Michael Porter has a nice essay over at Wharton on why strategies fail. I always enjoy how for Porter it all comes back to understanding what strategy is.
Some of my notes and excerpts:
- Failure comes from within. “I have come to the realization after 25 to 30 years that many, if not most, strategic errors come from within. The company does it to itself.”
- Being the best isn’t a strategy. “Many companies set out to be the best in their industry, and then the best in every aspect of business, from marketing to supply chain to product development. The problem with that way of thinking is there is no best company in any industry. ‘What is the best car?’ he asked. ‘It depends on who is using it. It depends on what it’s being used for. It depends on the budget.’”
- The term strategy is overused and misapplied. Another mistake managers make is relying on a flawed definition of strategy, said Porter. “‘Strategy’ is a word that gets used in so many ways with so many meanings that” it can end up being meaningless. Often corporate executives will confuse strategy with aspiration.
- Corporate strategy cannot be done without strong quantitative analysis, says Porter… “Any good strategy choice makes the connection between the income and the balance sheet.”
- One more mistake managers make is confusing operational effectiveness with strategy. Operational effectiveness is, in essence, extending best practices. Good operations can drive performance, Porter said, but added: “The trouble with that is it’s hard to sustain. If it’s a best practice, everybody will do it, too.”
