6 Reasons Why So Many Business Strategies Fail

So many books with numerous case studies have been published on the subject of strategic management with the goal of helping organisations implement winning strategies, yet still so many businesses fail to realise their goals and objectives because of horrendous strategic failures. A countless number of IT, new product development, mergers and acquisitions and new market entry projects have failed to live up to their expectations. For example look at the dismal failure of the acquisition of HBOS by Lloyds TSB and also that of ABN Amro, the Dutch bank by the Royal Bank of Scotland (RBS). In the UK, IT projects are among the government’s biggest failures and still, year after year businesses continue to lose millions and billions of money.

In today’s dynamic market environment, fast-paced technological advancements, new regulations, globalisation and constantly changing customer needs and wants are reshaping the future of a number of organisations. As a result, businesses need to step up their game and adapt quickly to the changing environment and circumstances in order to survive.

New technology, especially the internet, is allowing vast amounts of useful information that could enhance the strategic position of the organisation to be exchanged across the markets at the click of a button. Getting hold of this information, carefully analysing it and obtaining meaningful insights from it to aid decision making should be one of the most important priorities for any business. The competitive environment has become so dependant on the availability of valuable information, without which, a business will not be able to compete at full potential.

Deciding on which product or service to offer, which markets to enter or exit, which business line to sell or maintain, which supplier to use and not to use, whether to offer a price discount or not, which delivery channel to use for product or service delivery etc. all require information in order to make sound judgements. It should also be noted that availability of information is not all that it needs to execute a successful business strategy, there are also other factors that contribute to the success or failure of your organisational business strategy and these are:

# Not knowing what to do with available information: As I have mentioned above, having the necessary information at your finger tips to aid decision making is crucial. However, the problem some organisations make is going on an information gathering spree. By all means, they try to get their hands on every piece of information out there, whether useful or not, and store it in their databases. That same information will remain under storage for months and months untouched and more will be getting added to the list.

It is crucial to make sure that before you go on an information gathering spree, you have assessed your organisational information needs. Only collect that which is useful to your organisation and meet your needs. Remember collecting information can be very timely and costly and you don’t want to create a heavy burden on your financial and human resources.

Once collected, that is not the end of the road. Information should not be let to expire in databases or storage files. For example, if you have collected data on previous quarter sales, you need to analyse that data to find insights for better decision making. Business Intelligence (BI) or business analytic tools can play an important role here by helping you sort and analyse your data.

# Poor execution of the strategy: One of the reasons why some strategies fail is not because they were wrong in the first place, but because of poor execution. Some managers spend hours and hours of time planning the direction and destination of their organisations and only to get it wrong at the implementation stage. Lack of leadership and direction from senior personnel to see the strategy through can actually influence the strategy implementation process. Constant monitoring is essential to ensure there is no or minimal diversion from the main route. Also, some employees require the support, guidance and encouragement of their managers to sail through.

# Lack of prioritisation of objectives: Success is not achieved overnight. The mistake some businesses make is having more goals than their resources can support. As a result, instead of being fully committed to one or two causes, resources are wasted trying to balance the efforts. It is better to prioritise and hit fewer targets than to fail a wide range of objectives. This also helps employees to become conscious of the most important goals at any particular time.

# The plans are too rigid: When managers make business plans, they are normally based on certain assumptions. However, the market environment changes from time to time, hence the need to alter the plans to suit the new environment. Problems arise when the plans are not flexible enough to be changed. If that is the case, the business will be bound to suffer at the expense of competitors who are able, quickly and not hesitant to make any meaningful strategic changes.

# The plans are too vague for employees to understand them: The organisational strategy needs to be clearer to everyone within the business. Everyone should feel at ease and comfortable when asked to describe the position of the organisation now, where it is heading and how it intends to get there.

# Cultural factors: Sometimes strategies fail because they are inconsistent with the current organisational culture. It might be that your competitors are really doing well and then you imagine that by implementing the same strategies you will reap the same or greater rewards. If there are cultural differences between the workforce of the organisations involved, the risk of the strategies succeeding are very low. It might also be that you are still using the same old tried-and-tested strategies that were useful in the past but are no longer valid in today’s market. You need to be updated on the new developments happening in your industry or your sector.

What else can cause business strategies to fail?

Comments and questions are welcome.

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