This post is by Paul Leinwand, a partner at the consulting firm Booz & Co. and Cesare Mainardi, the managing director of Booz & Co.’s North American business. They are co-authors of “The Essential Advantage: How to Win with a Capabilities-Driven Strategy.”

We recently surveyed 1,800 top executives on the subject of strategy and found a striking level of frustration. The majority of executives in all industries admitted that their companies lack “coherence.” They struggle with setting a clear and differentiating strategy, working through a surfeit of conflicting priorities, ensuring day-to-day decisions are in line with their strategy and allocating resources in a way that supports the strategy.

More to the point, executives say that deciding on priorities and linking decisions to those priorities is a big hurdle at their firms. Our research shows that this problem is costly and draining: It forces companies to pay a significant penalty. We call it the “incoherence” penalty.

To put this problem into high relief, here is some of what we found:

  • Most executives – 52% – say they don’t feel their company’s strategy will lead to success.
  • Two out of three executives confess that their companies’ capabilities don’t fully support their strategy.
  • 64% of executives say their biggest frustration is having too many conflicting priorities.
  • The vast majority of executives– 81% – say growth initiatives at their companies lead to waste, at least some of the time.
  • Most companies – 54% – say their company’s capabilities do not reinforce each other.
  • The majority of executives – 56% – say that ensuring that day-to-day decisions are in line with strategy is a significant challenge; the same percentage reports significant problems with allocating resources in a way that supports the strategy.

So, what can you do to reduce the frustration, wheel spinning and daily struggle — and, at the same time, up the ante on performance?

The answer begins with getting a much firmer handle on what your company does really well – perhaps better than anyone else — and beginning to use that as a filter for making decisions, thinking about growth, considering mergers and acquisitions, budgeting and hiring. This sounds simple, even elementary, but it’s actually not.

The great majority of companies do not approach things this way. Their leaders and business heads are so preoccupied with the next answer to growth that they’re trying to play in too many disparate markets. They pursue multiple strategies and directions that actually undermine rather than reinforce each other. As a result, they don’t really win in any market, and the cycle of frustration continues while the pressure actually increases.

Winners, on the other hand, define the fundamental identity of the company by developing a clear idea of what it does best and how it creates value for customers. They then hone these distinctive capabilities – ones competitors can’t match – that will enable them to deliver competitive advantage. Procter & Gamble, Wal-Mart and Coca Cola are examples of companies that go about business in this coherent way.

So, the best route to improved performance and reduced frustration is recognizing that the true source of competitive advantage at your company is what it does particularly well (and how it does it), not what it sells. Once you’ve recognized that, you can begin to hire, invest, innovate, develop new initiatives, launch new products and enter new markets that reinforce and deepen this advantage and these differentiating capabilities. Use this filter ruthlessly, even obsessively. That will help you resist the temptation to jump at inappropriate market opportunities and dilute the company’s strength – and your effectiveness – by stretching it thin, in markets where the company doesn’t have the capabilities to win.

A good example of the kind of coherent, “capabilities-driven” behavior that leads to sustainable growth and a stronger organization is the way Amazon.com goes about acquisitions. It all happens through the filter of what will make the company even better at what it’s already great at – and has nothing to do with chasing random, new or adjacent markets.

Among Amazon’s acquisitions that reinforce what the company is great at:

  • Audible.com, a producer of audio books, helped Amazon create a digital audio-reading feature for the Kindle.
  • Joyo, the number one online bookstore in China, helped Amazon build capabilities for logistics, distribution and processing payments in China.
  • Dpreview, a digital photography review site, gave Amazon the capabilities in managing user-generated commentary, making Amazon the world’s richest forum of user-generated commentary on phones, PDAs and computer-based devices.
  • Zappos, the online shoe and apparel store, gave Amazon direct in-person customer support capabilities, which complemented Amazon’s automated capabilities.

The bottom line here: Don’t just know the market, know thyself really well — and double down on the best, most distinctive parts.

Image credit, WillSelarep, via iStockPhoto.com

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8 Responses to “Measuring executive frustration — and going after the big-picture cure”

  1. keithprivette says:

    Wow really the c-suite is just now realizing their middle layer of "managers", I won't even call them leaders are mucking things up! This proves one of my theories that, I think the people executing & delivery on an incoherent strategy are closer aligned to what the c-suite wants than the middle "career legacists"!

    Two causes to this problem:

    1. Organizational Charts & Kingdom building (by the middle management)
    2. Silo's not sharing Objective outcomes

    If you want to read more head on over to my blog and I wrote a couple of posts on this!

    • Wilson says:

      Huh, I don't see this as "the c-suite is just now realizing … middle … "managers"…are mucking things up." Rather, this is an admission of the c-suite's OWN failures, as any sort of high level finding like this. And not merely because the c-suite is responsible for placing those middle managers but more critically because STRATEGIC planning is the precise domain of c-suite managers, NOT middle management. If c-level leaders think that STRATEGIC planning is the domain of middle management, well, that's both sad and a clear indication of outright incompetence. I'm not suggesting middle management doesn't have a critical role in informing strategy-building or in refining and assisting with strategy, but that's not the same as leading strategy and making those decisions, as discussed in the article, about what is a priority and how it matches to strategy.

      All that said, I'm not saying this to diss senior management. In fact, dealing with strategy is very difficult. That's why, no sarcasm intended, c-suite leaders are paid the big bucks.

  2. Good post… not unexpected survey results, however.

    An added dimension that we should consider is that each employee's strategic value comes from leveraging their strengths also. Too often companies assign roles as if the boxes on an org chart are truly interchangeable. In fact, the employees you expect to implement your strategic direction come equipped with very different skills. Take advantage of them, or lose them.

  3. Adam says:

    This is a great article , but i would like to emphasizes the following :

    I think in order to have a neutral and objective survey you should have picked all companies with the same position of their Growth Cycle, then we really can find out …in other words , and in my opinion , when companies are in their growth stage , everybody listens, and Executives are more dynamic, and strategy oriented, once the company stabilizes or start to slow down, everybody thinks about consolidating his position, and sticking to what he knows., once the company in the down, or suffers shrinking market share you get this survey results

  4. [...] post is by Paul Leinwand, a partner at the consulting firm Booz & Co. and Cesare Mainardi, the [...]

  5. Excellent analysis of what is necessary in outward-facing way, but it's equally important to do the same in an inward facing fashion. What do I mean? If you want to achieve the greatest success at "recognizing the true source of competitive advantage at your company is what it does particularly well (and how it does it)", then you must reinforce for every single employee how they contribute to that competitive advantage in their daily work.

    You must make that come alive for them in their day-to-day tasks by setting up a truly strategic employee recognition and rewards program that acknowledges and appreciates any employee whenever (and soon after) they contribute to advancing this competitive advantage. This not only encourages them to repeat those efforts again and again, but makes your core company strategy real to them in what they do every day. This brings your strategy out of the abstract for your employees.

  6. Modestus says:

    Good post, i choose to go with the winners' attitude. it does not only applies to organizations, but we can also apply it to our individual lives .W hat is that thing you derive pleasure and joy in doing best. Some professional touches to it will make you stand out among equals. Thanks SmartBolog.

  7. [...] partners at Booz & Co have written an interesting article called Measuring executive frustration — and going after the big-picture cure. In part, they [...]

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