I want to revisit a really fundamental idea in strategy, and that is that the objective of effective strategy execution is to create, and occupy, and defend a valuable competitive position. In other words, you want to create value in a way that's consistent with both your values, your opportunities, and the capabilities that you have. And so this is the sort of fundamental strategist's challenge, and this is something that we've spoken a lot about, right? But here's the thing. Strategies often fail! In fact, candidly, the empirical evidence is not kind here. By some measures, over 70% of corporate strategic initiatives are never successfully implemented. So given that sort of dismal statistic, why focus on strategy at all? One might ask, why bother? Right? And look, it's a fair question, but I think the answer lies in the fact that we don't aspire to be part of that 70%. Rather, we aspire to be part of that 30% in which we did create and execute an effective strategy, right? And oftentimes, the key to ending up in that 30% is better strategy. It's having a better sense of what our strategy should be and what it is. In other words, when I say better strategy, I mean better on all three dimensions of strategy execution. We need to have a strong analysis that is thorough, and well-grounded, and is sort of adaptable to the changing conditions of the marketplace. We need to have a good process for formulating that effective strategy, given the analysis we've done. And we've gotta have a plan for implementing that strategy that, again, is going to be effective. All three of these sort of aspects or elements of strategy execution are things that we're talking about. But it may just turn out that better strategy is, in fact, the key to performing better and ending up on the better side of the statistics, right? And so therefore, it's really important to understand what some of the common pitfalls are to good strategy execution. And that's what I want to focus on just for a few moments now. So what are the common mistakes to strategy execution? Well, let's start at the top. First of all, there can be a failure to understand your own organization. Now, that seems sort of strange, right? But in fact, that's true that oftentimes, organizational strategies fail because the organizations don't really understand themselves that well, right? So that's the thing I want to put to you. I want you to think carefully about how well do I understand my organization? Do I really understand my capabilities and strengths? Do I really understand how the marketplace might be changing? Have we done a really effective strategic analysis to really understand who we are and what we're all about? Because if we don't have a good, accurate starting point, we may just head in the wrong direction altogether. So that's a common mistake. Another common mistake is the failure to really understand how you are performing, right? So assessing the performance, sort of understanding performance feedback for the organization turns out to be a really tricky thing. It's much more difficult than it appears. In fact, often, sort of blunt measurements of performance, if the stock price is up or down today, sort of basic accounting measures, things that we might put on our tax filings, all of those metrics are useful. But they can sort of highlight certain things, and they can also obscure certain things, right? So it's important to really understand and dig deep within the organization to understand how you're performing. What are the leading indicators of what your performance might be down the road? I think that's a common failure, a common mistake, and it's a reason why, a lot of times, strategy doesn't work out well for some organizations. What's another common mistake? Another one is the failure to really understand the sort of context, the industry dynamics, the competitive market that you're operating in to really understand which direction things are headed in. What are the trends versus what are the uncertainties? What are the things we're not sure about? But to really focus on understanding that economic context, the social context, to really have a grasp on what's the environment that we're doing business in, what's it really like? And do we really understand which direction things are headed in? So that's a common failure, to not really thoroughly and effectively understand the business context that the organization is operating in. Another common mistake can be a hyperfocus on growth for growth's sake. So by many accounts, growth is a good thing. Certainly, investors are looking for growth in you as an organization, for example. But growing just for the sake of growing can cause an organization to do a lot of foolish things, right? And it's much better to understand how growth might help you execute on your effective strategy. And once you sort of put growth together with your understanding of what your strategy is and what it ought to be, you might have a better handle on where you should grow versus where you shouldn't grow, right? But oftentimes in organizations, this sort of focus on growing at all costs by any means necessary can be a recipe for disaster. Another common problem can be a mismatch between the organization strategy and the sort of structures and processes of corporate governance. Are we organized in the right way that will really enable us to bring out the best in our organization, and will ferret out problems, and will help us to really do the things that will enable us to execute on that strategy? If we don't get that right, if things are misaligned and we have governance problems, that can be a common reason for the failure of a strategy. And finally, there's this idea of the competency trap. Sometimes, organizations can get stuck in what I'll describe as a competency trap. And what I mean by that is that, look, on one hand, we oftentimes take as a starting point for strategy formulation and execution a deep understanding of our capabilities. What is it that we know how to do well? And that can be a useful way to approach strategy, but it's also possible to take that too far. If our starting point always simply involves what it is that we're already good at, we might find ourselves being really good at something that the market no longer wants. And all of a sudden, we wake up one morning and we say, wow, why are sales way down? Why are things not going so well? It may be because we've kept trying to do the things that we're good at, and we've pursued that path, and we missed something that we could have seen coming. So competency, an affective understanding of your capabilities is important. But you want to make sure that you don't use that as a way to paint yourself in a corner by always just playing to your strengths, right? So these are common mistakes when it comes to strategy execution. And these are the type of things that you need to be aware of and guard against as you form, and set, and execute on your organization's strategy.
