managers are overwhelmed with activities. While checking lots of tasks off a to-do list each week may foster a sense of accomplishment, activity doesn’t always equal achievement. If the individual tasks aren’t strongly supporting the strategy, then we may fall into the trap of activity for activity’s sake. When there are lots of things to do, managers feel guilty stopping to take time to think strategically about the business. After all, most performance reviews don’t include a big box for “Thinks strategically for six hours a week,” with the rating of “Exceeds Expectations,” marked in it. When there is a lot to get done, time to think is often the first thing to go.
  • 2. Commitment (72 percent). Gaining commitment from others to support and execute the strategy vexes many managers. Often referred to as buy-in, commitment can be challenging for several reasons. If the people expected to execute the strategy aren’t aware of it, or don’t understand it, then commitment will be non-existent. According to a study out of Harvard Business

School, a shocking 95 percent of employees in large organizations are either unaware of or don’t understand their company strategies.17 This finding may be rejected out of hand by some senior leaders, but it’s crucial to find out just how high that percentage is for your group. Another reason buy-in is lacking is because many people don’t understand the reasons behind the strategy and how it will help them achieve their goals. A study of 23,000 workers found that only 20 percent said they understood how their tasks relate to the organization’s goals and strat- egies.18 If leaders fail to share why the strategies are in place, and don’t translate them to people’s respective work, the level of commitment will be minimal.

  • 3. Lack of priorities (60 percent). A great cause of frustration among managers is the overall lack of priorities at the leadership level. When everything is deemed important, it creates an overflowing-plate syndrome. If clear priorities are not established up front, then it becomes difficult for people to determine what they should be working on and why. This lack of priorities prevents people from taking things off of their plate, resulting in the frustration of feeling spread too thin by too many initiatives. A lack of priorities is a red flag that the difficult work of making trade-offs—choosing some things and not others—was not accomplished in setting the strategy. Good strategy requires trade-offs, which in turn help establish priorities by filtering out activities that don’t contribute to the achievement of goals.
  • 4. Status quo (56 percent). Numerous studies in the social sciences have shown that people prefer the status quo to change.19 When people change strategy, inevitably they are changing the allocation of resources, including how people invest their time, talent, and budgets. Since strategy involves trade-offs, certain people will be gaining resources and others losing resources. Obviously, those slated to lose resources are going to prefer to keep things they way they are. Another factor in the preference of the status quo is the “if it ain’t broke, don’t fix it,” mentality. For groups that have experienced success in the past, the idea of making changes to the strategy flies in the face of common sense, so their question is, “Why change what made us successful?” What they may not realize is that changes in market trends, customer value drivers, and the competitive landscape may be making the current strategy obsolete. In leading a revival at Starbucks during his second stint as CEO, Howard Schultz said, “We cannot be content with the status quo. Any business today that embraces the status quo as an operating principle is going to be on a death march.”20
  • 5. Not understanding what strategy is (48 percent). Even at the highest levels of organizations, confusion abounds as to what exactly is a strategy. Perhaps due to its abstract nature, strategy tends to mean different things to different people. It’s often confused with mission, vision, goals, objectives, and even tactics. Failure to provide managers with a universal definition of strategy, and clear examples to refer to, leaves the term open to interpretation, creating ineffective plans and inefficient communication. To determine the level of understanding in your group, provide each manager with a 3" X 5" notecard at your next meeting and ask each person to record their definition of strategy along with an example. Collect the cards, read them aloud to the group, and tally the number that defined strategy in the same way. Professor Richard Rumelt describes the problem this way: “Too many organizational leaders say they have a strategy when they do not. . . . A long list of things to do, often mislabeled as strategies or objectives, is not a strategy. It is just a list of things to do.”21
  • 6. Lack of training/tools for thinking strategically (48 percent).

Many managers aren’t considered strategic simply because they’ve never been educated on what it means to think and act strategically. For many years in the pharmaceutical industry, district sales managers were not asked to be strategic, because the blockbuster business model combined with the reach and frequency sales approach proved to be a winning formula. However, changes in the industry—including healthcare reform, geographic differences in managed care, reimbursement policies, and the emergence of Accountable Care Organizations (ACOs)—now require district sales managers to strategically allocate their resources and make trade-offs between different opportunities to grow their business. Research has found that 90 percent of directors and vice presidents have received no training to become competent business strategists.22 It shouldn’t be a shock then that a Harris Interactive study with 154 companies found only 30 percent of managers to be strategic thinkers.23 The disconnect on proficiency in strategic thinking can sometimes occur between a CEO’s perspective and the perspective of senior executives. A global survey showed that while only 28 percent of CEOs felt their teams needed improvement in strategic thinking, more than half of the non-CEO executives indicated that strategic thinking skills were in need of improvement.24 Procter & Gamble CEO A. G. Lafley writes, “There simply is no one perfect strategy that will last for all time. There are multiple ways to win in almost any industry. That’s why building up strategic thinking capability within your organization is so vital.”25

  • 7. Lack of alignment (48 percent). Getting people on the proverbial same page is difficult when it comes to strategy. The challenge lies in the fact that different groups within the organization have their own goals and strategies. Sometimes they align with others, but often times they don’t. When there is misalignment, power struggles erupt and instead of working with one another, managers from different areas work against each other to ensure their priorities take precedence. Lack of alignment can also occur between executive teams and the organization’s board of directors. Some organizations use their board to provide input into the development of strategy and some use the board to review the already completed strategy in a Q&A-format presentation. Selecting the optimal intellectual exchange and setting appropriate expectations for contribution can be critical to a CEO’s success. A survey of 1,000 corporate directors found the number-one reason for success and the number-one reason for failure in CEO appointments dealt with strategic alignment between the CEO and the board.26
  • 8. Firefighting (44 percent). Make no mistake, a firefighting mentality starts at the top of the organization. If managers see their senior leaders constantly reacting to every issue that comes across their desk, they too will adopt this behavior. Firefighting then becomes embedded in the culture and those that are seen as the most reactive, oddly enough, garner the greatest recognition. Managers who thoughtfully consider each issue before responding don’t seem to be doing as much as the firefighters, when in reality, they’re exponentially more productive.

“Let’s think about that,” is a simple but powerful phrase that can eliminate reactivity within your business and culture. The next time you receive an e-mail marked urgent or someone comes charging into your office with how to react to a competitor’s activity or a new flavor-of-the-month project, reply with “Let’s think about that.” Then stop and consider how this helps you achieve your goals and supports your strategic focus. To do so, determine the probability of success, impact on the business, and resources required. If after this analysis, the new task doesn’t appear to support your goals and strategies, kindly inform the relevant parties that, relative to the other initiatives you’re working on, this doesn’t warrant resource allocation.

9. Lack of quality/timely data and information (36 percent).

Strategic thinking is defined as the ability to generate new insights on a continual basis to achieve competitive advantage. An insight is the combination of two or more pieces of information or data in a unique way that leads to the creation of new value. So, at the core of strategic thinking is the information or data, which we piece together in unique ways to come up with new approaches, new methods, or new solutions for providing superior value to customers. Managers who aren’t receiving timely, high-quality information and data regarding the key aspects of their business are going to be hindered in their ability to think strategically—and the ability to understand this information is critical. A study showed that 62 percent of workers cannot make sense of the data that they receive.27 Without clear priorities and methods for understanding, categorizing, and sharing insights, managers at all levels will continue to struggle with generating new ways to achieve their goals and objectives. Research by the consultancy McKinsey & Company verified the challenge managers face when it comes to profitably growing their business on strategic insights:

A fresh strategic insight—something your company sees that no one else does—is one of the foundations of competitive advantage. It helps companies focus their resources on moves that separate them from the pack. Only 35 percent of 2,135 global executives believed their strategies rested on unique and powerful insights.28

10. Unclear company direction (32 percent). It’s difficult for managers to set strategy if there isn’t clear strategic direction at the business unit and corporate levels. In some organizations, there are strategies at the business unit and corporate levels, but they’re kept secret. Evidently, this secrecy is to prevent competitors from finding out their strategy. While it’s understandable to keep proprietary processes and future intellectual properties secret, it makes little sense to keep strategy hidden away. If strategy is how to achieve the goals and objectives, it’s impossible to gain full engagement and proper commitment from employees in rolling out the strategy if they don’t know what it is. The other main reasons for unclear company direction are lack of process to develop strategy, a “we’re too busy to plan” approach, and ignorance as to what comprises sound strategy. Managers from more than 500 companies have taken an assessment I developed called, “Is Your Organization Strategic?” and the average score is 45 percent, a failing grade, indicating there are many rudderless companies out there that are strategically adrift.

 
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