Pitfalls in strategy formulation process

Concern over company’s failure to implement strategies is well known. Very often we come across companies that fail to convert strategic plans into actions. But a little thought is given on the quality of strategic plans that are formulated. The question whether strategic plans were really worth implementing is rarely asked. Most of the times the plans thrust upon the organization are anything but strategic in nature. Upon close examination one may find that these plans are at best a collection of tactical plans targeting operational efficiency. Operational efficiency has long ceased to be a strategic issue, but for those industries still in their infancy.


In general operational efficiency is the basic prerequisite for competition – which is not the same as winning in the competition. The fact that these companies call their plans strategic, reveals that they lack an understanding of the term “strategic” – whether it is long term and important or it is about dominating in the marketplace or it is about generating above average returns.

In the following text we have made an attempt to uncover the causes of why companies fail to come up with strategies that have a compelling effect on implementation and followed the discussion with some possible indicators, though not strictly quantifiable ones, to assess how well your strategy was made and how well it is working out for the company.

Reason Number 1: Lack of innovative business ideas

A big reason behind a company’s inability to formulate great strategy can be leaders lacking clear business ideas. Leaders as strategic thinkers in a rare genre, but if you have some, then their business insights will provide the pivot for the strategic planning process in the company. In fact the decision on targeted markets and customers emerge from this idea. These ideas determine the decision criteria for all strategic issues. When leaders lack business ideas, they often delegate the strategic planning process to strategic planning departments, limiting their role to occasional facilitation of “strategy meets”. Companies believe that strategic plans can be developed in one or two day strategy meets. Without a strong basis for formulating the plans such companies finally end up with plans that are meaningless from strategic point of view.

Reason Number 2: Failure to involve key functionaries

Many a times strategic plans are developed by a few in the company without the involvement of all the senior executives, in which case the critical success factorsfor accomplishing the mission of the company are not thoroughly deliberated upon and as a result, wrong priorities are set. This makes the plans unrealistic for implementation.

Reason Number 3: Absense of a climate of trust and creativity

Conceptually the planning process starts with identification of all possible alternatives, followed by analysis of the alternatives and selection of the “best-fit” option. The phase where alternatives are identified requires a climate of trust and creativity. In this phase alternatives are evolved by looking at strategic challengesfrom all possible angles and identifying as many alternative options as possible, as quality of strategic plan is directly proportional to the number of alternatives identified. Failure on the part of leadership to provide a climate of trust will restrict the people from coming up with all possible alternatives. Important point to remember is that strategic planning process is a learning exercise rather than a platform for criticism and blaming. In the second phase a company may use relevant analytical frameworks and tools to analyse the alternatives available against the decision criteria – leadership idea – eliminating the unfeasible options. And in the final phase senior management may use their experience, intuition and judgment to identify the best possible option for the company. In general companies do not make use of tools and frameworks available for analysis. Over and above, the team members use their intuition, experience and judgement in identifying the alternatives, too early in the process, instead of using creativity in looking at them from all possible angles. This kills many potentially viable alternatives with out due analysis. These companies have their sequence wrong and such actions in effect have adverse impact on the quality of the resulting plans, which are either impractical or even when implemented do not have the desired result for the company.

Reason Number 4: Lack of structured process for information gathering and filtering

Few companies have a structured process for scanning the environment and observing the merging trends. There is either drought or an overload of information. Even when there is information the companies do not have a cue on how to draw any meaning from it. In the absence of relevant data, planners base their analysis of various factors on assumptions which may again result in inferior quality of plans, which over a short period of time lose their appeal to the people.

As year after year this process of strategy formulations continues (where strategic plans never gave great results, or great results were obtained with out implementing the documented strategy, or where future is assumed to be a straight extrapolation of recent past, or uncertainty and risk is treated as something which cannot be mitigated), belief on strategic plans is eroded to such an extent that the exercise is taken up just as another routine, isolated from the business of the company.

So is there an indicator to tell that the strategy formulated is really great? The answer is, there is no single test of rationality, but certainly there are a few indicators like:

• Great strategies are based on sound business ideas
• Realistic strategy can be described and understood in one line. The whole company recognizes the strategy tagline
• Competitors respond to worthwhile strategies of a company

There is only one way to great strategic plan – innovative business ideas of leaders and an integrated strategic planning process that ensures a climate of trust and creativity.