Defining company strategy is a fundamental CEO responsibility. Watch out for these common pitfalls as you go about it.
In a well-run company, a clear strategy drives actions and decisions at every level of the organization.
Unfortunately, getting to that ideal state can be tricky. The path to strategic clarity is marked by a few traps that I’ve seen many a CEO fall into (and perhaps fallen into myself over the years).
Let’s look at seven of the most common strategy traps and how you can avoid them.
1. Confusing strategy with budgeting.
If your strategy-creation process begins with detailed budgeting at the business-unit level, you need to step back and think bigger picture. Defining company strategy is about answering a few key questions about what the company is trying to achieve and how it will do so–not hashing out a rigid plan.
I like Stephen Bungay’s definition of strategy: “a framework for decision making, a guide to thoughtful, purposive action.” At its core, strategy is a framework for guiding decisions. It should later translate into specific plans created by each department–but it shouldn’t start there.
2. Jargon overload.
We’ve all seen company strategies that seem like they were spit out by a corporate buzzword generator. Stick with plain English. Your strategy needs to be clear to your workforce and should help them decide the best course of action in their jobs week to week. Buzzword bingo only frustrates and obfuscates. Extra points for incorporating distinctive, interesting wording that will stick with employees.
3. Overlooking human capital.
As three Bain partners recently discussed in Harvard Business Review, we’re now operating in a time when financial capital is cheaper and more abundant than ever. While financial capital is likely still important to your business, the other form of capital–human–must become more central to most companies’ strategies.
If your strategy excludes the domain of building, nurturing, and retaining the right types of talent, it likely has a critical gap.
4. Strategy as time-suck.
CEOs are not immune to procrastination, and spending months tweaking and tinkering with a strategy can become a very expensive form of it. It’s important to research your strategy, get buy-in from the board and your executive team, and so on. But don’t get so tied up in the process that you never arrive at a usable strategy. Move quickly to follow through.
5. Getting locked in the past.
Strategy creation is an intensely future-oriented process. Do not become imprisoned by historical data and the status quo as you set your direction. Paint a vivid vision of the future, and don’t be afraid to question assumptions that have long been ingrained in the company’s DNA.
6. Lack of differentiation.
Your strategy must set you apart from rivals. If your strategy doesn’t show in stark terms how your approach to winning is different from everyone else’s, it isn’t any good.
7. Keeping it to yourself.
This is the big one that has derailed untold numbers of strategic initiatives. Once you define your strategy, it must be shared with the entire employee base in a way that inspires them and guides them in decision-making. You can’t just share it once, either–it must be continually reinforced.
Do this well, and you will really set yourself apart: Robert Kaplan and David Norton estimate after decades of studying the topic that 95% of employees are unaware of or do not understand their company’s strategy.
First appeared on Inc.com