Why strategies fail: Lunch and learn with Dan Fogel

8.22.2014 Article, Charlotte Center, School News, Strategy

By Page Leggett (’87)

For years, “strategy” has been one of the biggest buzz words in business. But what is it? And does everyone share a common definition of it?

Those were among the questions Dr. Dan Fogel, executive director of Wake Forest University’s graduate programs in sustainability and graduate research professor of sustainability examined at a July 12 lunch and learn. Students, staff, faculty, alumni and local business people gathered in the Wake Forest Charlotte Center to hear Fogel’s thoughts on “Why Strategies Fail.”

The strategy expert surprisingly said, “Strategy isn’t everything.” Executives mustn’t be so taken with the latest strategy that they forget their original business model.

Before Fogel delved into why strategies might fail, he and his audience discussed what strategy is.

An effective strategy helps outline what to do and – just as importantly – what not to do. Simply put, a strategy acknowledges a company’s market position and its internal capabilities to service the market. A solid strategy takes into account external and internal analyses.

The real benefit of developing a strategy is the act of thinking about your business, Fogel said. The predictions it yields are less important than the examination process. Developing a strategy – and then communicating it to employees – helps companies get a “sense of self.” And if a company doesn’t have a well-defined sense of itself, it doesn’t matter what market opportunities present themselves.

Fogel examined how two major companies are currently refocusing their strategies. Both Walmart and Apple were featured in The Wall Street Journal recently in articles that highlighted their new CEOs. Tim Cook stepped into the top spot at Apple after the celebrated Steve Jobs died. He’s doing things Jobs never dreamed of – settling the long-running feud with Google, for instance, and acquiring a company, Beats Electronics, and allowing Beats to keep its name.

Walmart’s new CEO, Doug McMillon, is shaking things up, too. Amazon, previously an online retailer of books, has emerged as an unexpected competitor. Walmart is shifting its strategy and moving into e-commerce. The big box giant is also experimenting with smaller stores and marketing to higher-end consumers.

When external markets change – as is the case with Amazon breathing down Walmart’s neck – companies have to examine internal operations. A shift in strategy may be in order.

Play to your strengths
The breakfast cereal industry had to make a strategic shift in the mid-1990s. Fogel outlined how Kellogg’s was the dominant player in the mid-1980s, with 83 percent of market share. Kellogg’s was killing the competition, yet 50 percent of its production facilities were idle at any given time.

Enter Walmart and other discount retailers that began to sell generic cereal for about $1.90 a pound, compared to Kellogg’s $3.90. Consumers weren’t brand-loyal, it turned out. They bought on price.

Kellogg’s determined, Fogel said, that they weren’t really in the cereal business. They were in the marketing business. They could use that marketing know-how (and the unused production space) to build a new category – the breakfast bar. “Over 10 or 12 years, Kellogg’s redefined their industry,” Fogel said.

The company’s examination of external forces and internal capabilities yielded strong results. Kellogg’s stuck to its competencies, and that’s always good strategy.

“If you stray from your competencies, it may not make much sense – even if you see a market opportunity,” Fogel said. Beware any “strategy” that involves moving away from what you do best, he suggested.

Will Walmart’s new strategy work? The retailer is veering away from what they do well: in-store sales. Fogel wondered: “Can they do e-commerce? “Can they sell to the upscale customer?”

Why strategies fail
Fogel said there are several reasons a strategy might fail:

  • Companies stray from decisions already made.
  • Executives try to think too fast. (Fast thinking is good at times, but when you’re developing strategy, you can’t think – and move – too quickly.)
  • No success measurements are established.
  • There’s too little focus on internal capabilities

Like Walmart, Apple is making changes. The company has always grown organically, but now they’ve grown through an acquisition. Fogel says Apple leadership should be concerned about the impact on employee morale. The departments that have always focused on innovation suddenly have to focus on integrating a new culture. (Fogel emphasizes that a good strategy will always take an internal analysis as seriously as an external analysis.)

Fogel’s advice: Let your internal competencies – not market forces – drive your strategy, and you’ve set yourself up for success.

 

Page Leggett is a freelance writer/editor/communications strategist in Charlotte, N.C., and a 1987 graduate of Wake Forest University.