Friday Business Feature: Lacking Clear and Consistent Strategy, Most Companies Paying a 'Coherence Penalty'

Executives say they're pulled in too many directions and that their company's capabilities don't support their strategy, Booz study finds; majority of execs cite too many conflicting priorities


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New York City — January 28, 2011 — Booz & Company



The Essential Advantage: How to Win with a Capabilities-Driven Strategy

Executive Frustration is Palpable — and a Marker of Incoherence



  • A great majority of executives (64 percent of the survey respondents) say that their biggest frustration factor is "having too many conflicting priorities."
  • Executives report that their biggest challenges are (a) ensuring that day-to-day decisions are in line with the strategy (56 percent) and (b) allocating resources in a way that really supports the strategy (56 percent).
  • Half of the executives (50 percent) consider setting a clear and differentiating strategy a significant challenge.
  • In fact, most executives (52 percent) do not feel their company's strategy will lead to success. Only 21 percent say their company has a right to win in all the markets in which it competes.
  • Most executives (81 percent) say growth initiatives lead to waste, at least some of the time.
  • The vast majority of executives (82 percent) say functional departments in their companies get competing demands from different business units.

Probable Cause of the Frustration

LinkedIn





  • A significant number of executives (43 percent) say their company's strategy does not fundamentally differentiate the company in the market.
  • Nearly half of executives (49 percent) say their company has no list of strategic priorities.
  • While most executives say their company has a clear way to create value, most (53 percent) say that this "way" is not understood by employees and customers.
  • Similarly, most executives say their company has a clearly stated set of capabilities, but only a third of executives (33 percent) say those capabilities support the company's strategy and the way it creates value in the market.
  • Very few executives (21 percent) say all of the company's businesses leverage the same set of capabilities.
  • In fact, most executives (54 percent) say their company' capabilities do not reinforce each other.


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Bottom Line: Big Problem with the Way Many Companies Set Strategies







The Coherence Premium



  • Executives who say their companies have very few (one to three) firm-wide strategic priorities are the most likely to say their companies have above average profitability and revenue growth (compared to those having more firm-wide strategic priorities or no list of priorities at all).
  • Executives who say their company's capabilities support the company's strategy are most likely to say profitability and revenue growth are above average. (The same is true of executives who say the company has a clear set of capabilities, versus those who say the company doesn't.)
  • Respondents whose companies are deemed coherent by the Booz & Company algorithm are most likely to say profitability and revenue growth are above average. (They are more than twice as likely to say their company has above-average profitability than those respondents whose company has been characterized as incoherent by the same algorithm.)



Survey Methodology



www.booz.com/coherence-profiler

The Essential Advantage: How to Win with a Capabilities-Driven Strategy www.theessentialadvantage.com www.booz.com/cds


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