Why Most Organizations Get Strategy Wrong

Most organizations get strategy wrong not because they are lazy or aren’t smart enough or don’t have the right consultants. In fact being too smart and having too many consultants can ensure a bad strategy. The number one reason I see is the inability of the organization’s leader(s) to identify or at least come to terms with the main problem facing the organization. Professor Richard Rumelt at the Anderson School at UCLA points this out in his Good Strategy, Bad Strategy talk at the London School of Economics. Some strategies are really goals: grow 10% or achieve a 15% increase in employee satisfaction. Other strategies are just a series of action items: do this, accomplish that. Rumelt calls those strategies, “a dog’s breakfast.” I have had the misfortune to see many strategies of this type. These aren’t strategies. They’re more like documents playing strategies on TV.

But why don’t organizations focus on the main problem? The problem is usually obvious. My answer really comes down to the difficulty leaders have making tough choices. The problem with facing the main problem is that it tends to force you to do something about it. Most people don’t want to do that because it means canceling projects, shifting resources, upsetting power balances, and “moving people’s cheese,” as Spencer Johnson famously wrote. I have talked with dozens of leaders about key strategic decisions that each one knew s/he needed to make. The main problem is usually obvious but internal resistance to change gave them pause about taking action. The leader has to work with these people everyday after all.

In the private sector you may be able to slash budgets or shift resources quickly but in most government and non-profit organizations leaders are constrained. Even most private sector organizations resist budget cuts and resource shifts and a leader’s ability to take swift action is more constrained than it appears. So in practice most strategies start off well but are gradually watered down as various people ensure their interests are protected. Soon your strategy is like Gulliver among the Lilliputians gradually pinned down by a thousand tiny ropes.

One of the classic examples of this phenomenon is Steve Jobs’ reentrance to Apple. Over the years since his firing, Apple had gradually expanded its product line until it offered 16 different types of computers. When his sister asked him which computer to buy, Jobs didn’t know what to tell her and he was the CEO. Why did this happen?

Each team that built a computer didn’t want to shut down and find new teams when their product became obsolete. That might mean working with new people they didn’t know or at a new office and how would that affect their parking spots?  Instead they advocated for a new version of their product regardless of any other effort within Apple. So instead of shutting down the old team and prioritizing resources to the new product, Apple chose to do both. Soon they had 16 product lines.

Steve Jobs realized Apple had a big problem. The company was running out of money and would go bankrupt in six months. He needed to cut costs and stabilize their core customer set. It was simply a matter of survival. He cut 16 confusing and overlapping products down to 4 in a simple two by two matrix: consumer/pro, desktop/laptop. All the extra resources for the other 12 products were either reassigned or cut.

No one wanted to make the tough calls to get Apple back on track. The company had highly qualified and smart CEOs who didn’t want to make those choices. No one likes when people lose their jobs but Jobs understood that he either made the call and cut some people now or everyone would lose his or her job in six months.

Leaders earned their stripes by making these decisions. While not every leader faces as dire a dilemma as Jobs, all leaders face a main problem. Once Jobs stabilized the company the question was how to generate growth. Once they had the iPod the question was how to deal with the music for it. It never ends. Each solution creates a new problem that demands a new strategy.

Do you know what the biggest problem facing your organization is and are you prepared to tackle it?