Record-setting stock market performance could be masking a significant problem: Companies are actually strategically and financially out of shape, rendering many unfit for steeper competition and leaner market conditions.
Strategy&, a member of the PwC network of firms, surveyed more than 500 executives from around the world. The findings illuminate a gulf between corporate leadership’s carefully laid strategies for growth and how their companies actually operate.
“There is too much happenstance and not enough well-planned execution happening at companies today. And this disconnect between strategy and execution doesn’t bode well for the inevitable turn when the market will get tougher,” said Vinay Couto, Senior Partner at Strategy& (formerly Booz & Company) and coauthor of the Fit for Growth profiler and study.
The survey finds that leaders don’t communicate strategy effectively, and strategy doesn’t drive decision-making. Eighty-three percent of executives said their company’s overall business strategy isn’t well understood across the company, and 70% admitted that the strategy only minimally or moderately guides decision-making across the company.
Only about a quarter (26%) of executives said their company’s strategy translates to specific operational objectives, initiatives and measures.
The vast majority – 87% – of executives said there are major unexploited opportunities that could make the company a market leader but that are overlooked.
Most executives – 66% – said there are significant businesses, products and/or services in their companies’ portfolios that do not align with the company’s strategy. Only 25% of executives said there are clear and formal mechanisms at the company for channeling funding to critical strategic initiatives.
A significant number of executives said their organization’s culture is at odds with what’s demanded by its strategy (26%) and that the organization’s structure does not at all support their strategy (22%).
“When a company pursues growth, it must develop a clear sense of what really sets it apart from its competitors and the strategic opportunities that it is uniquely well-positioned to pursue. It must then invest with laser-focus in the capabilities that drive that differentiation – and be very lean elsewhere. Success does not come from a one-time great product, but from what everyone in the organization does day-in and day-out to further the company’s key strengths. Developing a clear strategy, communicating it throughout the organisation, and aligning financial resources and the organization with this strategy are key for positioning a company for sustained growth,” said Fit for Growth study coauthor John Plansky, a Strategy& Senior Partner.