12 major reasons for the failure of strategy in the business ecosystem

1. Lack of knowledge of strategy and of the strategy process. In hundreds of strategy

consulting engagements, I have found few senior teams who really have a solid grasp of

strategy and of the strategy process. The reason for this lack of knowledge is simple –

few, if any, senior executives have come up through a strategy function. Not surprisingly,

therefore, strategy oftentimes gets created, which is not strategy at all. No wonder the

execution is also a failure.

2. No commitment to the plan. People were not involved in its creation. As a result,

people don't "buy-in" to the plan and don’t feel committed to it. Equally serious, are the

legitimate objections to the plan that are never voiced, because either the leaders don’t

create an open environment in which people feel safe, or the culture doesn’t support it.

3. The plan was not communicated effectively. An article in the May/June 1999

Strategy & Leadership journal mentioned that the typical company gives access to the

plan to only 42 percent of managers and 27 percent of employees. In those situations

where it is communicated, it is oftentimes unclear what the strategy really is.

4. People are not measured or rewarded for executing the plan. In the same Strategy

& Leadership article, the authors say that less than 60 percent of companies tie incentive

compensation to achieving their strategic plans, while 97 percent tie compensation to

their financial plan results. Later, we will discuss how to tie the strategic plan to the

corporate performance management system.

5. The plan is too abstract; people can't relate it to their work. People do not see if or

how the strategic plan changes what they do. Alternatively, the plan is not translated into

the short-term actions that employees need to take.

6. People are not held accountable for execution. Accountability is very different from

responsibility. With accountability, I hold people ultimately responsible for portions of

the strategic plan and for predetermined results from that plan. Rewards and/or

punishments are administered accordingly.

7. Senior management does not pay attention to the plan. We see this in cases where

once the strategic plan has been created, senior management attention reverts to day-byday

business as usual. In change management dynamics, we find that “what management

pays attention to,” is one of the most powerful enablers of new initiatives.

8. Strategy is not clear, focused and consistent. As a result, people cannot understand

the priorities of the business; anything seems to go. Also, they cannot “internalize” the

strategy and act upon it.

9. Conditions change making the plan, as conceived, obsolete. No effort is made to

update the strategy on a regular basis.

10. The proper control systems are not in place to measure and track the execution

of the strategy. The organization also has no process in place to learn from the strategy

and to update it as necessary. I will say more about this later.

11. Reinforcers, such as, culture, structure, processes, IT systems, management

systems and human resource systems, are not considered, and/or act as inhibitors.

This is one of the major reasons for the failure of strategy execution. In this regard,

culture is especially critical. Each of these elements must align with the proposed strategy

for the execution to be successful. Later, I will discuss a framework to accomplish this.

12. People are driven by short-term results. Short term metrics and the need to

produce financial results for shareholders, drive people to focus on day-by-date tactics,

rather than long-term strategy.

10 Lessons from the Swarm

I recently finished reading Peter Miller’s, The Smart Swam, and I highly recommend it. In it, Miller provides a fascinating overview of how various types of animals – ants, honeybees, termites, sparrows – tackle complex problems by leveraging collective “intelligence.” Better yet, Miller points to the lessons that humans might learn from these animals.

What follows is a run down of some of the major lessons from the book, but I highly recommend reading the book in its entirety.

***

Miller identifies four major principles of smart swarms: self-organization, diversity of knowledge, indirect collaboration, and adaptive mimicking. Here are ten points I took from his discussion of the four principles:

1. Decentralized control: For self-organization to produce worthwhile results – like, for example, the Linux operating system or Wikipedia – individual members of a group have to be free to make their own decisions within a relatively sparse set of restrictions imposed by the community (e.g., no profanity, appropriately commented code).
2. Distributed problem solving: It’s in the very nature of complex problems that no single individual has the answer. Each member of the group contributes a bit towards creating a solution, just as many different writers and editors may contribute to a single Wikipedia entry.
3. Multiple interactions: Of course, for distributed problem solving to work, there have to be opportunities for individuals to interact frequently and in a variety of different ways. As Miller puts it, repeated interactions help to “amplify faint but important signals and speed up decision making” [267].
4. Diversity of knowledge: Of course, if all the interactions are among the usual suspects (a problem I find with many trade and professional associations), then you end up with birds of a feather syndrome, or homophily. For wrestling with really complex issues, bring together individuals with a wide range of backgrounds and cognitive abilities. A “healthy dose of randomness” [267] can also be a plus.
5. Limits of human intuition: Our “gut” is often not what we think it is. In addition to the tunnel vision that can come from homophily (above), Miller argues that our intuition, which has been “shaped by biological evolution to deal with the environment of hunters and gatherers, is showing its limits in a world whose dynamics are getting more complex by the minute.” [58]
6. Friendly competition of ideas: To compensate for the limits to our intuition and make the most of a diversity of knowledge, what we need is a bit of healthy competition among ideas – you know, the type of thing you might get when you don’t just teach to the test or dogmatically adhere to “best practices.”
7. Effective mechanisms for narrowing choices: If you are going to allow for a bit of competition, you have to have some way to narrow down the choices and make decisions. For me, Miller’s description of the seemingly byzantine processes of New England town meetings [83-91] suggested why human beings so often fail at directly leveraging collective intelligence – most of the time, we don’t have the patience and discipline for it.
8. Indirect collaboration: Miller doesn’t really talk about it as such, but I think that human beings’ ability to collaborate indirectly – to work independently yet collectively toward a common end like Wikipedia, or, I would argue, democracy – is perhaps the great antidote to our seeming weakness in working directly together to make hard choices. The wonder is not that we face so many problems, but that we have somehow solved so many together in spite of our differences.
9. Adaptive mimicking: One of the reasons that indirect collaboration and many of the other concepts listed here have such power is that, once they start to take hold, they can spread rapidly because of our tendency to mimic each other. The forces of influence are strong – particularly given the growth of the Web and mobile communication technologies. While they can be forces for good, they do also have their dark side – a point Miller brings home with force in his discussion of locusts as well as a number of human tragedies resulting from crowds spiraling into self-destructive behavior.
10. Risk minimizing strategies: As so much of Miller’s book suggests, there are often great benefits to going along with group behavior. As one sociologist Miller interviews puts it, “Nine out of ten times it’s the right thing to do…or at least it is a risk minimizing strategy [212].” In other words, when we run with the herd, go with the flow, we tend to increase our real and perceived safety – both physically and mentally. The challenge for all of us, of course, is paying enough attention to know when it makes sense to break away from the herd.

Naturally,there is a great deal more to Miller’s book than what these ten bullets can provide. If you have the least bit of interest in how human beings learn and act as groups, reading all of The Smart Swarm is well worth your time.

Why did I create this blog on Business Ecosystems?

The present and future of business and economics will evolve around Business Ecosystem. What is Business Ecosystem? The network of organizations – including suppliers, distributors, customers, competitors, government agencies and so on– involved in the delivery of a specific product or service through both competition and cooperation. The idea is that each business in the “ecosystem “affects and is affected by the others, creating a constantly evolving relationship in which each business must be flexible and adaptable in order to survive, as in a biological ecosystem.



My goal is to help you understand. That competition although important does not have to be a zero-zum game. Competition within the Business Ecosystem can benefit each specific business within their niche, but at the same time creating synergies of emergence industry or actors within the business environment of the Business Ecosystem. I hope you will enjoy the information and can become a participant within our ecosystem.



Juan Morales