THE 5 MOST COMMON STRATEGY MISTAKES — AND HOW TO AVOID MAKING THEM
As Warren Buffet said, “It’s good to learn from your mistakes. It’s better to learn from other people’s mistakes.” Over the last few decades, I have witnessed great strategies catapult companies to new heights of success. Conversely, I have also seen poor strategies rob companies of their futures, putting employees out of work or draining business owners’ life savings. Getting strategy right often requires companies to recognize the ways that many get it wrong. A winning strategy is one that continuously learns, oftentimes from others.
Our new, digital economy has presented well-adjusted companies with colossal opportunity. However, the chaos of the transition has also led to unforeseen stumbling blocks.
Here are the 5 most common strategy mistakes:
LACK OF UNDERSTANDING OF MODERN VALUE DRIVERS.
While the works of strategy experts like Michael Porter, Henry Mintzberg, and Bruce Henderson are foundational to nearly all strategic thinking today, many leaders solely apply elemental strategy frameworks dating back to the 1970s, 80s, and 90s. These tools and ideas are not irrelevant, but to be pertinent, they must be updated to account for our new value drivers, intellectual assets and human capital that are covered in the book Outsizing: Strategies to Grow Your Business, Profits, and Potential.
OUTDATED APPROACH TO STRATEGIC EXECUTION.
Thanks to technology and innovation, tasks have shifted from routine to non-routine and from manual to digital. Yet too many companies focus solely on supply management, organizational design, cost control, and quality improvement. Don’t get me wrong — these management practices are important. However, in isolation they don’t fulfill the demands of our new experience economy. Companies must focus on building activities to deliver exceptional, memorable experiences to customers.
INEFFICIENT ORGANIZATIONAL STRUCTURE.
Company structure has grown increasingly complex, relying on layers of direct supervision for management. While direct supervision works well in a commodities or goods business, it can be expensive and counterproductive in service and experience economies. A stratified structure lends itself to hierarchical command and control management tactics that result in employee compliance rather than engagement. The new economy calls for engaged employees who can mutually adjust to increase agility in an unpredictable environment. Business optimization requires a team that can drive speed to value and devise creative solutions to optimize the customer experience.
FUTILE MOTIVATIONAL TACTICS.
Too many companies get strategy wrong because they motivate solely through extrinsic rewards rather than building strategies that prompt intrinsic buy-in. When leveraged in isolation, extrinsic rewards can lead to unintended consequences. Extrinsic rewards are quid pro quo and straightforward in the industrial economy. For example, produce twenty widgets at a set profit margin and receive a specified bonus. But what happens when value drivers change and experience, knowledge assets, and human capital are the cornerstones for achieving economic profits? How can companies reward the intangibles?
COMPANY CENTRICITY OVER CUSTOMER CENTRICITY.
In service and experience economies, every decision must revolve around the customer. Too often, companies choose what to do and how to do it based on their own needs. Leaders focus the company inwardly and become distracted by their own mission, vision, and values while ignoring the most important thing — the values of their customers and what motivates them to buy. At the end of the day, if a strategy doesn’t revolve wholly around pleasing the customer, it’s bound to eventually fail.
Regardless of industry, size, or number of years in business, companies fall prey to similar strategy mistakes. Understanding where others fall short provides you with the knowledge to avoid similar pitfalls. In doing so, you will be enabled to design, build, and implement a simple, powerful strategy.
Learn more about strategy design and implementation by checking out the Re-Energize Podcast or by getting in touch.
