Strategic Management Assignment

Why Strategies Fail in Organizations

Submitted by-
Shikhar Shaurya Bhardwaj
A058
80012301373

Introduction

Effective strategies are the lifeblood of any successful organization. However, despite
intensive planning and well-intentioned efforts, many strategies fall short of their intended
impact. In this paper, we explore the common reasons behind strategy failures and discuss
how organizations can mitigate these challenges.

1. Lack of Understanding the Problem

Strategies often fail when leaders do not fully comprehend the underlying problem they aim
to solve. Rushing into strategy formulation without a deep understanding of the context,
market dynamics, or customer needs can lead to misguided approaches. Organizations must
invest time in thorough problem analysis to ensure alignment between strategy and reality.
According to a study by Harvard Business Review, 42% of strategy failures occur due to
inadequate problem diagnosis.

Example: Kodak and Digital Photography: In the late 20th century, Kodak, a photography
giant, failed to grasp the magnitude of the digital revolution. They were entrenched in film-
based photography and didn’t fully understand the shift toward digital imaging. Despite
having early patents for digital cameras, they hesitated to embrace the technology. Their lack
of foresight led to their downfall as competitors like Canon and Nikon surged ahead in the
digital photography market.

Recommendations:

 Comprehensive Problem Analysis: Invest time in understanding the problem

thoroughly. Conduct market research, gather customer insights, and analyze data.
Engage cross-functional teams to gain diverse perspectives.
 Stakeholder Involvement: Involve key stakeholders early in the strategy formulation
process. Their input can provide valuable context and prevent blind spots.

2. Ignoring Organizational Capabilities

A strategy’s success hinges on an organization’s ability to execute it. Failing to assess

internal capabilities—such as talent, technology, and infrastructure—can be detrimental.
Organizations must evaluate whether their existing resources align with the proposed
strategy. If gaps exist, targeted investments or skill development may be necessary. A survey
conducted by Forbes Insights and EIU revealed that 68% of executives believe their
organizations lack the necessary capabilities to execute their strategies effectively.
Example; Blockbuster Video: Blockbuster, once a dominant force in video rentals, ignored
the rise of streaming services. They had a chance to acquire Netflix but dismissed it. Their
focus remained on physical stores, and they underestimated the power of digital distribution.
As a result, Blockbuster’s inability to adapt to changing consumer preferences led to
bankruptcy.

Recommendations:

 Comprehensive Problem Analysis: Invest time in understanding the problem

thoroughly. Conduct market research, gather customer insights, and analyze data.
Engage cross-functional teams to gain diverse perspectives.
 Stakeholder Involvement: Involve key stakeholders early in the strategy formulation
process. Their input can provide valuable context and prevent blind spots.

3. Underestimating Immovable Pressures

External forces, such as regulatory changes, economic shifts, or industry disruptions, can
render even the most well-crafted strategy ineffective. Leaders must recognize these
immovable pressures and adapt their plans accordingly. Flexibility and agility are essential to
navigate unforeseen challenges. A Harvard Business Review article highlights that 56% of
strategy failures result from external factors beyond an organization’s control.

Example; Nokia and the Smartphone Era: Nokia, a global leader in mobile phones, faced a
critical juncture when smartphones emerged. Despite their strong position, they
underestimated the impact of touchscreens and app ecosystems. Nokia clung to its Symbian
operating system while Apple’s iPhone and Android devices gained traction. The immovable
pressure of technological disruption eventually led to Nokia’s decline.

Recommendations:

 Environmental Scanning: Continuously monitor external factors such as regulatory

changes, technological advancements, and market trends. Stay informed and adapt
proactively.
 Risk Mitigation Plans: Develop risk mitigation strategies for immovable pressures.
Consider diversifying markets, building resilience, and maintaining flexibility.

4. Ignoring Cultural Landscape

Organizational culture significantly impacts strategy execution. A misalignment between

strategy and culture can lead to resistance, lack of buy-in, and ultimately failure. Leaders
should assess whether the proposed strategy aligns with the prevailing values, norms, and
behaviors within the organization. Cultural change may be necessary to support strategic
goals. Research by Collis emphasizes that 70% of strategic initiatives fail due to cultural
misalignment.

Example; DaimlerChrysler Merger: The merger between Daimler-Benz (Mercedes-Benz) and

Chrysler aimed to create a global automotive powerhouse. However, cultural clashes between
the German and American management teams hindered collaboration. The organizations had
different communication styles, decision-making processes, and work ethics. The resulting
cultural misalignment weakened the joint venture, and eventually, Daimler sold Chrysler.
Recommendations:

 Culture Assessment: Assess the existing organizational culture. Understand values,

communication norms, and behavioral patterns.
 Change Management: If cultural misalignment exists, initiate change management
efforts. Communicate the strategic vision clearly and involve employees in shaping
the culture.

Conclusion

Successful strategy execution requires more than just a well-designed plan; it demands a
holistic understanding of the problem, organizational capabilities, external pressures, and
cultural context. By addressing these factors proactively, organizations can enhance their
chances of turning strategies into tangible results.

References:

1. Olson, A. B. (2022). 4 Common Reasons Strategies Fail. Harvard Business Review.

2. Forbes Insights and EIU. Why Good Strategies Fail And How To Avoid That Yours
Does Too.
3. 6 Reasons Your Strategy Isn’t Working. Harvard Business Review.
4. 7 Reasons Why Change Management Strategies Fail and How to Avoid Them.
5. Collis, D. J. (2021). Why Do So Many Strategies Fail?. Harvard Business Review.
6. The Rise and Fall of Kodak. Investopedia.
7. The Last Blockbuster. The Atlantic.
8. The Decline and Fall of Nokia. The Economist.
9. The DaimlerChrysler Merger: A Cultural Mismatch. Harvard Business Review.