Why Is Strategy So Hard?

Why Is Strategy So Hard?

By Mia Maki FCPA, FCMA

This article originally appeared in the September/October 2019 issue of CPABC in Focus, published by the Chartered Professional Accountants of British Columbia. It has been reprinted with permission.

Many organizations struggle with strategy. In my experience, there are three main reasons why: Strategy is not one thing, it must be implemented and monitored, and companies o­ften try to do too much.

1. Strategy is not “one” thing

Organizational strategy is multi-faceted. Widely accepted frameworks by experts in this field factor in levels, elements, and tension.

Strategy has corporate, business, and operational levels

At each level of strategy, the key to success lies in decision-making. The question at the corporate level is “What business are we in?” Because decisions at this level pertain to the industry in which the company competes, strategy tends to be static for a long period of time, and controversy is rare. Similarly, strategic decisions at the operational level are rarely controversial, as they flow from decisions already made at the business level and are structural and resource-based in nature. The question at the operational level is “How do we organize to meet our strategic goals?”

At the business level, decision-making can be more challenging, with more questions to answer and differing opinions on appropriate strategy. “Who are our customers?” “How do we compete?” “Where should we focus our energies?” For example, the vice-president of sales may want to focus on the next quarter to maximize commissions for the team, while the vice-president of production wants to focus on soliciting future customers. The executive team may decide to narrow its focus by prioritizing one goal over the other.

Strategy guru Michael Porter believes that making hard choices is fundamental to effective strategy. “The essence of strategy is choosing what not to do,” he says. “There’s a fundamental distinction between strategy and operational effectiveness. Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different.” It’s typically at the business level that these hard choices have to be made.

Strategy has elements

The elements of a strategic plan are the company’s mission, vision, values, strategic goals, and implementation plan. Individuals involved in developing a strategic plan should provide specific details about each of these elements, because these details provide evidence that the hard work of decision-making has been done.

Strategy has tension

There will always be tension between what’s ideal and what’s doable. To be effective, a strategic plan must outline the company’s inspirational goals and the realistic steps and resources needed to reach them. The best way to achieve this balance? Diversity in the process—diversity in perspective, thinking, and expertise. In an ideal strategic-planning process, a small group makes the decisions, but only a­fter seeking the input of diverse team members.

2. Strategy requires implementation and monitoring

In my experience, most strategic planning is not specific enough. In order to convert strategic goals into action, companies need to be clear about how they will execute plans, grow sales, attract and/or retain customers, cut costs, and train employees to move in the right direction. In short, they must address the tension between aspirations and reality.

For example, if a company plans to grow sales by 10% over the next three years, will they increase their salesforce to do so? Will they put more resources into marketing? Are they going to expand into a new geographic market or engage a new customer segment? Will they take market share from a competitor by offering a cost-efficient bundle of products or services? Each of these strategies will require resources.

Sometimes, hard decisions such as these are not made in the planning process, and this lack of rigour leads directly to implementation issues. After all, how can a company achieve its goals if it’s not clear how it’s going to do so?

3. Companies try to do too much

After decades of work helping companies and organizations with their strategic plans, I believe companies can rarely handle focusing on more than three strategic goals at any given time. More goals in the plan than three? One to two years after the strategic plan is implemented, goals four and ­five will be languishing—guaranteed.

Why? Because everyone already has a full-time job. Getting employees to do their regular jobs while also executing on a strategic plan sets implementation up for failure. In addition to constrained human resources, companies have limited ­financial resources, and it is easy to squander dollars if they’re spent without focus.

Simply put, if too much is tackled in the plan, the plan will likely fail. As Michael Porter says, strategy is about making hard choices, and choosing what not to do is as important as choosing what to do.

I recommend that my clients set three strategic goals:

  • One outward-facing (competitive, customer related);
  • One inward-focused (training or systems); and
  • One that faces outward or inward, depending on the company’s needs. If the company has recently outgrown its systems, structure, and capacity, this third goal will likely face inward. If the company is ready to expand and has the right people and systems in place to handle growth, the third goal will likely face outward.

How to succeed at strategy

If you want to improve your strategic planning, implementation, and monitoring, start by having a candid debrief at the beginning of the annual planning process and looking for process improvements. For example, if strategic goals #4 and #5 never seem to get traction, assess whether you’re doing too much and need to refocus your precious resources. Are employees telling you they don’t know how to contribute to the strategic plan? Maybe it’s time to implement a cascading balanced scorecard program to align employee objectives with your strategic goals.

Strategic planning is an organizational skill that can be developed, but it takes more than a one-day retreat to really understand the levels, elements, and tensions at work. In the end, however, building your strategic capacity is well worth your time and effort.

Mia Maki BA, MBA, FCPA, FCMA is a Principal of a consulting firm and a Professor with the University of Victoria Gustavson School of Business. Mia has over 20 years of teaching experience.

Since 1986, she has worked in finance and accounting and has experience in a wide variety of industries including audio technology, airlines and aviation, not-for-profit, public accounting, marine transportation, fisheries monitoring, gaming and other technology arenas. Mia has worked for both private and public companies, has participated in raising over $50 milllion in funds, and has experience in international initiatives.

Attend CPA Alberta’s Executive Program facilitated by Mia Maki: Controller’s Operational Skills Program.