PoS Nov 2012 | Insights Shape Strategy?

Why do strategies fail?.

The principal purpose of strategy is to achieve a desired future state by making the business competitive. Strategies fail when they are inconsistent with the long-term goal. The leadership may have, as is usual, defined the desirable future as milestones, of size – read revenue – growth, margins, and profits.

It is a moot point that such a definition of long-term goal is inappropriate and may contribute to the failure of strategy. That aside, strategies also fail because they do not advance the firm’s competitive advantage.

Companies promote initiatives, often outlined in the business plan, to achieve growth, higher profits, or lower costs. For initiatives to be strategic – embody the firm’s strategy – they need to substantiate how they will create value for customers.

Managers are unable to formulate effective strategies because they are too focused on outcomes and overlook what customers want and why. They fail to see whether their initiatives will drive customer value and increase preference for the firm’s products and services.

Why don’t managers see the customer’s point of view? The short answer is, they lack insight.

Crafting a good strategy requires intimate knowledge of the customer, an empathetic understanding of their needs, how they use your products, what outcomes they desire, difficulties they face, and how they overcome them. Knowing who their customers are, how they serve them, and adapt to the changing marketplace help to develop effective responses – products, services, features, pricing, and technical support.

Customers’ business environments are changing. To stay current and relevant, to discern the salient from the insignificant every business should attempt to understand customers’ realities. This is insight.

Insight is developed by undertaking research, analysis, exercises, and experiments. Conversations with customers’ managers, observing their operations, and speaking with experts on trends in customer industries uncover new information and validate or negate our assumptions.

These projects – as I like to call them – should be carried out regularly, formally or informally, individually and in teams. Unfortunately, this is rarely practised.

In the absence of adequate insight, formulation of strategy is based on impressions, and individual and collective biases. No wonder strategies fail.

Leaders must encourage and enable managers to develop perceptive understanding of customers. And base their strategies on valuable insight, not impressions.

V.N. Bhattacharya
Business Strategy Consultant