Two Reasons for Five Common Strategy Mistakes

Growth relies on having a superior strategy, and in her recent HBR post, Joan Magretta identifies five common strategy mistakes. In reading the piece, two common antecedents became apparent. Hopefully, naming them will amplify rather than oversimplify her points, since she expertly explains how to correct each of the five.

The twin antecedent causes are a lack of clarity and a lack of focus:

  1. Confusing marketing with strategy – While good marketing is important, simply identifying your value to customers is insufficient to win big and often. A clear understanding of why you’ll win using focused execution is vital.
  2. Confusing competitive advantage with “what you’re good at” – Just being good at certain things isn’t enough to win business. Most companies are good in multiple areas, but sometimes the “strengths” they identify are merely minimum requirements to stay in business, like good customer service. Clarifying what you’re uniquely good at and how your unique blend of products, services, and relationships delivers higher value than competitors’ offerings leads to real growth.
  3. Pursuing size above all else, because if you’re the biggest, you’ll be more profitable – A young, smaller company with a clear and focused strategy can maintain higher margins than larger competitors. It happens in many industries, and Joan’s example of BMW versus GM makes the point.
  4. Thinking that “growth” or “reaching $1 billion in revenue” is a strategy – Desiring to “grow the business” and “enhance revenue” constitute objectives; they don’t identify the strategic moves needed to fulfill them. As discussed often in this blog (e.g., see “Attacking Business Entropy“), clarity about positioning is crucial and fundamental to a successful strategy.
  5. Focusing on high-growth markets, because that’s where the money is – The retail sector was not a high growth market when Amazon entered it. It’s a classic example of finding a new, better way of attacking an old, slow growth market to take share from existing competitors.

Why is it important to get strategy right? Operations-focused CEOs sometimes wonder if strategy is about hiring high-paid consultants to create pretty slides and well-written plans for consumption by boards of directors and investment bankers. As pointed out here before, clear and focused strategic thinking is the key to effective execution. Clarity and focus provide the foundation, and the value of the results – accelerated growth, higher margins, and increased understanding of the market – profoundly surpass the value of a new presentation.

About Bob Barker
Bob Barker is a trusted advisor to CEOs, helping them identify, define, and execute new growth-accelerating opportunities. He also shares ideas on LinkedIn (robertgbarker), in guest posts on related blogs, and in industry publications. Contact him via email at bob@2020outlook.com.

Comments

2 Responses to “Two Reasons for Five Common Strategy Mistakes”
  1. David Downey says:

    Great posting, Bob. Thank you!

    A couple of thoughts…

    It has been my experience that businesses tend to struggle, or not fulfill their potential not because they don’t have a clearly defined strategy, but rather from a failure to effectively execute that strategy once it is formulated and handsomely bound. Executive office shelves are often lined with terrific business plans, but they gather dust while those executives tend to everyday fires that land on their desks. Compensation plans should be tied to the successful execution of strategic plan action steps.

    Gross margin continues to be the most important number on a company’s financials. It is the engine that propels everything else.

  2. Pete Hayes says:

    Good observation Bob.

    Clarity and focus. And hopefully that clarity is informed by the realities of the market. Then, focus is the discipline of building objectives and plans to execute with the assurance knowing we’re on the right path.

    For some reason, this reminds me a bit of Tim Tebow in the 4th quarter. There’s intense clarity about what needs to get done, and they focus on executing.

    Pete

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