Welcome to Your Guide on Strategic Failures!
Ever wondered why some massive companies suddenly disappear or why a "genius" plan goes totally wrong? In this chapter, we explore the messy reality of business. Even the best-laid plans can fail. We are going to look at why strategy is so hard to get right, the difference between "planning" and "doing," and how businesses can prepare for the unexpected.
Don’t worry if this seems a bit heavy at first – we’ll break it down into bite-sized pieces with plenty of real-world examples!
1. Why is Strategic Decision Making and Implementation So Hard?
Making a strategy (a long-term plan) is like trying to predict the weather five years from today. It’s difficult because the world doesn't stand still.
The Difficulty of Decision Making
Decision making is tough because of uncertainty and risk. Managers often have to deal with:
• Information Overload: Having too much data to process.
• Poor Quality Data: Making decisions based on guesses rather than facts.
• The External Environment: Changes in the economy, laws, or technology (think of how AI is changing things right now!).
The Implementation Gap
The "Implementation Gap" is the space between a great idea and actually making it happen. A strategy might fail during implementation because:
• Lack of resources: Not enough money or the right staff.
• Poor communication: The workers on the "front line" don't understand what the bosses want.
• Resistance to change: Staff might be scared of new ways of working (remember Kotter and Schlesinger’s reasons for resistance!).
Quick Review: Implementation
Implementation is the process of turning a plan into action. Most strategies fail here, not in the planning room.
2. Planned vs. Emergent Strategy
There are two main ways strategies come to life. Think of these as "The Itinerary" vs. "The Adventure."
Planned Strategy
A Planned Strategy is a formal, written-down plan created by top managers. It is logical and follows a set path.
• Pros: Provides clear direction and makes it easy to allocate resources.
• Cons: Can be too rigid. If the market changes, a "planned" business might keep heading toward a cliff just because "it’s in the plan."
Emergent Strategy
An Emergent Strategy develops over time. It isn't always written down at the start; it's a response to unexpected opportunities or threats.
• Pros: Very flexible and allows the business to learn as it goes.
• Cons: Can lack focus, leading to "strategic drift" (more on that below!).
Key Takeaway: The most successful businesses use a mix of both. They have a plan but are brave enough to change it when needed.
3. Strategic Drift
This is a big concept for your exams! Strategic Drift happens when a business's strategy no longer fits the environment it operates in.
The Four Stages of Strategic Drift
1. Incremental Change: The business makes small, sensible updates.
2. Strategic Drift: The world starts changing faster than the business. The "gap" begins to grow.
3. Flux: Management realizes something is wrong. They try many different things, but there is no clear direction. Conflict often breaks out.
4. Transformation or Death: The business either makes a massive, radical change to survive or it fails and goes out of business.
Memory Aid: "I Don't Feel Terrific"
• Incremental
• Drift
• Flux
• Transformation
Why does drift happen?
Often, it's because of organisational culture. Managers become "blind" to change because "we've always done it this way." This is sometimes called strategic paralysis.
Did you know? Nokia once owned 40% of the mobile phone market. They suffered from strategic drift when they failed to realize that customers wanted touch-screen smartphones, not just better battery life.4. Evaluating Strategic Performance
How do we know if a strategy is actually working? We can't just wait until the end of the year to check the bank account. Businesses use several tools:
• Financial Ratios: Checking ROCE (Return on Capital Employed) or Gearing to see if the strategy is profitable and safe.
• Market Share: Is the strategy helping us beat the competition?
• The Triple Bottom Line: Evaluating performance based on Profit, People, and Planet (Elkington’s model).
5. Strategic Planning and Contingency Planning
Because things go wrong, managers need to be prepared.
The Value of Strategic Planning
Even though plans fail, the process of planning is valuable because it forces managers to analyze their strengths, weaknesses, and the competition (think back to SWOT and Porter's Five Forces).
Contingency Planning and Crisis Management
• Contingency Planning: This is "Plan B." It involves preparing for "what if" scenarios (e.g., "What if our main supplier goes bust?").
• Crisis Management: This is the business's response after a disaster has happened. The goal is to limit damage and restore the brand's reputation.
Quick Review: The Value of "Plan B"
Contingency planning is expensive and takes time, but it can save a business from total collapse during a crisis.
Common Mistakes to Avoid in Your Exam
• Don't assume Emergent Strategy is bad. Many students think "unplanned" means "lazy." In reality, being able to adapt (emergent) is a huge competitive advantage.
• Don't confuse Strategic Drift with a regular dip in sales. Drift is a long-term failure to keep up with the world, not just one bad month of trading.
• Don't forget Stakeholders. When a strategy fails, it’s often because a key group (like employees or customers) wasn't considered during the implementation phase.
Final Summary Takeaway
Strategies fail when there is a gap between planning and doing. Successful businesses stay alert to Strategic Drift, balance Planned goals with Emergent opportunities, and always have a Contingency Plan ready for when things go wrong. Keep your strategies flexible, and you'll stay ahead of the curve!