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Why Strategic Failures are Increasing and How to Prevent It

In order to achieve strategic initiatives, organisations need to reduce the amount of operational work they do to simply run the business, and increase their activities, in the form of projects, which will change the business.

This is a necessary and inevitable response to the changing business world in which we operate, but unfortunately, many organisations are unable to manage this shift and deliver these projects successfully – despite this being the basis for successful strategy execution.

However, while the impact of these projects on strategic initiatives is significant and cannot be underestimated, the resulting increase in the number of projects put in place is leading to an increased rate of strategic failure. This is due in the most part to poor project management skills.

My research has uncovered the following three major actions that traditional-functioning organisations need to enforce, if they are to avoid difficulties with executing their strategy:

  1. Align organisational structure with the organisation’s changing reality
  2. Introduce governance to support execution of the strategy
  3. Improve company-wide focus

 

The Importance of Alignment

The alignment and the balance of an organisation’s structure, combined with the extent to which change-the-business activities are deemed important, determines the overall success of project performance, and in turn, strategy execution.

In his book Strategy and Structure, published in 1962, Alfred Chandler claims that an organisation’s structure should be driven by its chosen strategy. If it isn’t, inefficiency will result.

More often than not however, management underestimates or completely ignores this fact. Consequently, organisations fail to evolve (or adapt) as quickly as the business drivers, and subsequently, a large proportion of projects fail.

Until recently, departmental success was measured using key performance indicators tailored to each function. For example, a finance department’s success was measured by whether it was closing the books and producing the financial statements on time, while the HR department’s success depended on low turnover, or whether it had finished employee appraisals on time.

This approach creates lots of internal competition and a “silo mentality.” Some heads of departments will operate within their own little kingdoms and find cooperating with other parts of the business difficult. In many cases, the key performance indicators of one department could be at odds with those of another.

On the opposite end of the spectrum, strategic projects – those chosen for their importance in achieving strategic goals – are almost always cross-departmental. This means that a strategic project, such as expanding the business into another country, requires resources and input from a number of different departments. Facility experts find the location, lawyers handle the legal documents, HR experts recruit the people, salespeople develop a commercial plan and so forth.

Due to the size and critical nature of these projects, contribution and cooperation of all these departments is needed if these projects are to succeed.

Cross-departmental projects require sharing of power between other members of the organisation in the pursuit of what is best for the business. Unfortunately,  almost all of the power in a traditional functioning organisation— those responsible for resources, budgets and decision making—still resides with the functional/department heads.

 

Strategy ExecutionThe Importance of Governance

One of the major reasons why traditional-functioning organisations have difficulty supporting and following up on strategy execution is the absence of the right governing structure.

Once the strategic planning department has consolidated the strategic plans for the next three to five years, it hands over the execution to different departments. However, as previously noted, departments within functional organisations concentrate only on the portion of the strategy for which they are responsible. For example, marketing will focus almost exclusively on its marketing plan, which in turn will be broken down into different initiatives, programme and projects.

Today’s governing structure therefore needs a role – a department even – to take responsibility for the strategic, cross-departmental projects, as well as take a consolidated overview of the progress of strategy execution, and most importantly, flag up when the strategy is not being correctly executed.

Although the CEO, together with the executive board, are ultimately responsible for all company initiatives, the reality is that today, most companies still lack the clearly assigned responsibilities for effective companywide strategy execution; and this is why such initiatives often fail.

My recent research has shown that 52 percent of the companies I observed had an established project management department, but only 23 percent of them had a project portfolio management office, which is the engine room of an organisation when it comes to coordinating and delivering the entire change-the-business initiative.

 The Importance of Focus

I have also identified a lack of focus as one of the main hindrances for companies achieving their strategies, and have uncovered the three main reasons why a company becomes unfocused:

  1. Top executives do not know their own organisation’s key strategic initiatives

Having  facilitated more than 30 workshops with senior management teams, in which I ask them to write down their company’s top three initiatives and then list their replies on a flip-chart, I have found that every time, the response often include more than three initiatives and sometimes only the managers’ own initiatives.

When I reveal the list, there is a moment of silence in the room and a certain level of embarrassment. The point of this exercise, I explain, is to show that if the executives of the firm do not know the company’s priorities and are unable to focus on what is key, then they cannot expect the same focus from their employees.

This lack of focus can also be explained by the pressure on many CEOs to show results quickly. Consequently, they often invest in many initiatives, thinking that they will increase their chances of success. But this thinking is totally wrong as it leads to a lack of understanding of what the real priorities are for the business.

  1. Being focused is difficult and requires lots of discipline.

Focus imposes order. It requires energy, work and some pain – which people often try to avoid. However, the results of a study by psychologists Matthew A. Killingsworth and Daniel T. Gilbert of Harvard University have shown that human beings are, by nature, unfocused. [1]

At any point, an average of 50 percent of the population is not focused on what they are doing. In addition, 30 to 40 percent of employees’ time in the workplace is spent tending to unplanned interruptions and then reconstituting the mental focus the interruption caused. This was not the case 20 years ago, simply because the tools of interruption were not so plentiful.

If a company’s top management is not focused, this significantly increases the possibility that the rest of the organisation is also unfocused. Lack of focus not only leads to unhappiness, it also leads to errors, wasted time, miscommunication and misunderstanding, diminished productivity and loss of income.

But when top management is extremely focused, this is transmitted to the staff and the increase in performance is huge.

 

  1. There are too many projects

Finishing projects is very difficult and consequently the number of projects continues to rise. Most companies have trouble cancelling projects that are not doing well. This increase in projects leads to a gradual decrease in focus within the entire organisation.

In my entire career, I have only seen a few projects terminated – and only because the company went bankrupt. One reason for the difficulty in ending projects is that companies do not want to admit that they have failed. Most of the projects have a senior executive as a sponsor, so stopping a project will be seen as his or her personal failure.

The benefits of becoming a focused organisation are massive – and the good news though is that all these issues can be overcome. One of the first things that Steve Jobs did when he returned to Apple in 1997 was to cancel almost 300 projects at once. He was convinced that Apple was unfocused; and in order to survive, the company needed to become highly focused.

Steve Jobs managed to transform Apple by becoming a focused organisation, and any executive can do the same.

Join our webinar on the 5th December presented by Antonio Rodriguez, the world’s leading champion of project management and strategy implementation. Antonio will discuss why it is that senior executives do not regard strategy execution as an important means for their organisations to succeed in their long-term plans.

Strategy Execution Webinar 

[1] Nov 15, 2010, NY Times. Study from Daniel Gilbert and Matthew Killingsworth from Harvard University – 250,000 replies.

 

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About Antonio Nieto-Rodriguez

Antonio Nieto-Rodriguez
Antonio Nieto-Rodriguez (antonionietorodriguez.com) is the world's leading champion of Project Management and Strategy Implementation. He is the creator of concepts such as the Hierarchy of Purpose featured by Harvard Business Review, or the Project Manifesto; which argues that Projects are the lingua franca of the business and personal worlds from the C-suite to managing your career or relationships. Antonio has been recently nominated Thinker of the Month by the prestigious Thinkers50.com, who identifies the most influential management thinkers in the world, inc. Michael Porter, Clayton Christensen, Rita McGrath. Author of the best-selling book "The Focused Organization" and a much in-demand speaker at events worldwide, Antonio has presented at more than 160 conferences over the past 15 years, regularly evaluated as the best speaker. European Business Summit, Gartner Summit, TEDx, and EU Cohesion Policy Conference with EU President Donald Tusk; are some of the events he has delivered inspirational speeches. A pioneer and leading authority in teaching strategy execution and project management to senior executives at top Business Schools; currently visiting professor at Duke CE, Instituto de Empresa, Solvay, Vlerick, Ecole des Ponts and Skolkovo.

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