Building Strategies That Are Doomed To Fail….Understanding Strategy and Managing Risk
Written by admin on April 19, 2017
There was a study done that suggested that 90% of all business strategies fail. Other numbers suggest anywhere from 60-80%. I found these numbers staggering but the data that most people attribute to why is equally sobering. Originally we thought that the main reasons companies fail is because most don’t understand the strategy that management put in front of them. They don’t have processes aligned with the strategy and then leaders only spend 2 hours a week discussing the strategy.
Why do I think this is so amazing? Because, after talking with thousands upon thousands of business owners, I see that most strategies are usually doomed from the onset. Why do I say this? Because most business strategies aren’t based upon what is really going on in their world. It is based on what they think is going on, what some “expert” told them was going on, or even worse; what had gone on years ago. It’s like the blind leading the blind.
Paul B. Carroll wrote in the book Billion Dollar Lessons about a study that him and co-author Chunka Mui did on specific business failures between 1981 and 2007 showed some striking examples. Almost 425 U.S. companies with over 500 million in assets filed for bankruptcy. That same time period over 250 publicly traded companies wrote off well over 350 billion in losses. That is 350 billion with a B! What is even more shocking was why those losses happened.
The same research suggests over 45% of those losses were the product of poor awareness of what was really going on around them. They in essence, were headed East looking for a sunset. It didn’t matter how effective they were in their implementation, they were never going to be successful. A large majority of the remaining percentage could have limited the loss if they would have been more aware of their surroundings to begin with.
Creating a strategy requires an understanding of where you are, where you are headed, and what the terrain is between you and where you are going. The challenge is the terrain isn’t stagnant, it is dynamic. So creating a plan or strategy based upon poor awareness or unclear understanding is insane. Your map needs to be based upon your situation, outcome and surroundings.
This is why during Tony Robbins teaches that the First Force of Business Mastery is having an effective business map. Without a map, how do you expect to ever build a strategy that will get you where you are going? Do you know where your company really is? Do you know where you are really headed? Do you know how to identify the real risks in the marketplace that can be creating havoc on your bottom line?
Being strategic is about managing risk. The goal is to de-risk your strategic investments in such a way as to allow you to grow geometrically. You can’t do that if you don’t understand how to read the terrain you are operating in.