How to spot a bad strategy?

The widely accepted definition of good strategy is the deliberate ‘choice to perform activities differently, or to perform different activities, better than market competitors’ in the delivery of your organization’s value proposition (Porter 1996).

A value proposition is the reason why customers turn to one organization over another. It solves a customer problem or satisfies a customer need (Osterwalder & Pigneur 2010).

A good strategy – regardless of industry or sector – involves a clear set of choices that defines what the organization is going to do and, most importantly, what it’s not going to do, to solve a cohesive business problem. A business problem can be any hurdle, situation, or variation which, when resolved, should lead to a measurable performance improvement.

Albert Einstein once famously said “If I were given one hour to save the planet, I would spend 59 minutes defining the problem and one minute resolving it” (Spradlin 2012). Many strategies fail to get implemented – despite the ample efforts of hard-working people – largely because most organizations are not proficient at articulating their business problems. They also fail to identify which ones are absolutely crucial above all others to their employees who are responsible for implementing new strategy objectives (Vermeulen 2017). 

Good strategy is about managing a growing digital future and effective strategy design is crucial as it directs the attention and actions of the whole organization, and not part thereof. Simply, it’s a way through a difficulty, an approach to overcoming an obstacle, a response to a business problem. If the business problem is not defined, actual implemented strategy can be very different from what was initially intended, planned or thought.

Good strategy is therefore straightforward, simple and easy to understand given it constitutes the strength applied to the most promising business opportunity for the organization. In this context, far too many organizations say they have a strategy when, in reality, they don’t. Consequently, organizations focus less attention on external strategic issues like competitor moves, customer needs and/or growing technology debt and trends. Instead, organizations espouse what is known as bad strategy, which is not simply the absence of good strategy (Rumelt 2017). 

Nobel Laureate Kahneman (2011) states “It is much easier to identify a minefield when you observe others wandering into it than when you are about to do so (yourself)”. Speculand (2020) found that ‘while successful strategy implementation is improving, 48% of organizations are still failing to achieve more than two-thirds of their own strategy objectives.’ This is compounded by the fact that only 28% of executives and middle managers responsible for executing and communicating strategy are able to explicitly list three of their company’s strategic priorities, and why a mere 5% of employees collectively responsible for strategy implementation can recall their own organization’s strategic objectives (Nieto-Rodriguez & Speculand 2021).

This can be explained by Rumelt (2017) who says bad strategy ignores the power of choice to explicitly focus on the most critical business problem. Instead, organizations continually attempt to implement a multitude of conflicting, unrelated and disjoined strategy documents, objectives and interests with varying success. Despite the roar of voices wanting to equate strategy with ambition, leadership, vision, planning, or the economic logic of competition, good strategy is effectively none of these (Rumelt, 2017).

Pijl (2020) advises bad strategies come in all shapes and sizes. For starters, a bad strategy is one without a clear purpose. This is the case when hard decisions are avoided and organizations are unable or unwilling to define and explain the nature of their business problem. To avoid doing a bad bad thing with strategy design, Rumelt (2017) says to look for one or more of its four major hallmarks to detect a bad strategy. They are:

1. Fluff: A form of gibberish masquerading as strategic concepts or arguments. It uses words that are anodyne, verbose, inflated and unnecessarily abstruse including esoteric concepts to create the illusion of strategic thinking.
2. Failure to face the challenge: Bad strategy fails to recognize or define the challenge facing the organization and its business model. When you cannot define the business problem, you cannot evaluate a strategy or improve it.
3. Mistaking goals for strategy: Many bad strategies are just statements of desire rather than plans for overcoming business model obstacles. A business model describes the rationale of how an organization creates, delivers and captures value for customers and/or public services (Osterwalder & Pigneur 2010).
4. Bad strategic objectives: A strategic objective is set by a leader as a means to an end. Strategic objectives are “bad” when they fail to address critical issues facing the organization or when they are impracticable.

Rumelt (2017) says “the core of good strategy is always the same. It’s about discovering the critical factors in a situation and designing a way of coordinating and focusing visible actions to deal with those factors”.

A strategy that fails to define a variety of plausible and feasible actions is missing a critical component. If no one admits there is a business problem, there will never be good strategy. Good strategy involves focus and, therefore, choice. Like Ozark’s Marty Byrde (Jason Bateman) once said, “People make choices. Choices have consequences.” Choice means setting some strategic objectives aside in favour of implementing others. When the difficult choice is not made, weak amorphous strategy design and strategy implementation is the result (Rumelt, 2017). 

When organizations try to execute more than ten strategy objectives, or worse multiple strategy documents, less gets done and in some cases, none of the strategy objectives are successfully completed. No organization can do it all at once and as such, it's important to recognize the practice of ‘addition’ and ‘subtraction’ in resetting strategy objectives. By focusing on between three and five objectives at a time, it sends a clear and compelling message to the organization and its employees responsibly about what needs to be done most urgently (Nieto-Rodriguez & Speculand 2021).

In comparison, bad strategy is long on goals and short on action. It assumes that goals are all you need. It puts forward strategic objectives that are incoherent and, sometimes, totally impracticable. It uses high-sounding words and phrases to hide these failings. The need for good strategy is episodic, and not necessarily annual or biannual (Rumelt, 2017). As such, organizations should view any improvements to the business model as changes to those decisions: what your offerings will be, when decisions are made, who makes them and, most importantly, why.

Below are the key differences between bad strategy and good strategy adapted from (Sørensen 2020):

Pijl (2020) says “a strategy that is not carried out is just as worthless as no strategy at all”. If your organization struggles to demonstrate results, particularly from strategy implementation, take heed from (Proctor, 2018) who advises:

• Those who made the statement, “That’s a good (strategy) idea,” only had a 10% chance of making a change.
• Those who committed and said, “I’ll do it”, had a 25% chance of making a change.
• Those who said when they would do it had a 40% chance of making a change.
• Those who set a specific plan of how to do it had a 50% chance of making a change.
• Those who committed to someone else that they would do it had a 60% chance of making a change.
• Those who set a specific time to share their progress with someone else had a 95% chance of making a change.

In summary, bad strategies come in all shapes and sizes and are ones without explicit focus on the business problem and resultant action. This occurs when hard decisions are avoided and organizations are unable or unwilling to define and explain the nature of the business model challenge, particularly in the age of information. In comparison, a good strategy defines the business problem and develops a strategy for a growing digital economy. Kane et al. (2020) advise that “organizations make a constant mistake in strategy design by planning to adapt their organizations to the digital infrastructure as it exists today. Any quarterback, football player, hockey player can tell you that you need to lead a moving target if you are going to hit it aiming where it is going to be rather than where it is”.

As such, far too many organizations fail to consider that by the time they complete strategy implementation to today’s environment, the digital environment to which they had adapted would be entirely different (Kane et al. 2020). This is why mature organizations recognize technology as a moving target and begin to adapt their business model and ways of working to the infrastructure of the future. Speculand (2021) says “only when a strategy is successfully executed do you know if it was a good strategy. Only when it’s well-executed do customers notice the difference. Only when the execution succeeds does it positively impact shareholder (and customer) value”.

Finally, if you want to boost your strategy development and implementation skills, consider the Strategy Implementation Professional course and certification, developed in partnership with the Strategy Implementation Institute.