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How To Recognize "Bad" Strategy

Dr Norman Chorn

How to recognise bad strategy

A recent Dun & Bradsheet analysis (1) reports on the alarming rate of small business failure over the last 12 months. The report states that Australian business failures have trended steadily upwards since 2008, with the greatest increase in the last three years. Clearly, the economic and tight credit conditions are significant contributors.



A key finding of the D&B report (2)states that these failures place Australia in the same risk category as a number of countries being impacted by the euro-zone debt crisis, such as Portugal, Spain and Italy!



But a further analysis of these failures reveals something more alarming. The more in-depth analysis of this situation by the Australian Securities and Investment Commission (3) (ASIC) reveals that the "poor strategic management" of these businesses was a much higher contributor to failure than the poor economic and trading conditions. And this applies to medium and larger businesses as well!



I am concerned by the view expressed by several leaders and commentators that strategy is "unimportant" or "irrelevant" in these uncertain and complex times. I believe it reveals a knee-jerk reaction and superficial understanding of the concept of strategy. Moreover, it often encourages ad-hoc and poorly conceived responses to a very challenging operating environment.


And what to do about it!

A recent Dun & Bradsheet analysis (1) reports on the alarming rate of small business failure over the last 12 months. The report states that Australian business failures have trended steadily upwards since 2008, with the greatest increase in the last three years. Clearly, the economic and tight credit conditions are significant contributors.


A key finding of the D&B report (2)states that these failures place Australia in the same risk category as a number of countries being impacted by the euro-zone debt crisis, such as Portugal, Spain and Italy!


But a further analysis of these failures reveals something more alarming. The more in-depth analysis of this situation by the Australian Securities and Investment Commission (3) (ASIC) reveals that the "poor strategic management" of these businesses was a much higher contributor to failure than the poor economic and trading conditions. And this applies to medium and larger businesses as well!


I am concerned by the view expressed by several leaders and commentators that strategy is "unimportant" or "irrelevant" in these uncertain and complex times. I believe it reveals a knee-jerk reaction and superficial understanding of the concept of strategy. Moreover, it often encourages ad-hoc and poorly conceived responses to a very challenging operating environment.


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About the Author

Dr Norman Chorn is a highly experienced business strategist helping organisations and individuals be resilient and adaptive for an uncertain future. Well known to many as the ‘business doctor’!


By integrating the principles of neuroscience with strategy and economics Norman achieves innovative approaches to achieve peak performance within organisations. He specialises in creating strategy for the rapidly changing and uncertain future and can help you and your organisation.


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By Norman Chorn March 27, 2023
In my previous article "Accelerate Performance with Strategic Alignment - Define the logic of your strategy", we demonstrated the alignment between the market and business strategy by matching the logic of the market with the logic of the strategy. The Explore logic emphasises a market where customers seek new solutions for emerging requirements. The strategy responds by exploring new opportunities and driving for growth. The Exploit logic occurs in a more stable market where customers seek lower costs and reliability of supply. The appropriate strategy focuses on operational efficiency and building close customer relationships. Culture is key to shaping the capabilities of the business to successfully implement strategy . It drives the way that people behave, decisions are made and actions are taken. It determines, therefore, the strategy that is actually realised in the market, as opposed to that which is merely intended. We make a key distinction between the desired culture and the appropriate culture. The desired culture is what people may choose because it sounds attractive and in vogue. However, the appropriate culture is the culture that is required to successfully implement the chosen strategy. Often, these can be different. For example, people might seek to develop a culture that is ‘innovative’, ‘flexible’ and ‘empowering’, but this may not be the appropriate culture needed to successfully implement the business strategy. DEVELOP THE APPROPRIATE CULTURE FOR YOUR STRATEGY Developing the appropriate culture requires a deliberate emphasis on certain cultural attributes and making trade-offs on others. As we will see, the attributes that are traded off are usually the opposites of those that are emphasised.
2 puzzle pieces
By Norman Chorn March 27, 2023
In Part 1 "How to Accelerate Performance with Strategic Alignment - Understand the Logic of the Market" we outlined different market conditions and defined them in terms of two overarching logics — Exploring and Exploiting . To briefly recap, an Exploring logic is one where customers are seeking new solutions for emerging needs. It’s all about change and action. An Exploiting logic occurs in a more stable market in which the issues are about lowering costs and working collaboratively with customers. It’s a market that focuses on stability and cohesion. FORCES THAT SHAPE YOUR STRATEGY Clearly, it is one of these two logics — or a combination of both — that will shape your strategy as you operate in these markets. See figure 1 below that describes how these logics will form your business strategy:
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