A vote of no confidence

Jun 10 2011 by Brian Amble Print This Article

Conflicting priorities, a lack of direction and an obsession with chasing growth at all costs. That's how more than half of senior executives worldwide characterise their own organisations, posing some serious questions about the competence of their corporate leadership.

A new survey of more than 2,350 global executives by Booz & Company survey has revealed that over half (53 per cent) of executives do not believe that their company's strategy will lead to success and a similar proportion said that their company's business model Ė or "way of creating value" - is not well understood by either their employees or their customers.

Almost two-thirds (64 per cent) complained that the company has too many conflicting priorities and that its capabilities do not fully support their strategy.

And an even greater proportion Ė some 83 per cent Ė said that their company's growth strategy leads to waste, at least some of the time.

"These are troubling symptoms. It's clear to us that this low 'company confidence' is a result of companies' tendencies to chase too many unrelated growth initiatives," says Booz & Company Partner Paul Leinwand.

"Instead of asking the question 'what are we great at and how can that help us grow', companies often look for markets that seem 'adjacent' or in a similar sector but where they may not have the capabilities to succeed."

As the survey makes clear, new avenues of growth are often not just risky but counter-productive, because they draw attention away from the company's core business and lead to failure and frustration.

In fact, companies which have the fewest firm-wide strategic priorities (one to three) are the most likely to report above-industry average revenue growth (as compared to those having more priorities or no list of priorities at all).

"Based on the survey results, we believe that the key question leaders and top executives should ask is, 'How can we get focused on the right initiatives - the ones that are best for our company?'" Leinwand said.

"To get to the answer, executives need to explore a set of more fundamental questions: 'What is the company great at doing? What are the few crucial capabilities the company can bring to bear more effectively than anyone else?'"

The survey findings support the benefits of this "capabilities-driven" approach to developing strategy: Those executives who say their company's differentiating capabilities fully support the company's strategy are almost twice as likely to report above-average revenue growth for their company as all the others in the survey.

"The real challenge for leaders and top executives is selecting the opportunities that are best for the company and turning down many that are alluring but do not offer a real chance to win," says Mainardi.