Year 2009 was a dreadful year
I believe most senior management would agree that 2009 will stand as the worst year in recent history. As we are preparing to close the fiscal year, we look to 2010 with caution in search for signs of optimism. However, we should not forget to look back on 2009 and reflect on how we handled the challenges of the year.
It has been said several times over that the current crisis is not a market crisis in the textbook meaning of the term. The current crisis is or at least started as a financial crisis, where in spite of business opportunities, liquidity was not available or difficult to get at. However, reflecting on the predominant reactions to the crisis, many companies defaulted to actions of past times. Defaulted to crisis management instead of change leadership (see my previous post on this topic).
The issue of strategy execution
If the current crisis is predominantly a financial crisis then the existing corporate strategy may not be wrong by assumption. However, the strategy will require alignment to new external factors. If the strategy is robust then changing external factors ought not necessarily change the strategic goals pursued, merely the path towards them. The reaction of many companies to continuously change or reformulate their strategy may be indicative of another problem. The problem of executing the strategy.
Higgs and Rowland, 2005, conclude in their research of strategy implementation in international companies that 70% of all change initiatives fail to produce expected results. Norton and Kaplan, the authors of The Balanced Scorecard, claim this number to be closer to 90%. Regardless of the exact figure both studies paint a gloomy picture of the challenges of implementing a corporate strategy.which highlights the problem of strategy execution.
Implementing strategy in uncharted waters
I have during the past months spoken to executives in companies of varying sizes, industries, and complexities. Most recognizes the issue of strategy implementation. Summarizing the key two current reasons behind the issue, the predominant reason is the difficulty of translating the strategy into tactics plans and subsequently specific projects. As many companies has downsized their organization during 2009, the same companies now face the lack of resources and competences to execute and implement the strategy. And senior management simply does not have the time or spare focus to undertake this task amid dealing with the crisis.
The second reason is related to the organization context. The severity and speed of the crisis has forced many companies to react swiftly and dramatically. This after a period of growth and prosperity. The many downsizing of companies have created a misalignment in how organizations perceive themselves. Successful strategy implementations require a solid grasp and understanding of the change context; hence the issue when designing the optimal path for pursuing the strategic goals.
A hybrid approach to change management
One remedy is to bring in outside assistance, which has its benefits and drawbacks. The benefits are the influx of required competences, resources, and insight to implement the strategy. The drawbacks are the associated cost and the fact that outside consultants are external to the organization, which can result in a lack of organizational commitment to the change program. Another remedy is to sit the crisis out, which is likely to result in loss of competitive edge and market shares.
I propose a hybrid approach, where external assistance is brought in only to address the two key issues mentioned previously.
The external consultants represent the extra resources required to bridge the step from strategy to tactical plans, where they because of their external perception of the company are able to provide the critical insight of the “new” organization as input to designing the change program. Their involvement would then only be in the early phases of the strategy implementation like catalysts of change.