Why good strategies fail – PMI shares insights from latest study

Strategic initiatives are too often relegated to the realm of good intentions left by the wayside. The truth is that well implemented, supported strategies can drive a company’s growth and development

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The Project Management Institute recently sponsored an Economist Intelligence Unit study into why good strategies fail

A large percentage of strategic initiatives are deemed failures and considerable money is wasted each year on these failures. Organisations report that only half of all strategic initiatives are successful, and that nearly 15 percent of every euro spent on strategic initiatives is wasted due to poor project performance: €129m for every €1bn spent. Strategic initiatives – the programmes that deliver the change businesses need to move forward – should be assessed, managed, and supported in very specific ways to ensure success.

Research done by the Project Management Institute, in partnership with Boston Consulting Group, along with work commissioned through the Economist Intelligence Unit, provides insight into the importance organisations place on implementing strategy, despite the significant difficulties they have in implementing associated programmes. The research also identifies the characteristics of organisations that are more successful with strategy implementation.

Successful organisations place a priority on executive sponsorship, which our research cites as the top driver of project success

European CEO spoke to Mark A Langley, President and CEO of the Project Management Institute, about managing strategic initiatives and what organisations can do to improve the odds of success.

You have some interesting statistics about strategy. Could you shed some light on these?
In Why Good Strategies Fail: Lessons for the C-Suite, an Economist Intelligence Unit report sponsored by PMI, we found that 61 percent of firms struggle to bridge the gap between strategy formulation and implementation, and that only just over half of strategic initiatives are successful. Given that 88 percent of organisations said implementing these important programmes successfully would be ‘essential’ or ‘very important’ for their competitiveness over the next three years, it’s critical that they figure out how to bridge this gap.

More alarming is that only 17 percent of executives even identified strategy implementation as strategic. That means they see it as operational, tactical, or something other than essential to the future of their business.

If strategy is the lifeblood of any thriving organisation, why do so many struggle with implementation?
A major reason is that it is not always clear who is responsible for strategy implementation. You formulate your strategy with your senior team, and your chief strategy officer will take charge of the development, but there is no single resource or function responsible for implementing what has been developed.

All strategic initiatives are major programmes that will likely involve many different departments and business lines, so implementation doesn’t fit in just one place or with one person. It gets dispersed among various operational groups or business units. That makes it difficult for the CEO to have a direct line of sight into how the company is doing with its most important initiatives, unless he or she makes it a priority to have this visibility.

Are organisations aware of how much money they are wasting on unsuccessful strategy implementation?
When I speak to CEOs about the amount of money that is wasted when programmes fail, they are often shocked and want to know what they should do. I tell them that to really understand the financial impact of failed strategic initiatives, they need to look at their organisation’s entire portfolio – how they are performing, what benefit they are realising, and what competitive advantage is being achieved. Doing so gives you a better sense of not only how well you’re doing in meeting your strategic goals, but also of what you’re spending – and wasting.

Organisations that are successful in implementing strategic initiatives, by comparison, prioritise effective, engaged executive sponsorship, which our research cites as the top driver of project success. It’s also important to proactively address factors that contribute to project failure, such as changing priorities and inadequate requirements. Organisations that excel at change management and requirements management increase their ability to differentiate themselves, and can gain an advantage over competitors.

Why is executive sponsorship so important? Isn’t a CEO committing to a strategy enough?
The executive sponsor is an individual in the organisation whose seniority allows them to influence stakeholders, remove roadblocks, and allocate project resources when necessary. Every programme needs this direct support. An effective sponsor uses his or her authority and experience to help the team understand the alignment of the project or programme to the organisation’s strategy. And the sponsor reports progress to the other members of the executive leadership team, including the CEO, to ensure the visibility mentioned earlier. Even though PMI research shows that having actively engaged executive sponsors is the top driver of success, less than two-thirds of key initiatives have executive sponsors assigned to them.

Simply naming an executive sponsor isn’t enough either – he or she has to be engaged. One in three unsuccessful projects fails to meet goals due to poorly engaged executive sponsors, which is often a function of them being overextended. On average, sponsors spend 13 hours per week on each project they sponsor, in addition to their primary responsibilities.

What role do metrics and agility play in successful strategy implementation?
Most executives live by the adage ‘you get what you measure’. I believe, in most cases, ‘you get what you resource’. Too many of us overlook the fact that outcomes depend on inputs, and if we are measuring the result of a poorly planned or poorly resourced initiative, we aren’t going to be happy with the metrics. A recent survey showed that almost 50 percent of projects aren’t resourced properly, with 29 percent receiving too few resources. If your metrics indicate you didn’t get the desired result, start the analysis by looking at resources.

What organisations are really looking for is a way to be quick and nimble, and take advantage of new opportunities while making sure they are protecting the investments they have already made. They need a blended approach that delivers the best of an agile environment and a more traditional, governance-driven approach.

What should a CEO be doing to increase the likelihood of getting strategic initiatives implemented?
One thing we haven’t talked about is having a culture that supports strategy implementation as vigorously as it supports strategy development. One place to start is by embedding not just the importance of talent, but understanding what kind of talent is needed. Too often the people responsible for programme implementation are chosen or evaluated only on technical skills. In some cases, not enough consideration is given to whether these people also have business acumen and leadership skills, which are essential for those charged with the successful delivery of strategic initiatives. What’s more, you need to ensure that every strategic initiative has a trained, committed and dedicated executive sponsor.

Finally, it’s about recognising that all strategic change happens through projects and programmes. If you can’t see your organisation’s future in your portfolio of strategic initiatives, you have no hope of achieving it. Make it a point to explicitly connect strategy implementation to strategy development through a direct line of sight to your most important programmes, and that will go a long way towards greater success.