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Business strategies fail for a variety of reasons, but often the soundness of the strategy is not at fault. A strategy audit that assesses ten issues can pinpoint the reasons why your strategy is not achieving the desired results.
1. Is senior leadership committed to the same strategy? The single most important influence on successful strategy implementation is a shared understanding and commitment by the senior team. Commitment, not agreement. However, even senior teams who think they agree on the strategy often have different interpretations of that strategy. If asked to define key terms in the strategy, they provide slightly different interpretations. Ask your executive management to provide one quantitative measure of success for each element in your strategy. If they can’t agree on the measures it’s a reflection that they don’t really agree on the strategy.
2. Does the strategy identify a unique selling proposition? Many strategies fail to clearly identify the way in which their offering will be differentiated from the competition. One retailer outlined a three part strategy: “We will offer the best assortment, delivered with excellent service, and priced to provide superior value.” This is a not so unusual all-things-to-all-people statement that fails to identify a key differentiator. Federal Express has one clearly stated key selling proposition: when it absolutely, positively has to get there on time. Every Federal Express employee knows this. Every employee in your organization should know the single most important aspect of your offering.
3. Have you selected a target market? Some organizations fail to identify their target market(s) because they associate targeting with writing-off some parts of the market. Selecting a target market doesn’t mean that you turn your back on other customers, it simply means that you focus decisions regarding your offering on the needs of the target market. Without the focus provided by a target market and key selling proposition, it’s virtually impossible for organizations to consistently create highly satisfied customers.
4. Is your strategy consistent with customer and employee attitudes about your strengths and weaknesses? Few organizations complete a full SWOT analysis on a regular basis, but most organizations do receive regular survey feedback from customers and employees. Use this feedback from key stakeholders to confirm the basic assumptions of your strategy. If “technology” is your unique selling proposition, then your customer survey results should confirm your competitive advantage in this area, and the analysis should confirm the importance of technology to your target market.
5. Does your strategy help you understand what you will not do? Without a strategy, any idea is a good idea. A sound strategy helps an organization sort through the hundreds of opportunities in the market place, and to quickly seize those that are consistent with its strategy as well as to rule out those that they will not pursue. It’s often said that companies have a more difficult time deciding what they will not do than in deciding what they will do. In their brief book Top Management Strategy, Tregoe and Zimmerman propose the concept of “driving forces” to help organizations set the parameters of their strategy. If your management team struggles with disparate strategy alternatives (should we focus on new products or new markets?) then you may need to go back and determine the driving force of your strategy.
6. Have you determined the key success factors of the strategy? Effective organizations do most things well – operations, human resources, financial controls, etc. But the most successful organizations identify those areas at which they must excel for their strategy to succeed, and then align the entire organization around those issues. Southwest Air determined that baggage handling was a key success factor of their ability to turn aircraft around quickly, which in turn is a key success factor for keeping costs down. Purchasing is a key success factor of many mass retailers. Hiring is a key success factor for many consulting firms. Strategy and industry determine the areas at which an organization must excel. A strategy map is a powerful tool to guide organizations in operationalizing the key success factors of their strategy. (A strategy map is a pictorial representation of the hypothesized cause-and-effect relationships in your strategy. If we do this, then we should get that, and if we get that, it should lead us there.)
7. Do you have an approach that links resource allocation to key success factors? Most organizations have a complex budgeting process, but surprisingly few of these are linked directly to strategy and key success factors. Rather, the squeaky wheel syndrome tends to rule; the biggest problems get the most resources. Often priorities should be given to key success areas where performance is good in order to make it excellent rather than devoting those resources to improving problem areas. This may be the only way to create delighted customers. Review your budgeting process, and look for the linkage with strategy.
8. Do employees understand your strategy and the assumptions on which it is based? Frontline employees daily make customer related decision; departments set goals for their staff and reallocate resources on a regular basis. Organizations have very limited resources; all these decisions and actions must contribute to the strategy. This can only be accomplished if the entire organization understands that strategy. If you’ve developed a strategy map to identify your key success factors, the output from that exercise can serve as a powerful strategy communication tool to employees as well. If you administer a regular employee survey, make certain to include questions about their understanding of your business strategy.
9. Do your recognition and reward systems reinforce your strategy? Ask your employees informally what really gets rewarded in the organization and in their department, what’s really important to senior management and to their manager. This includes everything from formal monetary incentives, to who gets ahead, to the informal ‘ata-boys. Typical answers are often staying within budget, not rocking the boat, meeting sales targets or even making the boss look good. Then look at the performance goals you’ve set for your department. How do these answers compare with your organization’s strategy and key success factors? To see how you’re doing, create two columns on a sheet of paper. In the first column, list the subset of organizational key success factors on which your department should be able to have an impact. In the second column list performance goals for your department and employees. Now look for a relationship between the two columns. If it doesn’t exist, your department is not pulling its full load in contributing to the strategy.
10. Does your organization have a way to quickly determine whether failure to achieve goals is due to a poor strategy or just a poor strategy implementation? The only way to quickly identify the causes of failed strategy is to frequently collect data on each of the strategy’s key success factors. Then, if your strategy is not meeting your goals, you have data to tell you whether it’s because you failed to implement the key success factors (probably good strategy, just poorly implemented), or whether you failed despite successful implementation of key success factors (probably bad strategy.) The Balanced Scorecard provides an excellent guide and framework for developing a set of 15-20 measures that can be used to guide and test the strategy and its underlying assumptions on a regular basis. (See Bullseye by Schiemann and Lingle and The Strategy Focused Organization by Kaplan and Norton.)
Strategy implementation is the most challenging and important task of a senior leadership team. Gone are the days of five-year plans, replaced by shorter term plans that emphasize speed, responsiveness and successive strategic approximations. There are a number of tools available to address any of the short-comings uncovered by a strategy audit that help an organization remain both flexible and focused on achieving their strategic goals.
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