In his 2015 book Thirteeners Daniel Prosser makes the claim that 87% of businesses fail to execute their strategy each year. The colossal waste in money, energy and simple human joy behind that statistic is shocking. And it reflects the much-quoted earlier work by Kaplan and Norton (The Execution Premium) that 90% of strategies fail to deliver all their goals.
If this is true, just what is going on? How can this be commercially sustainable? How can highly skilled and highly paid executive teams in leading global companies be getting their basic strategy wrong 9 times out of every 10?
The truth, of course, is that they don’t. Both Prosser and Kaplan/Norton are regularly misquoted. In the shock of the statistical carnage it’s easy to overlook the important little words “execute” and “all of their goals”.
But we still have a problem. And, in an increasingly volatile and ambiguous business world, it’s a fatal handicap to future business performance. It’s not the formulation of strategy that’s at fault. It’s the inability to execute.
According to the Economist Intelligence Unit, 87% of CE Suite say executing strategic initiatives successfully will be essential for their organisations’ competitiveness over the next three years. Yet 61% acknowledge that they struggle to bridge the gap between strategy formulation and its day-to-day implementation.
Having lost sight of our objectives, we redoubled our efforts Walt Kelly
In most organisations, a huge amount of energy and investment goes into strategy design and formulation. But that’s not where the problem lies. In almost all cases, it’s in an inability to execute that kills the strategy.
It’s a problem of clarity and prioritisation, with a multiplicity of competing objectives paralysing management’s ability to act decisively and strategically.
A problem of engagement, with management, overwhelmed and unclear of priorities, disengaged and unwilling to take responsibility for fear of sanction
And a problem of communication, with line management unable to articulate strategy and align staff behind it.
“Fewer than 10% of employees report that they understood their company’s strategy” Kaplan & Norton The Execution Premium
It’s not a problem you find in the best entrepreneurially-minded businesses.
Over 20 years of working on strategy with both the best entrepreneurial businesses and the biggest corporate businesses, we have observed a fundamental difference in the cultural approach to strategy between the two. And I believe that difference is at the heart of the costly execution problem in corporate business.
That difference is as simple as this: fast-moving, entrepreneurially-minded businesses actively engage their people at every level so that they not only clearly understand strategy but take ownership of it.
Of course, that’s easily done in a small or flat structure. But this is not just a matter of structure and scale. It’s a matter of human beliefs and behaviours. It can and does work in organisations of any size. But it requires a complete change of attitude.
Key to this approach is having management first identify and emotionally engage with the purpose that exists behind the strategy. This starts at the top but ultimately needs to happen at every level required to execute the strategy. It’s a radically different approach to the imposed top-down, ‘strategic launch’ approach of most large companies.
“High performance people do better work if they understand the context…the best managers figure out how to get great outcomes by setting the appropriate context, rather than by trying to control their people”. Reed Hastings, Netflix
By first understanding the context (the ‘why’), it’s far easier to take ownership and responsibility for the strategy (‘what’ needs to be done). By then working through a structured process of prioritisation it’s possible to see with clarity how this can be achieved for that particular management team or business unit.
That resolves the first execution problem of a lack of clarity, with competing objectives paralysing management’s ability to act decisively and with velocity – and that can be critical. As Baum and Wally conclude in their work “Decision Speed and Financial Performance ‘there is a particularly clear association between strategic decision-making speed and subsequent commercial performance’.
And there’s a second feature of entrepreneurial management teams that has been lost in traditional corporate hierarchies; trust. A lack of trust leaves middle management unwilling to take responsibility for fear of sanction and creates the familiar sclerotic cultures of endless meetings and analysis which are the hallmark of a culture fundamentally unable to take responsibility. After any time spent in a typical UK corporate it will become abundantly clear why high-trust cultures are 50% more productive (Paul Zak).
Clarity of context and a culture of trust also resolve the third problem of strategic execution; communication. If management are confused as to the purpose the strategy serves and unwilling to take responsibility for it, they can hardly be effective in communicating it to, and inspiring, their teams. It’s hardly surprising that, in most organisations, the vast majority of employees haven’t the first idea of what the strategy is – and that’s a major disincentive to effort and commitment.
Entrepreneurial management has long been adept at navigating the kind of volatile, uncertain and ambiguous business world corporate organisations are increasingly having to face. In this new world companies with a desire to survive need to learn the lessons of contextual clarity and trust that allow entrepreneurial businesses of any size to be strategically agile, adaptable and fast.
But for that to happen someone in the organisation needs to take some self-responsibility for changing how things are done. And that will never happen..
John Rosling is a writer and lecturer on entrepreneurship, CEO of Contexis and Head of Thought at the Contexis Index; ever curious as to how entrepreneurial thinking is the key to activating purpose, stimulating agility and velocity and fulfilling human and commercial potential in global organisation