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Is Strategy Really That Important?

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Published on: November 2016

Written by: Miguel Sequeira Nunes

Originally published by Nordic Light.

What if the billions of dollars spent in designing a new strategy were invested in a more effective way? Is all the effort you are putting in designing that strategy generating the desired results?

In today’s competitive world, having a clear view of what are the strategic keys for your company’s success seems to be extremely important. That is why probably most of the organizations spend a lot of time, resources and money into setting a strategy that can position them to the future. But is strategy really that important?

About three years ago, I met in Sao Paulo the Latin American Commercial VP of one of the largest employers in the world. He told me how the company was established in Latin America in the 70s and the great YOY growth results and high EBIT margins they had achieved since then. However, due to the financial crisis, most of its competitors were looking for new markets to grow and of course Latin America was a key market to attack.

 

Is Strategy That Important

 

Forseeing a high drop in market share and a threat to their profitability levels, he described to me the new commercial strategy he had set for the next years – a lot of focus in their corporate customers, increasing the number of visits and focusing on building solid and long-term relationships to ensure client retention and high prices. After a very pleasant conversation, he turned to me and said: “This is what we need to do, however my biggest challenge now is to actually make it happen.”

In fact, the odds were not on his side. According to the Harvard Business Review, companies deliver only 63% of the financial performance their strategy promised and a recent Economist survey pointed out that 57% of firms failed to execute strategic initiatives over the past three years.

After one year of implementing the new strategy, the executive looked exhausted. He had made big investments in a new CRM system and reformulated the commercial structure to ensure the strategy was executed effectively. However the results were not as expected. Competitors were growing faster and pricing levels were decreasing.

We started discussing the possible causes behind this challenging execution and he mentioned things like: “my people simply are not willing to do things differently,” “they are always discussing in the hallways how the competition has a stronger brand strategy,” “my sales people always say clients are not willing to pay a higher price.”

What I was hearing was actually something we at BTS find very common across organizations and reflected exactly what we found out from years of research and experience with our clients.

Strategic execution must start in the people (they are the ones executing it) and you cannot expect people to do things differently just by telling them. To ensure people are putting the strategy in action, you need to ensure that (1) there is alignment on the understanding of the strategy, people understand what the strategy is and what is expected from them; (2) people have the right mindset, they believe in the strategy and they are excited about executing it; and (3) they have the required capabilities, they have the specific skills and they use the tools and processes in the right way to execute on the strategy.

In the eyes of that executive, the strategy was excellent, his team was just not executing it, so though the strategy was good, it was set for failure. For the next 6 months he focused his efforts on making sure he could ensure the alignment, mindset and capabilities of his people, and while that task was not easy, he can now say Latin America is the fastest growing market for the company worldwide and its pricing levels are now higher than ever.

For that executive, as it should be for most of the business executives today, while strategy is important, execution is key. As Thomas Edison once said: “Vision without execution is hallucination.”

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