DBA Literature Review - WordPress.com€¦ · not play defence” (Carroll and Mui 2008b, p.2). The reluctance to look at failure extends beyond strategy into all areas of business

DBA Literature Review -‐ Ty Wiggins Page 1

DBA Literature Review

University of Wollongong

Ty Wiggins

Student No:

“Why does business strategy fail?”


Executive Summary

This review examines the literature that addresses why strategy in business fails or fails to

perform. The goal is to find if there is consensus on where the weak or fail point exists.

With so many educational resources, journal articles, scholars, students and consultants;

why is it that the general feeling is most strategies fail to perform at the desired level.

The research is broken into six sections representing the strategy process; design,

communication, implementation and evaluation, and the key influencers of strategic success

being leadership and culture.

What is found is that there is a limited amount of scholarly literature tackling this issue and a

dearth of empirical research specifically looking at strategy failure.

The literature tends to pick one or two of the sections, or aspects within those sections and

then argue that it is there that the fail point is located, however very few back this up with

research or case studies.


Contents

Executive Summary ................................................................................................................. 2

Introduction .............................................................................................................................. 4

Why Study the Failure of Strategy ........................................................................................... 4

Methodology ............................................................................................................................ 5

Strategy Definitions .................................................................................................................. 5

Positive Bias in Literature ........................................................................................................ 6

What is Success and what is Failure? ..................................................................................... 7

A Model for study ..................................................................................................................... 8

Stage 1 - Design .................................................................................................................... 10

Stage 2 - Communication ...................................................................................................... 13

Stage 3 - Implementation / Execution .................................................................................... 16

Stage 4 - Measurement / Evaluation ..................................................................................... 20

Influencer 1 - Leadership ....................................................................................................... 21

Influencer 2 - Culture ............................................................................................................. 22

Gaps in the Literature / Potential Research ........................................................................... 24

Conclusion ............................................................................................................................. 25

Appendix ................................................................................................................................ 29

Databases .......................................................................................................................... 29

Journals .............................................................................................................................. 29

Keywords ........................................................................................................................... 30


Introduction

This is a literature review for a DBA thesis entitled “Why does business strategy fail”.

The term ‘strategy’ is one of the most commonly used terms in business, there are

thousands of books for sale on the subject, tens of thousands of graduating MBA students

each year and countless strategy consultants globally. Why then is there so much confusion

and debate on the subject and more importantly why do many strategies fail?

Why Study the Failure of Strategy

There is a significant need for this study and the information that it will hopefully unveil. In

their paper “The Strategy-to-Performance Gap” Mankins and Steele surveyed 197 CEO’s

and found that on average, most strategies deliver only 63% on their potential financial

performance with many executives put the figure at 50% (Mankins and Steele 2005).

Based on their survey they attribute the gap in strategy to performance to “a combination of

factors, such as poorly formulated plans, misapplied resources, breakdowns in

communication, and limited accountability for results (Mankins and Steele 2005). This study

is the basis for this literature review and the proposed research.

The opportunity in the above example is for a 40-50% improvement in the financial results of

businesses based on their strategy and the obvious flow on effect to the key shareholders

and stakeholders. However this is a survey conducted at a large corporate level (companies

with $500m+ in sales) and in organisations that have the resources devoted to designing

and implementing strategy as well as the ability to track the financial results. In smaller less

resourced companies the results could be expected to be even lower based on a lack of

strategic resources and knowledge, so the opportunity of financial benefit maybe even

greater from strategic success.

Carroll and Mui have researched the 750 biggest business failures of the last 25 years and

found that “46% of the catastrophes stemmed from misguided strategies” (Carroll and Mui

2008, p.44). This means that the largest single cause of business failure has been a

misguided or wrong strategy. This in itself provides a large opportunity for improvement and

also begs the questions that if these large organisations can get the strategy wrong, then

what is happening in small to medium businesses?


Kaplan and Norton argue that “most companies’ underperformance is due to breakdowns

between strategy and operations” (Kaplan and Norton 2008, p.65). This comment sits

closely with the findings of Mankins and Steele in that it is not an absolute failure but instead

underperformance.

The hope of the literature review and of the proposed study is to identify a “fail or weak’ point

that CEO’s, strategists and business owners can work to minimise thus increasing the

success of their strategies.

Methodology

The methodology for this literature review is to examine both academic and non-academic

writings that focus on the failure of strategy. The method applied involved accessing

scholarly literature through electronic databases and using a combination of several

keywords, plus non-academic writings through similar databases and search engines. The

articles were screened in terms of relevance to this study and articles with explicit reference

to strategy failure or failed strategy or strategy related performance issues were considered.

Articles that related to military strategy were excluded. (See appendix for a list of the main

keywords, databases and journals).

Strategy Definitions

The purpose of this literature review is to specifically look at the academic and non academic

literature that pertains to failure in strategy, it will not look at the over arching definitions (and

numerous debates) of what strategy is within the different contexts. Whilst some of the

seminary works on this area are used, they are there to set the generally accepted definition,

not to contest the validity of these definitions. Where definitions are offered it will be to

enlighten a particular debate or argument and not designed to encourage a general debate

on what is strategy.

The primary definition of what strategy is specifically related to this literature review and the

proposed study is that a business’ strategy is in essence its competitive advantage. A

broader definition is “the direction and scope of a business over the long term, which

achieves competitive advantage in a changing environment through its configuration of

resources and competencies with the aim of fulfilling stakeholders expectations” (Johnson et

al. 2011, p.3).


Positive Bias in Literature

One thing that is immediately apparent is that within both academic literature and non-

academic writing, there is a very strong bias to the positive aspect of strategy. Much of the

writing focuses on either new models or ideas for strategy or on the great success stories

and businesses that have triumphant over time.

Where the negative viewpoint is taken, it is often discussing the major catastrophic failures

such as Enron or Lehman Brothers. Articles examining the failure of strategy of a going

concern that does not end in absolute disaster is rare. Mendes article is an exception where

he examined and discussed the failed strategy at Eastman Kodak, specifically in their

inability to adequately deal with the onset of digital printing (Mendes 2012). This failure did

not end the company but did result in decreasing profit and returns over a period of time

significantly reducing the value of the business.

Of the literature discussed in this review, there is a skew towards non-academic writing. The

articles that attack the heart of the topic tend to be non-academic. Additionally there is a

dearth of any empirical studies into this area with the closest being surveys conducted and

published by the large management-consulting firms.

Carroll and Mui (2008) argue that the tendency in business writing is in favour of emulating

the success stories instead of trying to not avoid the failures. They give a good analogy that

looking only at the success stories is like “interviewing winners at the roulette wheel and

assuming that their strategies will help you win” (Carroll and Mui 2008, p.44). However to

get a accurate picture they argue that you must also interview the losers and examine their

strategies (Carroll and Mui 2008). They go onto suggest that this preference of looking only

at the positives is as detrimental as a sports team “that decides it will only play offense and

not play defence” (Carroll and Mui 2008b, p.2).

The reluctance to look at failure extends beyond strategy into all areas of business according

to Cannon and Edmondson who claim that while it is a logical thing to do, most businesses

simply ignore or dismiss their failures and thus do not benefit from them (Cannon and

Edmondson 2005).

“An important reason that most organizations do not learn from failure may be their lack of

attention to small, everyday organizational failures, especially as compared to the

investigative commissions or formal ‘after-action reviews’ triggered by large catastrophic

failures. Small failures are often the ‘early warning signs’ which, if detected and addressed,


may be the key to avoiding catastrophic failure in the future” (Cannon and Edmondson 2005,

p.4).

What is Success and what is Failure?

To prompt any discussion of the reasons strategy fails, one must first establish what

constitutes success and more importantly what constitutes failure.

Mankins & Steele (2005) used financial results versus stated financial objectives of

strategies as the measure. Their study consisted on large corporates with internal and

external accounting resources. These types of organisations are very numbers driven so the

effect against the bottom line is key however not all organisations are this numbers focused.

So as the sole measure it falls short of covering all businesses plus there are aspects within

even the large businesses that don’t show up on the financial statements. The strategy

could fail these errors but still get the tick for financial success and vice versa.

Davis argues that “financial indicators show the results of what the firm was doing yesterday

and provide little clue to the current strategic health of the business or its underlying

competitiveness” (Davies 1993, p.204).

Porter (1987) conducted a much smaller study (twelve companies) looking at businesses

that had made an acquisition as part of their strategy. His determination of failure was if the

companies divested their acquisitions. Again this not a scalable measure as it will not be

applicable for a large majority of businesses that have not or do not use acquisition as part

of their growth. Additionally mergers and acquisitions as a strategy itself may prove to be

flawed and represent a disproportionate amount of failures.

In their article Carroll and Mui define failure as any of the following events; (1) writing off

major investments, or (2) shuttering unprofitable lines of business, or (3) filing for bankruptcy

(Carroll and Mui 2008). Carroll and Mui’s study is focused on business failure, not

specifically strategy failure, so while these criteria are applicable it must be within the context

of overall business failure as a result or influenced by a failure in the strategy.

For this literature review and the proposed study, it is the ‘everyday’ failures that are of

particular interest. “By failure I don’t mean the spectacular crashes that make the front

pages, and I don't mean those due to chicanery. I mean the invisible failures behind targets

we don’t hit, the promotions we don’t get and the profits we don’t earn” (Chussil 2005, p.26).


A Model for study

In order to provide a framework to review the strategy process and to identify any weak or

fail points, it is important to establish a model for strategy that allows for the separation of the

strategy activities. The following model is proposed, designed by the author based on the

summation of experience and education.

Figure 1: The Strategy Process

The above figure gives a framework for the strategy process from design through to post

implementation evaluation. It reflects the steps the strategy process follows regardless of

whether it is an intended or emergent strategy. Whilst it could be taken as a framework to

use with future strategies, the intention is for it to be used to reflect the process as it

happens in everyday business.

Many of the articles, especially the ones that focus on implementation, group communication

in with the implementation or execution stage. For the purposes of the proposed research,

communication is separated from the implementation stage to reflect the importance of

effectively communicating the strategy, regardless of whether it sits in the design stage or

the implementation stage.

In addition to the four stages of the strategy process there are also two very strong

influences on whether a strategy succeeds or fail. These are leadership and culture. The

figure below includes these two influencers and the areas of their influence.


Figure 2: the Strategy Process with the Leadership and Cultural Influence

This view may not be accepted by other scholars and could potentially cause issues with the

proposed research. Rummler and Brache had a different view of the process and separated

strategy into only two components; formulation and implementation (Rummler and Brache

1995). In their approach the design stage falls into formulation and everything else including

communication is a function of the implementation.

Another alternative view comes from Sull who argues that the long held view of strategy as a

linear process needs to be abandoned because it prevents people from incorporating into

the plan new information as it arises. He goes on to say that a linear view wrongly separates

the formulation of the strategy from its execution and ‘thus planners craft their strategy at the

beginning of the process, precisely when they know the least about how events will unfold”

(Sull 2007, p.30).

In Sull’s view new information is generated via the execution of the strategy and this

information needs to be included. Also taking a linear view commits leaders to stick with a

failing or bad strategy. Instead of linear he concludes that the strategy process is more akin

to a loop where each strategy is considered a work in progress that can and should be

revised based on the interactions between the company and its environment (Sull 2007).

Pugh and Bourgeois also agree that strategy is an evolutionary process rather than a

destination or end point, “strategy is not something we have, it is something we do and have

to keep doing in order to support and grow a successful business or organization” (Pugh and

Bourgeois lll 2011, p.172).

A third view on the strategy process is that there are five phases;(1) intelligence gathering /

analysis, (2) formulation, (3) master project planning, (4) implementation and (5) monitoring,

reviewing and updating (Freedman 2003).

Leadership*

Culture*

Design* Communica5on* Implementa5on*/*Execu5on*

Measurement*/*Evalua5on*


Whilst there are numerous models and views they all contain very similar information, only

the importance of various sections differ. Based on Sull’s view the model for the proposed

research would (and probably should) look more like this;

Figure 3: Revised proposed strategy framework based on Sull (2007)

Stage 1 -‐ Design

Within each stage of the strategy model there are conceptual questions. Here it is does the

strategy fail because it is fundamentally flawed from the start?

Porter in his famous 1996 ‘What is Strategy” article discusses at length the concept of

strategy and argues that the reason that so many companies fail to have a successful

strategy is that managers are reluctant to make strategic choices and incorrectly see the

biggest threats to their strategy coming from outside the firm when the greater threat often

comes from inside the firm (Porter 1996). He suggests that organisations should consider

three aspects in designing a distinctive strategy; identify the genuine strengths within the

organisation, examine the marketplace to gauge what market positions are unoccupied,

focus the strategies on bringing its confirmed strengths to exploiting those unoccupied

strategic positions (Porter 1996).

If strategy is the pursuit of competitive advantage (Porter 1980; Porter 1991; Porter 1996)

then the issue with the design stage may come down to the absence of a strategy at all.

Design

Communica.on

Implementa.on

Evalua.on


“Just 53% of executives characterise their companies’ strategies as emphasising a relative

advantage over competitors” (Bradley et al. 2011, p.1). The McKinsey survey was based on

another McKinsey publication that discussed ten tests of an effective strategy, the first of

which is “whether the strategy will beat the market by creating competitive advantage”

(Bradley and Matson 2011, p.1). This implies that if the strategy does not seek a competitive

advantage then it is not a strategy but instead a wish list of outcomes, the business goals or

a set of targets.

Kaplan and Norton cite that a company’s underperformance stems from a breakdown in the

management system between the strategy and operations and that in many cases of

strategic failure the company fails to link the strategic objectives to the tools that must

ultimately deliver the objectives (Kaplan and Norton 2008).

Hrebiniak argued that even great execution cannot overcome the shortcomings of poor

strategic planning efforts or bad strategies (Hrebiniak 2006) which firmly puts the highest

responsibility in terms of success with the design or formulation stage of the entire process.

A common part of the strategy design for many businesses is the vision and mission.

Davies claims that based on his experience there are three reasons why these initiatives fail,

“because they are not shared, because they are too generic and not readily measurable; or

because they are not competitively relevant and have no connection with the needs of the

firm’s customers” (Davies 1993, p.203).

There are two dominate theories of strategy based on the pursuit of competitive advantage

and they take an alternative view of where this advantage comes from and what

organisations should be using to achieve it. They are the Resource Based View (RBV) and

the Market Based View (MPV). Supporters of the RBV of strategy (Barney 1996; Barney

2001; Collis & Montgomery 2005) contend that an organisation should compete on their

resources and not on their market position, especially those that are valuable, rare and

difficult to copy or imitate. The opposing view made famous by Porters Competitive Strategy

and his Five Forces Model argues that an organisation should based their strategy on their

environment using market and customer drivers to create a product offering (Porter 1980).

No literature was found comparing the eventual success of these theories in comparison to

each other so it is not possible to comment of whether one has a higher potential of failure.

However in future study, if it is decided that the fail point is in fact more commonly found in

the design stage then investigating what method the strategy design takes may prove

worthwhile.


Whilst many of the articles that identify design as the fail point focus on the strategy

formulation process, Carroll and Mui (2008) argue that it is the type of strategy that is more

destined to fail. They name seven suspect strategies that have the greatest propensity of

failure; synergy, financial engineering, rollups, staying the course, moving into an adjunct

market, using technology and consolidation (Carroll and Mui 2008). This identification of the

suspect strategies comes from studying actual business failures but what the authors don’t

do is take the seven strategies and compare their use in successful businesses. The

argument that it might not be the design process nor the design methodology, but instead

the type of strategy itself, has merit and could be further explored by comparing the

successful firms with the failed ones.

Early in the design process an organisation needs to decide how rigidly they will adhere to

the strategy or plan. This reluctance or eagerness to look early at contingencies may be a

key factor in the strategic success. In a case study that is described as successful Calfee

explains that “a hard-wired strategic plan was rejected in favour of a broad strategic intent”

(Calfee 2006, p.231) with the goal to be able to stress test several scenarios and

assumptions throughout the implementation. While this failure would show up in the

implementation, it is reasonable that it be labelled a design issue due to the stage where the

decision to be fixed (intended) or fluid (emergent) occurs.

Another overarching issue could be that the people who devise the strategy do not have

adequate knowledge of the business. This could be the case with the management team or

the use of external consultants. Either the strategy could be wrong (or designed with

another agenda) or it could be over complicated. Can someone from outside the

organisation, without emotional or personal attachment ever effectively design its strategy?

Or is it the opposite that only a detached external person can effectively see through

historical issues to set the most appropriate strategy?

No academic literature of the effect of external management consultants on the success or

failure of business strategy were found, this is another potential area of research. Do

management consultancies help to mitigate the potential strategic failings or do they

increase the possibility of failure. McKinsey and Co was engaged by Enron the year before

their infamous failure. However it is generally accepted that whilst consultants often get the

blame, much of the fault lies with the client’s inability to implement the strategies (Johnson et

al. 2009).

An issue that comes up in the communication section is the involvement or lack of

involvement of staff in the formulation stage. The articles that focused on design did not


raise this as an issue but the ones that look at communication and implementation often

mentioned that not involving the general staff (or representatives) in the design process

reduces a strategy’s chance of success.

Stage 2 -‐ Communication

While some strategy models go from design straight through to implementation, taking the

view that the communication of the strategy is the first part of the implementation, it is the

authors belief that the next stage of the strategic process is the communication of the

strategy to the employees and stakeholders. One of the potential claims of the proposed

research is that it is in the communication (or lack thereof) that the strategy process fails. As

such and because it is such a crucial step, communication is a separate stage.

There were several articles that put the blame of failed strategy on failed communication of

the strategy to staff. 60% percent of strategy implementation failures are due to ineffective

communication among executives, managers and line workers (Beer and Eisenstat 2004).

“The key to executing your strategy is to have people in your organization understand it”

(Kaplan and Norton 2000, p.167).

In their article titled “Can you say what your strategy is?” Collis and Rukstad argue that many

CEO’s cannot articulate their strategy, its objective, scope or advantage. As a result the

employees on the frontline are frustrated because there is no clear strategy to guide their

decisions and actions. They argue that it is the absence of clarity and communication of the

strategy that results in a strategy’s lack of success (Collis and Rukstad M 2008).

Porter reinforces the argument, “one of the most important functions of an explicated

communicated strategy is to guide employees in making choices that arise because of the

trade-offs in their individual activities and in day-to-day decisions” (Porter 1996, p.77).

There is potentially scope to research deeper into the frustrations and lack of clarity frontline

staff have around the organisation’s strategy in their day-to-day activities. As an adjunct to

the popular term of employee engagement, it may be found that there is a strategic

engagement, the level the employees relate their understanding of the company’s strategy

and their ability to translate the over-arching strategy to job specific tasks and customer

interactions.

Kaplan and Norton, the creators of the popular balanced scorecard found in their work that

on average, 95% of employees are unaware of or do not understand the organisation’s


strategy (Kaplan and Norton 2005). This is a damning judgement on business, the

managers and in turn the staff, who also bear some of the responsibility. If we were to take

this across to a military context then it would surely result in absolute tragedy. If 95% of the

soldiers did not understand or know the strategy, the ensuing battle would definitely be lost

along with probably 95% of the soldiers.

In another paper Kaplan and Norton argue that “once a strategy has been formulated,

managers need to translate it into objectives and measures that can be clearly

communicated to all units and employees” (Kaplan and Norton 2008). This is probably the

first key to effective communication, to put the strategy into terms and explanations that can

be communicated and more importantly understood.

Calfee takes the communication message further arguing that not only does the strategy

need to be communicated but that it needs to be fully supported and this support comes

from engaging the staff in the development stage. “To be successfully executed, winning

strategies need the kind of widespread organisational support that comes only when

members from across the organisation get deeply engaged in the process of strategy

development” (Calfee 2006, p.229). This takes the discussion back to the design stage

where the strategy development process starts and as others argue, if you haven’t involved

the staff in the process then by the time you start your communication it is too late.

When the communication does actually happen, some argue that it does not deliver the right

message. Speculand claims that the intent in communicating a new strategy is to “enable

employees to understand what is changing, to explain why an organisation is changing and

to define what they should do differently” (Speculand 2006, p.5). Anything further works to

confusion the staff and prompt unnecessary debate.

Based on his experience Scholey explains that there is one key to poor execution and that is

“the leaders who craft the strategy do a poor job at communicating the strategy to the ‘doers’

of the organisation to help make it real and tangible at their level” (Scholey 2005, p.12). The

implication here is that the designers of the strategy need communication training if they are

to be the ones ‘selling’ the strategy in, or that another member of staff should be charged

with the communication responsibility.

Effective communication can create more than just understanding. “Some strategies fail

because there is insufficient buy-in to or understanding of the strategy among those who

need to implement it” (Stirling 2003, p.30).


In his article DeLisi cites a 1996 Renaissance Solutions Survey claims that 85% of senior

management teams spend less than one hour a month in their strategy and have only 5% of

the staff understanding the strategy (DeLisi 2004). Whilst this is an older article there is

nothing evident in the literature search that argues or even indicates that this type of

organizational focus and behaviour has changed.

Beer and Eisenstat argue that a core barrier to implementation is poor vertical

communication which not only hinders the implementation of the strategy but also prevents

discussion of the barriers themselves (Beer and Eisenstat 2000). This hindrance prevents

important information from traveling from the front line employees up to management,

reducing their ability to make the necessary changes to the strategy.

Wery and Waco offer several explanations for why good strategies fail including poor

communication of the strategy. They argue that to get the support for your strategy your

“communication must be clear, consistent, and frequent across all levels of the organisation”

(Wery and Waco 2004, p.156).

Beaudan touches on the concept of strategic engagement in claiming, “if people believe that

a strategy is the best possible one for the business, their willingness to make the strategy

work regardless of the personal cost to them will greatly increase” (Beaudan 2001, p.66).

He concludes that businesses and CEO’ fail not because of a lack of strategic vision but

“because they don’t have a clear vehicle to help leaders and employees translate strategy

into a personally meaningful call to action” (Beaudan 2001, p.68).

There is a lack of academic interest on the area of communication. “Although an entire

discipline is devoted to the study of organisational strategy, including strategy

implementation, little attention has been given to the links between communication and

strategy” (Forman and Argenti 2005, p.245). They found in their research that in many firms

the function of communication is closely tied with strategy implementation and occasionally

to strategy formulation. They also suggest that effectively managing communication around

strategy can become in itself a competitive advantage. Disappointingly they did not offer

any examples of businesses where this has become or is the case.


Stage 3 -‐ Implementation / Execution

Within the proposed model the third stage is implementation or execution. The terms are

used interchangeably across the literature thus both are included as no significant difference

exists in the use.

“Effective implementation of an average strategy, beats mediocre implementation of a great

strategy every time” (Stirling 2003, p.27). This comment sums up the argument made by

most authors who favour the implementation stage of the process in terms of what is

important and where the common failures occur.

There appears to be a consistent school of thought that strategy fails at the execution stage.

Neilson et al argue that it is here that the majority of strategic failures occur and they offer

seventeen traits that relate to information flow, which promotes successful execution

(Neilson et al 2008). Kim and Mauborgne also identify the execution as the common failing

point and focus on changing behaviours to gain success (Kim and Mauborgne 2005).

Schneider cites a poll that found 70% of CEO’s considered themselves to be good at

strategy formulation but only 30% of the same sample considered that they or their

companies were any good at the implementation stage (Schneider 2007).

This line of argument assumes that the strategies that fail due to poor execution are

fundamentally sound and well designed. However this seems too simplistic. It is hard to

believe that the solution to low levels of success with strategy across different organisations,

industries, countries and cultures is just the execution or implementation. It could be that the

poor execution is an outcome and not the cause of failure and that the true problem occurs

somewhere earlier in the process.

There is a difference however with the conceptual view of the issues with implementation

from the academic to the non-academic writing. Broadly the blame in non-academic writings

seems to be on the organisation lacking the skills to implement the strategy whereas the

academic papers tend to imply that the issue is not lack of skills but lack of focus or

attention. “A key cause for missing strategy goals is that leaders do not invest the same

amount of time, energy, and resources in managing the implementation of the strategy as

they do in setting the strategy” (Getz and Lee 2011, p.303).

Freedman describes this lack of focus as a lack of strategic inertia, which is when executives

simply fail to put a priority on strategy (Freedman 2003). He says that “evidence shows that


once strategy is set, interest among top team members falls rapidly away” (Freedman 2003,

p.26)

Another frequently implied cause is that opposite to the people who believe the process

goes from design straight to implementation, there are some who think that communicating

the strategy is the same as implementation. “Senior managers get lulled into believing that a

well-conceived strategy communicated to the organisation equals implementation” (Beer and

Eisenstat 2000, p.29). They argue that all of the glory and attention is centred on the

formulation; the strategy is then literally handed to the employees to ‘get it done’. These are

often the same employees who had no involvement in the design and often have little

commitment to or understanding of the strategy.

In their working paper Li et al cite past research that acknowledges “strategies frequently fail

not because of inadequate strategy formulation, but because of insufficient implementation”

(Li et al. 2008, p.2). They agree that formulating a successful strategy is a difficult task but

claim that implementing is even harder.

Li et al found that across the research on strategy implementation there are five

organisational levels; corporate, strategic business unit, functional, operational and mixed (Li

et al. 2008). One of the issues they had with the research was that 41% of the studies in

their literature review did not “even indicate at which level their discussion of strategy

implementation is located” (Li et al. 2008, p.9). This issue is replicated in this literature

review with none of the featured articles specifically explaining at what level their discussion

of implementation is occurring.

Through their literature review Li et al also discuss two crucial aspects to the proposed

research: communication and consensus. Communication forms a constant theme in the

studies researched although they claim that few have really examined the link between

successful strategy and corporation communication. Consensus they claim is the focus for

many authors arguing that a firm must achieve both internal and external consensus to be

able to successful implement business strategies (Li et al. 2008).

Floyd and Wooldridge argue that agreement between the different levels of management

and staff within an organisation is defined as strategic consensus and they label any gulf

between the created strategies and the awareness at the ground level as the implementation

gap (Floyd and Wooldridge 1992).

Taking the concept further Rapert et al (1996) view the two key strategic outcomes to be

consensus and commitment. They claim, strategic consensus reflects the belief that the


strategy is the appropriate one to pursue, strategic commitment evaluates the depth of the

willingness to expend effort and resources in pursuit of the strategy (Rapert et al. 1996).

In some organisations the strategic planning process can take weeks, even months and

involve many staff members and hours from the senior management plus the additional

costs of external consultants. As such, once the strategy is in place there is considerable

pressure to 'stick to the plan' even when things change in a way that puts pressure on the

plan. Is the issue that it is ‘set and forget’ for many companies - does the strategic planning

process need to be a constant process of adjustment and revision. With the inability for

many companies to build truly sustainable competitive advantages is the old concept of

annual or bi-annual strategic planning a defunct one in today's society?

Likewise some organisations have a very fluid approach to their business and this may

relate to how they implement or fail to implement their strategy. Is a willingness to react and

respond to changes in the market place or business environment the death of a good

strategy?

In a study on organisational agility the Economist Intelligence Unit found that “more than

one-quarter (27%) of respondents admit that their organisation is at a competitive

disadvantage because it is not agile enough to anticipate fundamental marketplace shifts”

(EIU 2009, p.5).

Daniell argues that “one of the most common reasons why traditional models and classic

approaches to strategy formation have failed to generate acceptable results is that many

past strategies were over reliant on static snapshots of businesses and industries which

were in a constantly flowing process of change, redefinition and evolution” (Daniell 2006,

p.35).

Wery and Waco state that “of all the strategy execution challenges, organizational alignment

is perhaps the greatest – and most frequent cause of failure” (Wery and Waco 2004, p.157).

The concept of alignment involves ensuring that processes are put into place to address the

impact on the organization of strategic change because “the very people who keep the

operations going are the ones needed to change course” (Wery and Waco 2004, p.157).

One of the aspects that is not covered adequately in the literature is the impact of changing

environments or market conditions during the strategy process. Wery and Waco touch on it

by saying that “the success of a strategy is directly related to its timeliness and to the relative

stability of the business environment. Even a brilliant strategy can become irrelevant if the


market conditions have changed by the time the strategy is implemented” (Wery and Waco

2004, p.154).

Stirling argues that “strategies often fail because the market conditions they were intended to

exploit change before the strategy takes hold” (Stirling 2003, p.27).

Additionally some strategies fail because a competitor beats the company to market with a

similar strategy or because they don’t distinguish the company in the market.

The other aspect under market changes is a significant change in the competitor landscape

be it the introduction or removal of a major competitor or a highly effective response to an

organisation’s strategy from a major competitor.

A subset of the implementation stage is change management. Often strategy involves a

change to how or where the business operates and this change will inevitably impact the

people in the organisation. Some have argued that it is the inability to manage change

effectively that causes the implementation to fail (Hrebiniak 2005). However not all

strategies involve significant change, one of the identified problems under the design stage

is the adoption of a “same as before’ strategy where organisations make little to no changes.

There is no evidence that these strategies are any more successful. So change

management as a factor of implementing a strategy that requires it, may be a function of the

failure but cannot be the only one.

Another subset that was featured was accountability and more importantly that people are

not specifically held accountable for aspects of the implementation. To increase the

effectiveness of the implementation the plan should be divided into tasks and the leader

should ‘pin numbers’ on the backs of the people responsible. This should also be tied to

rewards and/ punishments for the results (DeLisi 2004).

As a cross over between design and culture Press argues that the two factors that ensure

success of a strategy, and are so important that they can be used to predict whether a

strategy will succeed or not, are “the organisation’s technical ability to execute the strategy

and the organisation’s will (or resolve) to implement it” (Press 2001, p.26). The issue of the

technical ability should be covered off in the design stage whilst the willingness is firmly an

aspect of culture probably associated with communication.


Stage 4 -‐ Measurement / Evaluation

The final stage of the strategy process is the evaluation or measurement of the results. In

many ways this may also prove to be the first stage of the process as many businesses work

on an annual strategic planning structure and this process should start with a review of the

last annual process. The key questions here are; does a review or evaluation take place at

all and if so, is the strategy evaluated against the right criteria. It is the authors experience in

many strategy sessions, that there is no review at all of last year’s strategy, its stated

objectives or results.

To truly take advantage of the organisational learning the process should be a full review of

the outcomes versus the stated strategic objectives plus an evaluation of the methods and

approaches used against the results. Simply, what was our strategy, did it work and if not

why. Unfortunately many business start the process with a “where are we today’ session

and then push on.

Mankins and Steele state that in their experience “less than 15% of companies make it a

regular practice to go back and compare the business’ results with the performance forecast

for each unit in it’s prior years’ strategic plans” (Mankins and Steele 2005, p.66).

In terms of the proposed research this could be a real trap. To not gauge the effect the

evaluation or lack of evaluation has on the design of the new strategy could be to miss the

key fail point.

In terms of what and how to measure Venkatraman & Ramanujam studied the performance

measures used in strategy research and concluded that the most popular and applicable are

financial performance such as ROA & ROE, business performance such as market share,

growth & diversification, and organisational effectiveness such as employee satisfaction &

social responsibility (Venkatraman and Ramanujam 1986).

From the feedback gained from their survey Mankins and Steele make several

recommendations for closing the gap between strategy and performance, one of which is to

monitor the performance of the strategy continuously. They claim that top performing

companies use real time reporting and “continuously monitor their resource patterns and the

results against the plan, using continuous feedback to reset planning assumptions and

reallocate resources” (Mankins and Steele 2005, p.71).

DeLisi cites a survey that indicates that 92% of organisations do not track the relevant KPI’s

against their strategy to assess their performance (DeLisi 2004). Based on this view it would


be nearly impossible for some firms to say whether they have succeed or failed with their

strategy, a little like the saying “if you don’t know where you are going, when you get there

you will be lost”.

So the issues and opportunities here are for firms to review and evaluate their strategies,

building the appropriate KPI’s to do so, and completing this process ongoing as well as at

the anniversary dates.

Influencer 1 -‐ Leadership

The leader of the organisation, the leaders below him/her and the leadership style across the

organisation all have the ability to strongly influence the success or failure of a strategy. The

leadership influence can also be applied positively or negatively to any or all of the stages in

the strategy process.

Factors that may affect the leadership influence include whether the leader is an owner/

founder, where they are in terms of the tenure / contract, their remuneration package and

bonus structure and their personal agenda.

Finklestein & Borg argue that “mistakes in strategy can be boiled down to two things: a

wrong idea and bad stewardship of that idea” (Finkelstein and Borg 2004, p.120). This is a

very simple assessment of the challenges strategies face in being successful, however it

may just be this simple. The wrong idea is the design of the strategy, which includes the

strategic choices. Bad stewardship implies more than just mis-management, it could also

include communication and promotion of the idea plus allocation of resources to the

strategy’s success. In their article they look at two case studies (Wang Laboratories and

Snow Brand Milk) and judge that “the flawed preferences of key leaders derailed their

competitive strategies” (Finkelstein and Borg 2004, p.122)

Over confidence was also mentioned by several authors as a leadership related issue. “We

also tend to be overconfident of our own abilities. This is a particular problem for strategies

based on assessments of core capabilities” (Roxburgh 2003, p.2). One would expect that

this was a lesser problem for bigger organisations who have many people working together

on the strategy however if the leader is particularly charismatic or dominating, then their over

confident decisions could steer the strategy wrong from the start. Alternatively the

overconfidence could influence the decisions that need to be taken during the

implementation stage around adapting to changing factors or environments.


Porter argues that the challenge of a clear strategy is an organisational issue and is

dependant on leadership. He goes on to say that due to the importance and difficulty of the

choices that need to be made, strong leaders are essential. “The leader must provide the

discipline to decide which industry changes and customer needs the company will respond

to, while avoiding organisational distractions and maintaining the company’s distinctiveness”

(Porter 1996, p.77).

In their article Mankins and Steele found that the causes of the gap between strategy and

performance were almost invisible to the senior management, “leaders then pull the wrong

levers in their attempts to turn around performance – pressing for better execution when they

actually need a better strategy, or opting to change direction when they really should focus

the organisation on execution” (Mankins and Steele 2005, p.66).

Influencer 2 -‐ Culture

The second main influencer is culture. Leadership and culture are intrinsically linked with

the culture being initially set by the leaders or founders and then evolving over time based

on the beliefs within the organisation and the acceptable behaviours.

In his article titled ‘Culture eats strategy for lunch’ Parr argues that in businesses such as

Southwest airlines, Costco and Starbucks, the culture is so strong that any strategy that

works against it will fail (Parr 2012). This view is supported by many authors including

Curran who states “culture is omnipotent, culture can kill the best strategic plan” (Curran

2002, p.257), and Beaudan who argues “when strategy and culture are at odds, culture

always wins” (Beaudan 2001, p.66).

It was surprising to find that there were not more articles that had studied cases where a

winning strategy was cut down in its prime by the established culture.

Schneider states that the missing link between the strategy and the bottom-line performance

is the organisational culture. “Even if a firm seems to have a superb strategy, if its culture

isn't aligned with and doesn’t promote that strategy, this ‘great’ strategy with either stall or

fail” (Schneider 2007, p.177). He adds that in order to leverage the people resources in an

organisation that the CEO needs to not only understand but also capitalise on the culture.

It is also identified that strategists need to be careful not to be fooled by short term results

when they have pitched their strategy against the culture, “to be truly sustainable, the

strategy must itself be aligned with a winning culture, one that drives excellence throughout


the entire organisation” (Calfee 2006, p.229). He uses a case study where the CEO

declared early that the “creation of a winning culture was a precondition to strategic success”

(Calfee 2006, p.231). This was a challenging concept for the staff that did not have a

winning culture. What they were forced to do was to take what was considered the ‘soft

stuff’ in terms of cultural change and make them ‘hard’ and tangible so the entire

organisation could drive the change. One of the key aspects that allowed this to be

successful was that there was a realisation that the organisation needed to own the culture

before it could take hold and succeed (Calfee 2006).

There is some debate on the basis of the relationship between leadership and culture as to

whether leadership forms the culture or the culture determines the leader. There is no

argument found in the literature though that if you want to implement a strategy that is

conflicted with your culture, that you first need to change your culture.

The implication is that at design stage the strategy versus the culture needs to be discussed

and if that is still the right strategy (acknowledging that it has lower chance of success if it

conflicts the culture) then there might be extra steps required in the design or communication

stage such as heavily involving the staff in the formulation process so they share

‘ownership’.

Tosti refers to it as the “strategy-culture gap” (Tosti 2007). He suggests, “one question that is

seldom asked at these strategy sessions is...to what extent do we believe we have a culture

that can support this new strategy?” (Tosti 2007, p.23). He also claims that “research

indicates that less than 5% of all culture change programs work” (Tosti 2007, p.25), which if

true, is a significant issue for any business that feels it needs a strategy to succeed that

clashes with its existing culture. The ability to be able to change the culture prior to

implementation is low so the implication is that another less desirable strategy needs to be

selected. Could this then lead to the failure of the strategy and in turn the business?

Perlitz continues the argument about the influence of culture on strategic success by

identifying the “not-invented-here-syndrome” which he explains as a situation where the

employees feel imposed upon “when strategies are being implemented in a top down

procedure. The lack of employee integration into the creative process of strategy

development often generates bias, which partly results from a given inertia, and partly from

the offence of not having been asked” (Perlitz 1993, p.116).

Delisi agreed saying that the reason that many middle and lower level mangers were not

committed to the strategy was because they had no involvement in its deign and creation

and thus had no ‘buy in’ (DeLisi 2004).


Not only can the culture works against the strategy passively but it can also be deliberate. If

the management think the strategy is the wrong one, or feel that they have the appropriate

skills and resources to implement it, then they are likely to sabotage the implementation

(Heracleous 2000).

There is an argument that a history of poor performance can create a culture that reinforces

that poor performance and intrinsically works against any strategy. Continuously unrealistic

planning processes create an expectation that the plans will not be achieved, then as this

becomes the normal experience within the organisation it breeds a culture where the

managers and staff expect failure and in doing so start to work to protect themselves form

the negative fallout that will eventually come (Mankins and Steele 2005).

Gaps in the Literature / Potential Research

From the literature searched and reviewed the gaps appear to be in any specific empirical

research on why strategy fails, either qualitatively or quantitatively. The current work is

included in other research such as Carroll and Mui’s examination of business failure and

McKinsey’s survey reviewing current strategy without looking specifically at et failures.

The second gap are detailed case studies on ‘everyday’ failures or failures that don’t result in

the end of the business. This can be broken down into the stages suggested (design,

communication, implementation and Measurement) where research could identify and

discuss failure that occurs at each level. For example it would be constructive for the

authors who believe that strategy fails at the implementation stage to offer case study

examples where the strategy did in fact fail at this stage and review what was done

incorrectly. Likewise with design, communication and measurement. The challenge will be

to establish that the other stages are not the problem, that is in the case study on

implementation that the design and communication stage were completed adequately to not

be a significant contributor to the failure.

The opportunity in both scenarios is to give CEO’s and strategists the tools on the failure of

strategy or the process to help close the strategy-to-performance gap.

Below is a non-exhaustive list of potential parameters for the suggested research:

• Case study of the top firms stated strategies and strategic objectives versus their

results.

• Survey of CEO’s on why and where they feel strategy fails.


• Survey of middle management / front line employees on why and where they feel

strategy fails.

• Studying the link between failed strategy and business failure

Conclusion

The literature review revealed a prejudice towards writing on the positive examples of

strategy or writing to create a new strategy model. What was found addressing why

business strategies fail was lacking in empirical studies and data. Just as professional

athletes and sports teams make it part of their regular routine to watch footage of their

losses and failures (and their competitors) in order to give themselves the best opportunity to

win, so too should businesses with their (and others) failures.

It is the author’s view that the literature points towards communication and culture as the two

biggest barriers to the success of a strategy. With the level of intelligence available,

especially in larger organisations it seems unlikely that most strategies would fail at the

design or formulation stage and with the support of technology it also unlikely that the key

weakness lies in the ability to implement. Having the willingness to implement however is

another issue. The crux of the challenge is summed up as follows:

Strategies are approved but poorly communicated. This, in turn, makes the

translation of strategy into specific actions and resource plans all but impossible.

Lower levels in the organisation don’t know what they need to do, when they need to

do it, or what resources will be required to delver the performance senior

management expects. Consequently, the expected results never materialise. And

because no one is held responsible for the shortfall the cycle of underperformance

gets repeated, often for many years” (Mankins and Steele 2005, p.68)

Irrespective of where the fail or weak point(s) occur, what the literature review has clearly

identified that the upside or opportunity in an improvement in strategy to performance is

enormous and certainly worthy of future research.


References

Beaudan, E (2001). 'The failure of strategy'. Ivey Business Journal Vol.65, No.3, pp64-68.

Beer, M and Eisenstat, R, A (2000). 'The Silent Killers of Strategy Implementation and Learning'. MIT Sloan Management Review Vol.41, No.4, pp29-40.

Beer, M and Eisenstat, R, A (2004). 'How to have an honest conversation about your business strategy'. Harvard Business Review Vol.82, No.2, pp82-89.

Bradley, C, Hirt, M and Smit, S (2011). 'Have you tested your strategy lately?'. McKinsey Quarterly Vol.January.

Bradley, C and Matson, E (2011) "Putting Strategies to the Test." McKinsey Quarterly.

Calfee, D (2006). 'Getting Engaged: an inclusive approach to strategy development'. Handbook of Business Strategy Vol.7, No.4, pp229-234.

Cannon, M, D and Edmondson, A, C (2005). 'Failing to Learn and Learning to Fail (Intelligently) How Great Organiosations Put Failure to Work to Innovate and Improve'. Long Range Planning Vol.38, No.3, pp299-319.

Carroll, P, B and Mui, C (2008). 'Failed Strategies. What CEO's can learn from the billion dollar mistakes'. Chief Executive, No.236, pp44-46.

Carroll, P, B and Mui, C (2008b). Billion Dollar Lessons, Penguin Group, New York.

Chussil, M (2005). 'With all this intelligence, why don't we have better strategies?'. Journal of Business Strategy Vol.26, No.1, pp26-33.

Collis, D, J and Rukstad M, G (2008). 'Can you say What Your Strategy Is'. Harvard Business Review Vol.86, No.4, pp82-90.

Curran, C, R (2002). 'Culture eats strategy for lunch every time'. Nursing Economics Vol.20, No.6, pp257.

Daniell, M, H (2006). 'Mastering the Dynamic Nature of Modern Strategy'. Handbook of Business Strategy Vol.7, No.1, pp35-41.

Davies, R (1993). 'Making Strategy Happen: Common patterns of strategic success and failure'. European Management Journal Vol.11, No.2, pp201-213.

DeLisi, P. (2004). "Strategy Execution: An Oxymoron or a Powerful Formula for Corporate Success." from http://www.org-synergies.com/Strategy Execution Paper3.pdf.

EIU. (2009). "Organisational agility: How business can survive and thrive in turbulent times." 2012, from http://www.emc.com/collateral/leadership/organisational-agility-230309.pdf.

Finkelstein, S and Borg, S (2004). 'Strategy gone bad: doing the wrong thing'. Handbook of Business Strategy Vol.5, No.1, pp115-124.

Floyd, S, W and Wooldridge, B (1992). 'Managing Strategic Consensus: the Foundation of Effective Implementation'. Academy of Management Executive Vol.6, No.4, pp27-39.


Forman, J and Argenti, P, A (2005). 'How Corporate Communication Influences Strategy Implementation, Reputation and teh Corporate Brand: An Exploratory Qualatitive Study'. Corporate Reputation Review Vol.8, No.3, pp245-264.

Freedman, M (2003). 'The genius is in the implementation'. The Journal of Business Strategy Vol.24, No.2, pp26-31.

Getz, G and Lee, J (2011). 'Why your strategy isn't working'. Business Strategy Series Vol.12, No.6, pp303-307.

Heracleous, L (2000). 'the role of strategy implementation in organization development'. Organization Development Journal Vol.18, No.3, pp75-86.

Hrebiniak, L, G (2005). 'A Strategic Look at Strategy Execution'. Optimize Vol.4, No.3, pp57-59.

Hrebiniak, L, G (2006). 'Obstacles to Effective Strategy Implementation'. Organizational Dynamics Vol.35, No.1, pp12-31.

Johnson, G, Scholes, K and Wittingham, R (2009). Fundamentals of Strategy, Prentice Hall, Essex.

Johnson, G, Whittington, R and Scholes, K (2011). Exploring Corporate Strategy, 9th Edition, Text and cases, Prentice Hall, Essex.

Kaplan, R, S and Norton, D, P (2000). 'Having Trouble with your Strategy? Then Map It'. Harvard Business Review Vol.78, No.5, pp167-176.

Kaplan, R, S and Norton, D, P (2005). 'The Balanced Scorecard: Measures That Drive Performance'. Harvard Business Review Vol.83, No.7, pp172-180.

Kaplan, R, S and Norton, D, P (2008). 'Mastering the Management System'. Harvard Business Review Vol.86, No.1, pp62-77.

Li, Y, Guohui, S and Eppler, M, J (2008). 'Making Strategy Work: A literature Review on the Factors influencing Strategy Implementation'. ICA Working Paper, No.2.

Mankins, M, C and Steele, R (2005). 'Turning Strategy into Great Performance'. Harvard Business Review Vol.83, No.7, pp64-72.

Mendes, G. (2012). "What Went Wrong at Eastman Kodak." Retrieved 03/01/2012, from http://strategytank.awardspace.com/articles/What went wrong at Eastman Kodak.pdf.

Parr, S (2012). "Culture Eats Strategy For Lunch." Fastcompany http://www.fastcompany.com/1810674/culture-eats-strategy-for-lunch 2012.

Perlitz, M (1993). 'Why most strategies fail today: the need for strategy innovations'. European Management Journal Vol.11, No.1, pp114-121.

Porter, M (1991). 'Towards a Dynamic Theory of Strategy'. Strategic Management Journal Vol.12, pp95-117.

Porter, M (1996). 'What Is Strategy?'. Harvard Business Review Vol.74, No.6, pp61-78.

Porter, M, E (1980). Competitive Strategy, Free Press, New York.


Press, C (2001). 'Why Strategies Fail'. Health Forum Journal Vol.44, No.2, pp26-31.

Pugh, J and Bourgeois lll, J (2011). ''Doing' Strategy'. Journal of Strategy and Management Vol.4, No.2, pp172-179.

Rapert, M, I, Lynch, D and Suter, T (1996). 'Enhancing Functional and Organizational Performance via Strategic Consensus and Committment'. Journal of Strategic Marketing Vol.4, No.4, pp193-205.

Roxburgh, C. (2003). "Hidden Flaws in Strategy." The McKinsey Quarterly Retrieved 2, from http://www.mckinseyquarterly.com/Hidden_flaws_in_strategy_1288.

Rummler, G, A and Brache, A, P (1995). Improving Performance: How to manage the white space on the organization chart, Jossey-Bass, Inc., San Francisco.

Schneider, W, E (2007). 'Why Strategies Fall Apart: The CEO/Culture Disconnect'. Handbook of Business Strategy Vol.4, No.1, pp174-180.

Scholey, C (2005). 'Strategy maps: a step-by-step guide to measuring, managing and communicating the plan'. Journal of Business Strategy Vol.26, No.3, pp12-19.

Speculand, R (2006). 'Getting Employees Behind Strategy'. Strategic Communication Management Vol.10, No.2, pp5.

Stirling, J (2003). 'Translating strategy into effecttive implementation: dispelling the myths and highlighting what works'. Strategy & Leadership Vol.31, No.3, pp27-34.

Sull, D, N (2007). 'Closing the Gap Between Strategy and Execution'. MIT Sloan Management review Vol.48, No.4, pp30-39.

Tosti, D, T (2007). 'Aligning the Culture and Strategy for Success'. Performance Improvement Vol.46, No.1, pp21-25.

Venkatraman, N and Ramanujam, V (1986). 'Measurement of business performance in strategy research: A comparison of approaches'. Academy of Management Review Vol.11, No.4, pp801-814.

Wery, R and Waco, M (2004). 'Why good strategies fail'. Handbook of Business Strategy Vol.5, No.1, pp153-157.


Appendix

Databases

• Business Source Complete

• Business & Company

• Emerald Journals

• Jstor

• Proquest

• Sage Journals

• Google Scholar

Journals

• Academy of Management Review

• Advances in Strategic Management

• British Journal of Management

• Business Strategy Review

• Business Strategy and the Environment

• Chief Executive

• European Management Journal

• Handbook of Business Strategy

• Harvard Business Review

• Industrial and Corporate Change

• International Business Review

• Ivey Business Journal

• Journal of Business.

• Journal of Business Strategy

• Journal of Economics and Management Strategy

• Journal of International Management.

• Journal of Management Inquiry

• Journal of Management Studies

• Journal of Management

• Strategic Change.

• Strategic Management Journal

• Strategic Organisation


• Strategy and Leadership

• Technology Analysis and Strategic Management

Keywords

• Strategy / Strategies / Strategic

• Business / Organisational / Firm / Company / SBU

• Fail / Failure / Failed / Failing

• Misguided / Misalignment

• Success / Successful / Succeeding

• Management / Leadership / Culture

• Communication / Engagement / Empowerment

• Administration / Bankruptcy / Merger / Takeover

• Measurement / Evaluation / Results / review

• Design / Planning / Process / Structure

• Framework / Model / Mapping

• Competitive Advantage / Advantage / Positioning

Documents

DBA Literature Review - WordPress.com€¦ · not play defence” (Carroll and Mui 2008b, p.2). The reluctance to look at failure extends beyond strategy into all areas of business