Strategy is necessary but not sufficient for business success

Being flexible doesn't mean you don't have to plan, says CEO and management accountant Andrew Harding.

by Andrew Harding
Last Updated: 27 Mar 2019

Understanding business strategy is the only path to long term growth. If managers are to sustain a successful and thriving corporate culture, they must also become business strategists. Yet, despite the wealth of talent and tools at their disposal, business leaders are often failing to achieve their full potential. In fact, it is surprising to think that 80 per cent of businesses actually fall short of the targets set out in their strategic plans.

The root of the problem is that strategy is often overlooked in its implementation phase, or worse, when a decision is taken not to implement one at all. Either way, a business that fails to implement its strategy is far more likely to become lost operationally. It is imperative that leaders know where they are going wrong and how best to unlock the secrets to that all-conquering business model.

One reason businesses succumb to strategic failure is the short-termism embedded in their senior management’s thinking. Often brought on by the onset of a crisis, stop-gap measures ultimately fail to address the root cause of the issue. This breeds an unwelcome culture of riskier decision-making, less sustainable choices and generally poorer internal governance, resulting in potentially ruinous consequences.

A key lesson is that good strategy does not constitute success by itself. It must be within the confines of realistic expectations that will allow for the business to easily create value. This means using a framework that provides the basis for simpler performance and better measurement, and that enables feedback to be shared with senior leaders to better inform their decision making.

The consequences of failing to embed a business strategy within a sound business model can be costly. HMV’s recent failure to effectively adapt to changing consumer demands has seen it teeter on the brink of collapse and should act as a warning to business leaders who are failing to reinvent themselves through their strategy.

Conversely, Iceland’s decision to purchase retail units from Asda and Sainsbury’s ahead of their planned merger is a good example of a business implementing an agile strategy in tune with their current operations and capabilities. Not only are they buying up cut-price space from their competitors, they are buying units that are the same shape and size – making it easier and cheaper to fill and operate, boosting their productivity.

To succeed, businesses should also embrace the opportunities that digital technology offers. The faster businesses turn tables on the current situation, the more chance they have of being the disruptors rather than the disrupted.

Mobile network giffgaff has carved out its own market niche through its core offering of SIM only mobile services. It recognised the ability to legitimately piggyback on existing carriers, which has allowed it to be flexible and foster greater levels of innovation. Moreover, its strategy of attracting "members" rather than "customers" alludes to a business well in tune with its basic purpose and generating a positive ethos where members service each other’s needs – keeping operating costs low. Not having to rely on using bricks and mortar stores, alongside a virtual community service, has proven a powerful combination for giffgaff.

Thriving businesses have shown that it is their strategy, rather than their authority, that is more important to successful management. Anyone who has witnessed the meteoric rise of Apple and fall of Nokia should know that market dominance can be here today and gone tomorrow.

The fundamental elements of this should be evident in a business’ everyday operations, and this ultimately stems from employees across the organisation all singing from the same hymn sheet. It is by responding to fast-changing developments in consumer behaviours and innovation, and by developing the digital skills and mindset of their workforce, that executives will grow the sustainable value of their business.

Andrew Harding is chief executive of management accounting at Association of International Certified Professional Accountants

Image credit: Pixabay/Pexels

Tags:

Find this article useful?

Get more great articles like this in your inbox every lunchtime