Avoiding Common Strategy Mistakes
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Designing effective strategies is often “job one” for senior executives. However, there appears to be one or more flaws in the strategic thinking of many otherwise successful senior managers. Observers note similar and recurring errors that senior and C-level executives continue to make with business strategy and development.
Writing for the Harvard Business School, author Joan Magretta, "The Most Common Strategy Mistakes," (December 2011) profiles the work of the noted strategy authority, Michael Porter and the overriding big question he's asked since his career began. “Why are some companies more profitable than others?”
An outstanding author, professor, management consultant, and leading authority on business strategy, Porter has penned 18 books and many published articles on competitive strategy, competitive advantages, and competition in general. Many consider him to be the “father” of contemporary strategy techniques and issues.
After years of research, Porter is a top strategy information source for senior executives. Many of his observations are accurate and immensely valuable in designing business strategy and development plans.
Common Strategy Errors
The most consistent and recurring strategy mistake: Targeting your company to “be the best,” but traversing the same road as your competition and believing that, by some magic, you will achieve better operating results. Many experienced executives still confuse operational efficiency with strategy.
A similar and equally debilitating mistake is to confuse marketing programs with strategic plans. Once again, while necessary and valuable, marketing campaigns are not, nor have ever been, strategy.
These and other prolific mistakes often arise from executives focusing too strongly on customers and their needs, at the expense of all else. Porter believes that, in too many companies, strategy is designed only around the “value proposition.” Unfortunately, this technique only focuses on the demand side of the competitive equation.
Even the most seasoned senior managers apparently forget that the supply side must also link to the demand component to reach the competitive advantage they crave. This lack of strategic balance leads to the mistakes noted above and those that follow.
A third popular error is for management to overestimate their company’s strengths, using this bias to make strategic decisions based on erroneous data. Designing a strategy based on this flawed conclusion often leads to flat or disappointing results. While management can design a successful strategy around real company strengths, this only works if your organization truly does something better than your competition.
For example, your company is strong in customer service, but you have competition that is equally strong. You will face challenges if you design a strategy based only on this strength. If your organization is performing the same activities, without a different slant or configuration, there are few reasons to expect that going down the same road will get your company to a different destination.
Porter also cites the common mistake of misidentifying the definition of your business. The classic example, as identified by Theodore Levitt decades ago, is that the railroads, at the height of their power, never understood that they were in the transportation business. This is why they failed to understand the threat posed by their competition, trucks and aircraft, until it was too late.
Had they designed an effective transportation strategy, they may have competed successfully. Instead, the railroads watched their competition accelerate past them in every operational, financial and marketing area. Railroad defenders contend that rapid advances in truck and aircraft efficiency would have achieved the same result, regardless of the intelligence of railroad strategic plans. Unfortunately, the business community will never know.
Recently, another recurring error involves management seeing their companies as “global.” In many cases, these organizations are national or sell only to neighboring countries, not throughout the world. Designing strategies for truly global companies is very different than creating plans for a more modest geographical area of influence.
However, the most damaging and most common mistake remains: Companies that have no strategy at all. In these situations, senior management “thinks” they have a strategic plan when, indeed, they do not. Typically, the executives label operational or financial plans as strategies.
In Porter’s view, so few companies design outstanding strategies, not from having faulty data or competitor analysis, but from facing more incisive obstacles that cloud senior management’s ability to make decisive strategic plans. Sometimes it’s corporate culture, company or organizational structures, biased internal systems, or flawed decision making environments. In essence, many organizations are unwittingly undermining their own ability to properly strategize.
Combine these internal barriers with external forces, such as opinions from industry “experts,” federal regulations, vocal consultants, and self-promoting financial analysts, and it’s evident that senior executives face difficult challenges to design creative, noteworthy strategies.
Senior managers must focus on overcoming these obstacles to create the intellectual freedom to design truly innovative strategies. Objectively evaluating the internal and external strategic “forces of doom” will help experienced executives avoid these common, dangerous strategy mistakes.
While not easy, avoiding these repetitive errors will deliver the quality business strategy and development results the management team wants. Learn to identify what is and what is not a strategy. Ignore or minimize the numerous internal and external obstacles. Dedicate yourself and your management team to identify or create those company components that differentiate your organization from its competition. Build your strategy around those differences, not your competitive similarities.