These Seven Risky Strategies Can Cause Avoidable Fiascoes


By Manie Bosman

While many authors on the topic of why strategic plans fail seem to agree that bad execution is the primary culprit, blaming failure on those who were supposed to “make it happen” is perhaps a a too easy way out for the “visionaries” on the top floor. Paul Carroll and Chunka Mui (authors of Big Blues: The Unmaking of IBM and Billion Dollar Lessons) are probably the world’s foremost corporate failure experts, and they believe that flawed strategies were in fact the biggest cause of failure. Studying 750 U.S. business failures over a period of 25 years, they concluded that most “avoidable fiascoes” resulted from seven “risky strategies”:

  1. The Synergy Mirage: Companies trying to expand by amalgamation with another company which has complementary strengths, often discover the whole isn’t always better than the sum of its parts.
  2. Faulty Financial Engineering: Aggressive financial practices are risky, and can cause brands, reputations, and whole enterprises to implode. 3- Stubbornly Staying the Course: Blindly increasing investment in existing strategies in response to market changes can be disastrous.
  3. Pseudo Adjacencies: Adjacent-market strategies try to build on core organizational strengths to expand into a related business. This includes marketing new products to existing customers, or existing products to new customers, or marketing via new channels.
  4. Bets on Wrong Technology: Technology-reliant strategies are inspired by the potentially large rewards for those able to develop breakthrough-products or services, such as Google, eBay, and iPod. However, many of these strategies were destined for failure from the start.
  5. Rushing to Consolidate: When industries mature, the number of players decreases. Those left standing often attempt to increase capacity, lower overheads and get buying and pricing control through consolidation. For various reasons, this often leads to their own demise.
  6. Roll-Ups of Almost Any Kind: The idea behind roll-ups is to combine large numbers of small enterprises into a large one with more buying power, larger brand recognition, lower costs, and improved marketing. However, according to the research, more than two-thirds of these ventures were unsuccessful to generate any value for investors.

Although these seven strategies are not always bad ideas and have in fact generated considerable wealth for some companies, they’re dangerous for being appealing in ways that can tempt executives to ignore signs of impeding danger. It seems that this once again confirms what I’ve stated in previous posts on this blog – that strategic plans without strategic thinking can be a sure recipe for failure in today’s dynamic and fast-changing environment.

Reference:  

Carroll, P. B, & Mui, C. (2008). 7 Ways to fail big. Harvard Business Review, September, 82-91.

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About Manie Bosman

Manie Bosman is Founder and CEO of the Strategic Leadership Institute. He is a leadership development consultant specializing in the emerging fields of neuroleadership and neurosafety. Based in Pretoria, South Africa, Manie has more than 20 years of international experience in cross-cultural interaction, diversity management, change management, public speaking, communication, corporate training and team development. He holds a Masters of Arts in Organizational Leadership and believes that effective leadership is the key determiner of success in any venture, group or organization.
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One Response to These Seven Risky Strategies Can Cause Avoidable Fiascoes

  1. Ian Rheeder says:

    Great balanced view, as most surveys have revealed that it was execution that was the culprit. I list some more studies below.

    A 2004 Economist survey of 276 top operations executives from large North American firms discovered that 57 percent were unsuccessful at strategy execution.
    • A study of 275 managers cited that a firm’s ability to execute strategy was far more important than the firm’s strategic plan.
    • Even more disconcerting was a Fortune cover story, “Why CEO’s Fail,” in which it was determined that CEO’s inaccurately believed that their failures were due to bad strategy, whereas in reality, 70 percent of the CEO’s just did not get the strategy implemented.
    • Walter Kiechel, in his Fortune article, “Corporate Strategists under Fire,” estimated that fewer than 10 percent of strategies implemented were actually effectively implemented.
    • Research undertaken in 2004 suggested that 90 percent of all company strategies fail, and 95 percent of employees admitted they didn’t understand their company’s strategy. So the next major blunder after not implementing strategy is fuzzy and misguided strategy, where people don’t know why, how or where to start implementing the strategy.
    • A 2009 global study of 3623 managers indicated that 40 percent of executives were resistant to change during a stressful recession. The survey suggests that this is likely because a third of all executives are not equipped to execute change, mainly due to their reluctance to attend training.
    • In Stephen Covey, Bob Whitman and Breck England’s book (2009), Predictable Results in Unpredictable Times, only 15% of the 150,000 large sample could recite their company’s main goals.
    • A Gartner survey revealed that just 26% of employees have aligned themselves to the company’s goals, but disturbingly 19% were actively working against the leaders desires!

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