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Strategy - BLOG

Five Reasons Most Companies Fail at Strategy Execution

Quy Huy, INSEAD Professor of Strategic Management |

If your organisational culture has these five characteristics, all attempts to implement strategic change will likely be doomed.

It’s no longer a secret that most companies struggle with strategy execution. McKinsey research tells us, for example, that 70 percent of change efforts fall short of desired results. The financial losses implied by statistics like these are massive, and corporate leaders have taken notice. Today’s senior leaders realise that implementation is at least half of the leadership challenge when it comes to improving performance via strategic change. Too frequently, however, they seek solutions in the wrong place.

When I speak to executives about what constitutes effective strategy execution, they very often emphasise the importance of “communication”. If they could only master the art of communicating the new corporate strategy, employee alignment would be guaranteed and resistance overcome. Of course, having a clear and consistent message is essential. But within organisational culture there can be powerful, unspoken messages that contradict official rhetoric. Peter Drucker famously said, “Culture eats strategy for breakfast.” I believe the same could be said of strategy execution.

Collective emotions

Managers are usually uncomfortable dealing with emotions in business settings, especially the all-important collective emotions — i.e., various emotions experienced by different stakeholder groups inside and outside the organisation, including employees, customers, communities, and investors. However, as much as managers may want their intended strategy to succeed, they still find it difficult to accept that the fate of their best-laid plans depends on the emotional allegiance of these groups. Instead, they assume their communications—which often focus only on the intellectual “left brain” rather than incorporating the “right brain”, the seat of emotional engagement—will be heeded when their back is turned.

My prior research shows that executives who are receptive to the subtle, non-verbal signs of collective emotion are more likely to have the credibility required to lead strategic change. Sadly, such leaders are still few and far between. 

Over time, emotionally illiterate leadership gives rise to a change-averse corporate culture. While profits are high and the economic climate remains promising, the problem stays under the radar—much like the early stage of cancer. But when a change in course becomes necessary, senior leaders find that no matter how hard they try, transformation never takes root.

Microsoft’s woes

Consider what happened internally at Microsoft in the year or two just before the iPhone came out. Having gotten wind of Apple’s impending game changer, Microsoft chairman Bill Gates tasked then-CEO Steve Ballmer with creating a copycat device to forestall Cupertino’s market dominance. Ballmer passed the word to his senior vice-presidents, each of whom had at his disposal thousands of engineers and an R&D budget running into the hundreds of millions of dollars. Their combined failure to produce an acceptable iPhone equivalent is the stuff of tech legend.

What went wrong? Despite their shared mandate, the departments didn’t cooperate fully with one another. A big part of the problem, experts agree, was Microsoft’s infamously cutthroat “stack ranking” system, which forced managers to grade employee performance on the curve. Regardless of individual performance, a certain percentage of staffers would always be ranked as “below average” or “poor”. Low-ranking employees were ineligible for promotions and pay rises, and would sometimes be shown the door.

As a result of stack ranking, Microsoft’s top talents were wary of and competitive with one another, seeking to surround themselves with employees who would make them look better by comparison. Any collaboration between them was stifled by the dehumanising corporate culture.

In November 2013, reports surfaced that Microsoft had abandoned stack ranking. Three months later, Ballmer stepped down as CEO.

Five main barriers

Microsoft’s story may be high-profile, but it is not unique. Wherever there is a lack of emotionally incisive leadership, employees will tend to fall back on the basic human instinct of self-preservation. Ironically, what is “survival mode” for employees may well spell the death of a corporate strategy.

In my decades of experience working with executives representing dozens of nationalities, I have identified five main emotion-based barriers to strategy execution within organisations. Each one presents a major danger to transformational efforts by preventing the necessary sense of urgency and commitment to a common task from taking hold throughout the organisation.

·         Mistrust and low sharing of useful and timely information – A “politics first” mentality that prizes appearance management above action. This causes a situation where no one wants to be the bearer of bad news. As with Microsoft, Nokia and probably Volkswagen, problems will come to leaders’ attention only when it is too late. Strategic alignment is further hindered by information-hoarding among players who see their colleagues as competitors.

·         Low receptivity to effortful change  –  Effortful change (even when it’s obviously beneficial, e.g. quitting smoking or staying on a diet) is easy to profess, difficult to do. Leaders must demonstrate their own willingness and ability to change before asking it of others.

·         More talk than action, then misaligned action – As I suggested above, communication for intellectual understanding does not elicit emotional engagement to implement the new strategy. When leaders fail to inspire the collective toward a common goal, each team will tend to veer off in its own direction. It becomes impossible to integrate all the silos.

·         Mechanistic action – When under high time and performance pressure, employees become creatures of habit rather than taking risks to become innovative.

·         Complacency  –  Confronted with the potential effort and risk of strategic change, the organisation as a whole believes the status quo is good enough, so why do the hard work to change it?

Balance is the key

Leaders already spend a lot of time and energy making a solid left-brained case for their strategy, as they should. But without a corresponding effort to engage emotionally and a culture that supports that effort, the spirit of change will quickly fade from the scene. To execute a strategy successfully, you need a good plan and an even better culture. I will discuss how this could be done in future blogs.

Quy Huy is Professor of Strategic Management at INSEAD. He is also Programme Director of the Strategy Execution Programme, part of INSEAD’s suite of Executive Development Programmes.

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Comments
Clement Gavi,

'Leaders already spend a lot of time and energy making a solid left-brained case for their strategy, as they should. But without a corresponding effort to engage emotionally and a culture that supports that effort, the spirit of change will quickly fade from the scene. To execute a strategy successfully, you need a good plan and an even better culture.'

Strategy can be seen as a structure of intelligibility thought in order to bring about, to realize something practically. Thus strategy execution suggests the strategy has been defines, it exists. As such when what has been defined poses problem when it comes to its translation into practical reality, the problems may be how lucid and positive the contents of what has been defined is for those who have to practice it.

Lucid in terms of it contains clues of its understanding, the reasons why of its necessity, etc and positive in terms of it has been conceived as such it affects positively in order to be adopted, in order for those who have to translate it into practical reality could easily make it theirs.

kmk,

how do you assess the organization redness for a change based on
five characteristics mentioned ?

quy huy,

We have developed a series of 360-degree measures to assess various factors as part of the coaching given in our strategy execution program at INSEAD.

Robin Speculand,

The five points Dr Quy Huy explains are also excellent, as is the Microsoft example. The concern I have is with the title. There are many reasons organizations fail at strategy execution and for each organization the reasons are different. Just as they must make the execution their own. In my research for my book coming out in mid 2016, Excellence in Execution, there are 16 most common reasons why execution fails.

Steve,

Would love to learn more about your book and when it comes out. If you have any articles I would like access to them to learn more from you. Thank you.

sscruggs10@gmail.com

Antonio Nieto-Rodriguez,

Very insightful article Dr. Quy, thanks for sharing.

Based on my experience and research, having the right excelling culture accounts for about 80% of successful implementation, while process only for 20%. If the culture is bad or non existent, the processes will try to do the work, but a process will never drive successful execution.

I agree with world expert Robin Speculated's remark that there are many other aspects to successful execution; it would be too easy to be successful otherwise....

One crucial point that is missing is the important of FOCUS at the top, starting from the CEO. This is one of the core competencies that comes across when research has been done in successful CEO. In my book, The Focused Organisation, I explain how Steve Jobs turned around a dying company by creating a laser focused organization.

Focus requires leaders to make choices, and stick to them till they are fully executed and benefits are delivered. Not easy to have the guts to do that in today's fast changing world.

quy huy,

I agree with you that there could be other factors. However, for communications purposes, it seems better to be concise and focus on what I believe as the most frequent and important factors based on my research done worldwide over the last 20 years.

TJS,

Very insightful article. I have painful memories of implementing a new matrix structure. We covered every base on communicating at all levels, but we didn't go deep enough with a group who were personally affected more than we envisaged. Instead we ploughed on with the implementation and were undermined by this group with their teams, leading to having to call a halt just before launch.
Where effortful change is needed, take your time until you have their genuine understanding and agreement that this is right for the organisation and therefore for them, not just their tacit agreement.

MAT,

Nicely put article. Very relevant in this Digital agea; Communication and articulation, telling a story that is relevant, off boarding irrelevant players and on boarding team players, Embracing core values, promoting new ideas, rewarding great achievers and persistently mentoring average players, these are realistic and relevant everyday pathways to Strategy execution. It worked.

Futurist Leader,

The stressful multi-tasking job of a CEO makes the receptivity for emotions demanded in this article a rather rare if not unrealistic ideal. However, there is a tool by which executives can capture even the slightest swings in employee mood: a straightforward in-house Prediki (NextGen Prediction Market) eliciting employees' KPI expectations 24x7.

Me,

Interested to see what's going to be on the future blogs.

But, since communication isn't delivered in any single way... I'm confused as to how they can't appeal to the "right" brain. With the use of imagery and other subtle messages, there must be a way.

If I was to powertrain the barriers listed down to enthusiasm and even-handedness, I should think that leading by example has no effect when there's a clear divide in power and status. These employees sound like a bunch of sheep. Perhaps self-fulfilling prophesies play their part.

Looking at the first barrier, you find the same problem Microsoft suffered, in universities were students from the same University wrongly think they are in competition with one another. This seems to then discourage sharing of ideas in case the results favour the student they've helped. If they anonymously helped one another, this would not be an issue.

To anonymise their employees, leaders simply need to emphasis on the collective advantage and not necessarily appease or legitimise their fears.

blueplate,

Executing the strategy is not just about planning and culture, you need management processes that cascade the strategy,the strategic initiatives that operationalise the strategy and the core values that support how individuals are required to behave. Strategy happens at an individual level and people need to understand where they fit in and how they can reconcile and cope with their normal day job activities and the new goals and activities that may be required to align themselves with the strategic objectives. The clue is in the phrase Strategy Execution Management. It is a management process not problem of culture or communication, which are just symptoms of the wrong management process.

Indresh Saluja,

We have been transforming family run businesses in India.
To execute a strategy roadmap needs the following
- Alignment at the start of the strategy roadmap between the key stakeholders. We typically do it through a two days workshop on creating a strategy roadmap drilled down two levels into specific actions
- People are never at fault, processes are. Bring measurability, work with people to bring in efficiencies, improve core end to end processes. There are not more than 4-5 key business processes in any business. The more we create the more silos we eventually land up with leading to less communication, mistrust, and eventually lack of involvement in any intervention
- We have designed a survey - Organisational Competitiveness Index which assess if managers believe their company is competitive and will do well in future, and assesses areas to be improved to bring competitiveness. Insights have shown its the core process failing as root cause and not the other aspects like lack of communication, silos, politics, insecurities, lack of involvement, blame game etc all these are outcomes of the core process and misalignment to it by everyone

Indresh Saluja,

We have been transforming family run businesses in India.
To execute a strategy roadmap needs the following
- Alignment at the start of the strategy roadmap between the key stakeholders. We typically do it through a two days workshop on creating a strategy roadmap drilled down two levels into specific actions
- People are never at fault, processes are. Bring measurability, work with people to bring in efficiencies, improve core end to end processes. There are not more than 4-5 key business processes in any business. The more we create the more silos we eventually land up with leading to less communication, mistrust, and eventually lack of involvement in any intervention
- We have designed a survey - Organisational Competitiveness Index which assess if managers believe their company is competitive and will do well in future, and assesses areas to be improved to bring competitiveness. Insights have shown its the core process failing as root cause and not the other aspects like lack of communication, silos, politics, insecurities, lack of involvement, blame game etc all these are outcomes of the core process and misalignment to it by everyone

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