10 big strategic mistakes – and how to fix them

The key to business success is to look carefully at your mistakes – and stop repeating them. But extraordinarily, some companies never seem to learn. They pay too much for acquisitions or pursue strategies that have been overtaken by the market. Many business owners have no exit strategy. Some start out in a niche and then expand and end up do nothing well.

Other companies fail strategically because they stuck to models that got overtaken by market forces. It explains why Telstra did not invent Twitter, why Rupert Murdoch did not create the Huffington Post and why Sony did not use its technical expertise to pre-empt Apple iTunes.

Errors of strategic judgement keep happening. And there are no small mistakes, they can all have big consequences. Repeating mistakes can kill a business.

So what are the biggest strategy mistakes companies make? And how can they be fixed? SmartCompany asked an accountant, lawyer, business coach, management consultant and company director for some tips. Here are their insights into the top 10 strategic mistakes.

1. N0 STRATEGY

Tim Gullifer, a partner at Deloitte Private says one of the biggest bloopers is one that is very easy to spot.

“When you go in and ask an organisation what is their strategy, they can’t answer it, they can’t articulate what their five pillars of interest are,” Gullifer says.

“The big question is, do you have a strategic plan, not a business plan, which is usually about the numbers.”

“Here we are in 2011 so I tell my clients do you have a vision for 2015 and they say, can you walk me through that? They don’t know what their strategy is.”

“Can they articulate it? Can they document it, have they shared it with the leadership group and the management team and the employees? People love to be led. If they know their CEO has a strategic vision for the future, it gives them a feeling of security.”

To address this, companies need to articulate their most important goals over the next five years. Do they want to be market leader in their niche? Or do they aspire to be a price leader offering the cheapest products around? Do they want to constantly innovate with new products and services? Are they committed to constant growth? By how much each year? Whatever strategy they choose, they need to articulate it and make it part of their culture.

Strategy plans are particularly important for trade sales and private equity deals.

“The first thing an acquirer says is can I have a look at your strategic plan please,” Gullifer says. “There is nothing more embarrassing to say ‘give me a month and I will document it.'”

2. INCONGRUENCE

Kevin Dwyer, who runs the management consultancy Change Factory, says he often works with companies where nothing in the organisation is aligned and every department operates as an autonomous silo. The strategy does not work because the different departments are undermining it.

“You see it most often, it really stands out,” Dwyer says.

“The strategy isn’t really there because they don’t have the procurement, the logistics, the performance management and the HR aligned with the strategy. So, for example, your strategy might be about becoming a leader in technical skills. But instead, HR is recruiting people for their relationship building skills, not technical skills.”

“At the highest level, the board and executive team have decided on a strategy but they don’t get everything locked in.”

Fixing the problem means identifying the silos. Companies need strong leaders to articulate the vision and make sure every department is working to it.

As Gullifer says: “Report your fiscal and non fiscal performance around the strategy. It keeps the strategy alive.”

“If one of their strategies is around growth, then all of the success the business has around growing the business and new business, and new products developed and market presence and market eminence are under the growth strategy. If it’s a people strategy and the business has successful retention, then that’s reported under the people strategy.”

3. GETTING TACTICS MIXED UP WITH STRATEGY

Dwyer says many companies make this mistake. Strictly speaking, tactics are short-term but strategy looks out over many years. One example might be two companies competing on price. One might lower the price every time they have goods in that they cannot sell. Or on special occasions, they might offer discount deals. Or if their competitors are running a sale, they will do the same. But the following week, the goods are selling at the normal price. That company has used tactics.

That’s different from strategy. A company focused on long-term strategy might say, “We will be the price leader”. This means they have to work their procurement and logistics to fit in with that strategy, so that they get their goods at the cheapest possible price. Everything will be built around offering the cheapest goods in town, everyday.

“When you are doing strategy, you should be making choices between two things that might be good,” says Dwyer. “If you are not being forced to choose, you are not doing strategy.”

Companies need to decide whether they will use tactics, or strategy. And if they adopt strategy, they will have to make hard decisions.