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How to Spot a Bad Strategy

by Mark Graham Brown, http://www.mindspring.comThursday, April 08, 2010

We’ve all been in those planning meetings where we begin by reviewing our company’s strengths, weaknesses, opportunities, and threats. Typically there is a much longer list of strengths than there are weaknesses, but companies seem to be getting more realistic these days and are willing to acknowledge that they are not good at everything. Once the goals or objectives have been established for the next year or two, the real hard work begins in coming up with strategies for success. There are often multiple strategies for a single goal. For example, a client had a goal of going from $400 million to $600 million in sales in the next three years. Industry data indicated that there was plenty of demand for their services, so this was a realistic goal. The company ended up with three key strategies for achieving their growth goal:

  1. Increase share of business. Get more work from existing customers.
  2. Acquisitions. Investigate and purchase smaller competitors or other companies who are in different markets/geographies.
  3. International. Focus on marketing to and acquiring new international accounts in Asia and South America.

Coming up with strategies is hard enough. Even more difficult is coming up with realistic and accurate ways of evaluating whether or not the strategies are the right ones. In this article, we will explore some of the practices that tend to work well when evaluating strategies, as well as the most common mistakes organizations make when assessing their strategies. We’ll start out by examining some of the errors and follow up with a review of the best practices I’ve seen in business and government organizations.

Mistake # 1: Failure to Get External Opinions on Strategy

Deciding on strategy is often more an exercise in politics than logic and reason. The executive team may brainstorm a list of possible strategies for achieving the goals, but it’s funny how the ones that make the short list are almost always the ones suggested by the CEO. Once in a while the CEO does not try to control the decision and it’s a more democratic process, but in these cases it is usually the person who can argue and present his/her case the best who gets to select the strategies. Regardless of how the decision making is done, though, it is always a wise idea to get the council of some outsiders. Perhaps your board can provide advice on picking the right strategy, but sometimes they are even to close to the situation and there is always the political factor operating with board members and executives as well. Most organizations have a handful of consultants or advisors who know their company well and who they can call on for honest advice about whether or not they have picked the right strategies. I would take the time and spend the money to get at least two or three outside opinions on the strategies you have selected before settling on them. This will be money well spent if the outsiders can point out some risks or flaws in your choices. The danger with this approach is doing it when you have already made up your mind and don’t want to hear anything that is contrary to the strategies you have already picked. Therefore, it is important to get this external input when the strategies are still in the idea phase, and probably before some big off-site planning meeting. This can provide you with some of the data you present when discussing alternative strategies.

Mistake # 2: Measuring Strategies With Activity Metrics

A pension organization I worked with had a strategy of balancing their investment portfolio to manage risk better. One of their metrics was the number of meetings with investment advisors. Another was the number of research papers written on different investment options. A second client had a strategy of growing sales through innovative new product designs; this was a fashion-oriented business, so it sounded like a great strategy. However, they measured the strategy by counting activities like time spent with customers, trade shows attended, and milestones completed on design projects. A third client had a strategy for improving communication with employees that focused on a newsletter, briefing meetings, and employee website. They measured the effectiveness of the communication strategy by counting metrics like butts in chairs at briefing meetings, the number of newsletters distributed and web site hits. When they measured the effectiveness of communication the following year, it actually got worse. I tried using Google ad words as a marketing strategy for my consulting and training business; I paid Google $400 to $600 every month to make sure Mark Graham Brown showed up on the first page if someone did a search on “performance metrics” or “Balanced Scorecard”. I got close to 1,000 hits per month, which people told me was excellent. I did this for six months before realizing that not one of those website hits translated into dollars in business, or even a good hard lead. The big mistake all of these organizations (including my own) are making is to judge the success of a strategy by measuring milestones, activities, or behaviors associated with the chosen strategy. You can complete all the activities on time and in the right number and still not achieve the goal.

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