Many strategic plans fail. In fact, 67 Percent of Strategic Plans Fail according to research from Inc. Many do so despite significant investment in crafting them and communicating them to the broader organisation.
Is it possible to pin a good majority of strategy failures on one key oversight? I think it is – and I’ll explain why as we get further into this article. But to get the elephant out of the room early…
One of the biggest reasons strategic plans fail is that they don’t take into account the external conditions in which the organisation operates.
I’ve seen it so many times. Far too often, CEOs and boards are so eager to get their new strategic plan ‘done’ that they miss a critical piece of the puzzle – the conditions in which they operate.
In my experience, addressing this missing piece has the biggest influence on whether your strategy will succeed or fail.
As Jack Welsh, former Chairman and CEO of General Electric, unfortunately found out himself –
“If the rate of change on the outside exceeds the rate of change on the inside, the end is near.”
One of the key roles of strategy is to ensure that the rate of change externally is reflected by the rate of change internally.
Let’s look at a very well-known example: Blockbuster.
What Does Strategy Failure Look Like?
In Blockbuster’s case, strategic failure basically came down to ignoring the external conditions. If the organisation truly understood and responded appropriately to its market, choosing to innovate to keep pace with market shifts, it could likely still be the dominant player today.
Overall, Blockbuster’s downfall can be attributed to several factors, but one of the primary reasons was its failure to adapt to changing consumer preferences and technological advancements. As streaming services like Netflix emerged, offering more convenient and cost-effective ways to access movies and TV shows, Blockbuster clung to its traditional brick-and-mortar rental model. This reluctance to embrace digital distribution led to a gradual, then rapid decline in customer traffic and revenue.
Additionally, Blockbuster faced increasing competition from online rental services, which offered a wider selection and eliminated the inconvenience of late fees. This all led to Blockbuster filing for bankruptcy in 2010 – a company truly outpaced by the external conditions in which it operated.
What are External Operating Conditions (EOCs)?
Often leaders are so busy keeping things running that they forget that their organisation operates within a bigger ecosystem and is subject to the changing tides of EOCs.
No organisation operates in a vacuum.
When we talk about EOCs, we’re referring to a mix of conventional aspects that largely focus on the macro environment such as:
- Economic conditions – for example how changed or reduced government spending directly impacts the NFP and Healthcare sectors.
- Social factors – e.g., demographic and population shifts such as ageing populations and changing demand for services across different generations.
- Technology (including AI) – e.g., how AI is potentially reshaping entire industries and job roles.
- Political – how political views impact policy decisions that can change industries e.g. more or less investment in fossil fuels or renewable alternatives.
And in modern strategy we’re also referring to less conventional EOCs that emphasise local and community aspects that are more nuanced and human centred. For example:
- Community trends – understanding the relationship between local and global conditions, e.g., people want to support the local bookstore or coffeeshop but at the same price point as Amazon or Nescafe, how do organisations manage this conundrum?
- Scale of problems to solve – how big and bold do organisations go when trying to solve today’s, as well as tomorrow’s problems, whilst staying financially viable so they’re around in 5 years’ time to tackle the bigger problems?
- Impact – how do you ensure the right balance of outputs versus outcomes? Finding the balance between building a stable offering or service, and then building your broader client and community impact is essential.
A shift in any of these could mean big changes for organisations who are connected to those particular conditions – this is why it’s essential that EOCs are thoroughly understood.
Don’t assume you know your market
The more familiar you are with the EOCs that are or could impact your organisation, the better positioned you are to make informed decisions and build a successful strategy.
Gathering information that’s highly relevant to the ecosystem and community your organisation operates in and getting the balance between conventional and non-conventional EOCs right, is absolutely crucial.
Consider the strategy of a Not-For-Profit organisation who is not investing time to understand the changing dynamics in social enterprise alternative revenue streams in light of reduced government funding. It will have significant gaps in knowledge that will impact whether the organisation makes the right decisions for their future or not – it can literally define whether the organisations exists or not.
Take a minute to think about your current strategy… Are you 100% confident there is no gap in your understanding of external operating conditions?
How to Build a Unique Picture of Your EOCs?
- Carve out dedicated time for a targeted set of Qualitative Customer Conversations with key external stakeholders. These are very different interactions compared to traditional interviews, surveys or specific feedback on the services your organisation provides.
- Make sure you include perspectives from parallel sectors and seemingly unrelated industry viewpoints. This helps test existing assumptions and viewpoints – particularly around different funding mechanisms and business models.
- Don’t assume you know what the biggest problems that need solving are – have practical conversations with very different external stakeholders to hear it directly from the horse’s mouth.
Understand your EOCs and where your gaps in knowledge are. Learn how to make decisions based on these insights and don’t risk doing strategy without them!
A core part of our Modern Strategy Methodology is unearthing unique external insights through our proven formula.
If you want support to ensure there is no gap in understanding your organisation’s specific EOCs, then get in touch for a conversation.
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