For many years companies have a strategy. Sometimes a good one. Sometimes a bad one. But what is strategy? A strategy is the route an organization wants to create in order to achieve a certain goal. The optimal route depends on how a company is organized. What the goal is depends on the situation. What do you want to achieve? For most companies the goal of having an organization is to maximize shareholder value (Brealy, Meyers, & Marcus, 2015). But why is it so important?
We can compare having a strategy with sports. If you want to win a game you will need to be competitive. If every competitor has the same strategy there is no competitive advantage (Stoelhorst, 2008). But imagine you have a way to do it different but better. Than you have a higher chance to win. It’s the same with a company. If every company sells the same product there is no difference in performance. You will need to change your strategy in order to win. A strategy can make it possible for a company to create a higher competitive advantage (Conner, 1991). For example, differentiate you product compared to your competitors like selling more products but at a lower price or products that are high of quality compared to the standard of the market (Porter, 1991). So a good strategy determines the performance of a company. There are different reasons to change a strategy. Do we change the whole strategy (Autonomous strategic process) or just a part of it (induced strategic process) (Burgelman, 1991).Sometimes a strategy just isn’t a good strategy after all. Or maybe the strategy is outdated and needs renewal (Agarwal & Helfat, 2009). Maybe it doesn’t fit the current environment (Werham, 1984) . Also when the environment changes, so does the way of organizing (Morgan, 2006). A changing environment can be a driver for innovation (B-Team, 2015).Therefor a strategy change can be needed. This can be achieved through innovation.
Companies have an intended strategy. This is a strategy that a company hopes to execute. It is a plan or action considering the most suitable plan for achieving objectives or goals.
Unfortunately sometimes the intended strategy doesn’t fit and needs to be emerged by emergent strategies (Mintzberg, 1978). This is an unplanned strategy that arises because of environmental changes like opportunities and threats. Think of governmental changes for example. This can cause “gaps” in your intended plan (this will be discussed later on the paper). But can you suddenly change you strategy? No you can’t! It has consequences. The generation of a strategy can be an easy process but the execution of a strategy can be rather difficult (Hrebiniak, 2006). Some companies have a good strategy but are poor executed.
A quote from the article of (Martin, 2010): “A mediocre strategy well executed is better than a great strategy poorly executed”. Who eventually stated this quote is unknown.
According to several study’s companies aren’t that good in execution (Cândido & Santos). They investigated 35 studies to the question: What is the failure rate of strategy execution? It can differ from 7 to 90%. The percentage all depends on the context of the initiative.
3 of the 5 companies rated their organization weak at execution (Neilson, Martin, & Powers, 2008). Also, of the 91 challenges investigated by (Bear et al, 2006-2016) a consistent execution is ranked third as greatest concern. Besides this, there are dozens of studies which prove that a high percentage of strategic initiatives fail. Because of this high rate it seems appropriate to find a solution for this problem by minimizing this rate. In most of the cases the strategy isn’t bad but usually it is because of the implementation of it (Li, Guohui, & Eppler., 2009) but why is it that so many companies fail to execute a strategy? There are several problems why a company isn’t able to execute a strategy properly.
One of the main reasons causing strategy execution to fail is because managers aren’t properly trained in order to execute the strategy (Hrebiniak, 2006) . It is too dynamic. There are too many factors which can lead to failure. No business strategy can succeed without an effective implementation. Most managers know more about thinking and developing a strategy rather than executing it. But why is this? There are just more books and articles about strategy generation compared to strategy execution (Sull, Homkes, & Sull, 2015). What (Hrebiniak, 2006) adds is that a student in the MBA programs learn more about the formulation and functional planning instead of also executing it. What causes the initiatives to fail? Below I described a list of reasons why executions fails (Werham, 1984), (Hrebiniak, 2006), (Li, Guohui, & Eppler., 2009), (Crittenden & Crittenden, 2008), (Wright, 2015):
1. The inability to manage change effectively;
2. Can’t overcome resistance to change;
3. Poor or vague strategy and not having guidelines or a model to guide strategy implementation efforts;
4. A poor or inadequate information sharing among individuals to execution;
5. Just a bad strategy;
6. loss of momentum;
7. Nobody just knows how to execute;
8. No synergy between departments;
9. Employees don’t know the strategy or are not aware of the strategy;
10. The strategy doesn’t fit the environment;
11. No commitment to the strategy;
12. Wrong structure;
13. Bad performance systems;
14. Trying to execute a strategy that conflicts with the existing power structure;
15. Unclear responsibility or accountability for implementation decisions or actions (blame game);
16. Resources are not available to implement (skills, capabilities);
17. Lack of support;
18. Strategy doesn’t match the organization;
19. Conflicting goals;
20. Not “enough” time.
There are probably more reasons why strategy executions fails but now we have a list of possible factors that we can keep in mind when we want to execute a strategy. The difficultly of execution lies within the fact that organizations are complex systems (Kraaienbrink, 2017). So when putting all this together we can see a clear gap between strategy generation and strategy execution. This is what we call a strategy gap. The gap between what we have at a particular moment and what do we want to achieve. But what is strategy execution actually? Strategy execution can be seen as the process of closing the gap between the actual and the aspired strategy (Kraaienbrink, 2017).
But how do we know if a strategy is good and when a strategy is executed successfully? A strategy is good when it’s it is coherent, efficient, effective, unique, flexible, robust, scalable, responsible, and when its pros outweigh its cons (Kraaienbrink, 2017). A strategy is successful when the gap between the actual strategy and the aspired strategy is closed to a satisfying extend.
But why is change so hard? Like mentioned before a company has many complex systems. Think about people, processes, structures, systems, procedures. Once you think that you have mastered it, there can suddenly be a change in the internal or external environment (Morgan, 2006).
But what can we do about it? Well I hope to achieve this with my manual.
A bad strategy execution is something where my company is familiar with. The company that I work for is an electrical company. We only install systems related to electricity. Our core business is: installing fire alarm, burglary alarm, camera observation and access control systems. Normally when installing access control systems we hire an architectural specialist to install the locks in the door frame. Our company doesn´t have any experience with this. Someone in our company suddenly got a lighting bulb above his head and thought: Hey, let do this ourselves. Instead of hiring someone who has some experience related to architectural, they hire someone who has no selling experience at all which are related to the architectural type of projects. Before this he never sold anything. He was an insurance transducer. But that’s not all. We also needed someone who can install the locks into doors springs. Instead of hiring a carpenter, they hired a high current electrician with no experiences related to the architectural type of projects. So the problem now is that they sell projects that are not even possible, but also install the products in a wrong way. Because the installation is wrong we have to grand service to fix it. Another problem is that our engineers have to prepare the projects work but don’t have to knowledge to prepare this type of projects. So the processing time of our engineers is increased. Our engineers already worked more than 8 hours a day. Now they work even more. This caused our engineers to stop accepting. This causes another effect that those companies have to wait longer for the installation to start. Nowadays, customers are more demanding and sometimes they do not agree to this “late” execution. So implementing something with little to no experience/training can cause a whole disruption in the processes of the company.
But can a manual increase the rate of success of a strategy execution just like the mechanic and salesman mentioned above?