Why your strategic plan might fail to drive growth

Almost every growth-minded company has a strategic plan. Unfortunately, the vast majority of strategic plans I see are lists of projects that don’t comprise a strategy. Worse, they place heavy demand on resources while potentially creating new operational systems or solutions within functional areas, which may not work seamlessly with the new direction of another department. Together, this can add work, undermine results and cause companies to spend lots of money with little to show for it.

The odds that strategic planning will improve your company’s growth performance are pretty dismal. Consider these statistics:

• Approximately 90% of strategic plans fail in the execution stage, which means they either don’t finish what they start or don’t get the results they intended to get.
• Only 13% of U.S. companies are able to achieve modest growth and sustain it for a period of five or more years.
• Only one in four strategic initiatives create value. (That is a bet you wouldn’t place in Las Vegas.)

There is a better way, and it’s called strategic engineering. Strategic engineering is distinct from strategic planning in several ways. First, strategic engineering is an outcome (rather than a process) that’s driven by people. Second, it is not accomplished in a day; it takes some time and effort to figure out. Third, its implementation requires focus and alignment across the organization.

To drive growth, companies should focus on strategic engineering rather than strategic planning.

Here are three reasons why:

1. Strategic planning encourages companies to look inward, while strategic engineering promotes an “outside-in” mindset.

One of the biggest inhibitors to growth is the “business gravity” born of habit that blocks our ability to see potential opportunities. To overcome that, the management team needs to use an “outside-in” mindset, asking what the market needs rather than what the company wants to achieve. Strategic engineering starts with a deep dive into the market space to determine relevant trends and opportunities.

To illustrate the value of this approach, consider this example: A client of mine, an injection-molder, was planning on recapitalizing the manufacturing floor because they were losing business to thermoforming. But after we took a stroll through a grocery store (they supported the food industry), we realized they had a wonderful opportunity to target a new food segment they had not served. After hiring a salesperson with strong relationships and fixing a few other challenges discovered in our “outside-in” review, they more than doubled their revenue in less than five years — without incurring significant capital expense.

2. Strategic plans cause companies to make lists and ask the wrong questions.

Strategic plans encourage companies to make lists, but strategy is not a list. Strategy is the overarching concept that determines how a company will win in the market. It needs to have focus. If a company tries to follow multiple strategic concepts at the same time, those concepts will compete with each another and cause the company to spend more money without making progress.

Look at Walmart and Target, for example. While these companies occupy the same space, they have very different, focused strategies. Walmart is about low price. It specializes in supply chain logistics, which enables the company to make a fair profit in spite of offering low prices. Too many companies try to just offer lower prices to win a bid and sacrifice margins, which is not a financially viable approach for the long term. Target, on the other hand, is more about fashion. It features branded goods and better merchandising, and it’s invested heavily in the internet experience. Each of these companies have made a choice about their position in the market and aligned their activities to support it, strategically engineering themselves for success.

The second issue that companies encounter when developing a strategic plan is they ask the wrong questions. If you ask, “How can the organization improve on its current state?” you will experience incremental improvement and struggle to challenge current paradigms. Rather, ask, “What is the potential of the organization?” Once defined, determine how to engineer the company to achieve that future. As my clients have proved time and again, this approach nets a much more significant outcome and sets them on the course to reach the next stage of growth.

3. Strategic plans are misaligned with resources and thus difficult to execute.

As noted earlier, most organizations fail to execute their strategic plans. The top cause of failure is under-resourced initiatives. In fact, strategy can be defined as how we spend our money. If we say we excel at customer service but don’t invest in training and equipping teams with this skill set, we may just be giving it lip service. Generally, you can look at a company’s budget allocation and discern its strategy from its spending patterns. Be sure spending aligns with priorities.

Another common mistake is developing a strategy but not determining what must be done to achieve it. New initiatives must be specifically identified, assigned, resourced and tracked to ensure progress. The initiatives shouldn’t just be superimposed on day-to-day work; otherwise, they will likely lose steam or get pushed aside as daily fires take resources away from them.

Gaps between intended results and actual results are often caused by poor or limited communication. Companies need to develop an intentional communication plan that keeps the strategy front and center; shares quick wins to encourage buy-in; provides clarity and consistency; becomes the drum beat for the organization; and ensures engagement and ownership of the strategy throughout the organization. Only when the collective brain trust of the organization is actively engaged in delivering the strategy will its full potential be achieved.

The good news is, meaningful, breakthrough growth is possible and attainable for all companies, even mature ones. The key is to stop using traditional, outdated strategic planning and start using strategic engineering.

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