Why Strategic Business Plans Fail

Strategic plans seem almost destined to fail. Why? Companies focus too much on current reality when planning for the unknown future. This leaves a business vulnerable to disruption. Craig Catley, Managing Director of StrategyBlocks, explains the simple steps companies can take to avoid the strategy failure trap.

Have you ever heard the saying, “the best-laid plans of mice and men often go awry?” The line might come from a 1785 poem by Robert Burns, but it’s no less true today than it was three centuries ago. In particular, a business’ strategic plan can fail for several reasons, both internal and external. Successful businesses learn from those failures, but that learning can be a challenge in itself. To effectively learn from a failure, you must first understand why the failure occurred in the first place. 

Over the course of my career, I’ve seen businesses that learn well from strategic failings—using those learnings as a catalyst for improvement. I’ve also seen businesses that continue to fail in similar patterns simply because they are missing out on the bigger lesson their strategic approach is trying to teach.

The top cause of a strategic plan’s failure seems simple on its face: the plan focuses too much on present circumstances. A strategic plan is intended to move a company closer to its stated vision and the goals needed to make that vision a reality — which implies that the focus of a plan should be the future. So where does the conflict come in? 

Although the future is impossible to predict, many companies build their plans as if current circumstances will continue linearly or perpetually, assuming that challengers or new trends will never enter the equation. This leaves a company or an industry open to being disrupted. 

Strategic Failure: A Real-world Example

Take one of the most famous disruptions of all: the rise of Netflix and the fall of Blockbuster. At its peak in 2004, Blockbuster had 9,000 stores around the worldOpens a new window , and it had even launched its own online DVD service, acknowledging that the internet was here to stay. The problem with the launch of its DVD service was that by that point, Netflix had been mailing DVDs with no late fees for six years. 

Blockbuster could have purchased Netflix in 2000 for $50 million. Believing that people would still want to come to its still-expanding stores, Blockbuster passed on the deal — and that competitor DVD service it launched four years later. It cost an estimated $200 million, four times as much as they could have spent on an already-built infrastructure with Netflix. 

Between that and ending late fees under pressure from both Netflix and Redbox, the company quickly found that the status quo it had come to rely on was no longer the status quo, and it was now behind. Blockbuster’s downfall may have been a long, slow demise — the company didn’t file for bankruptcy until 2010 and didn’t fully liquidate until 2013 — but the company’s heyday had long since been over. 

What could Blockbuster have learned from its passing on the Netflix deal? In 2000, its peak was yet to come. But by narrowly focusing on its brick-and-mortar operations – aggressively expanding its store count further and relying on the same policies like late fees that had brought in a significant amount of revenue — its strategic plans didn’t have the flexibility to accommodate new revenue streams or the value in an acquisition. As Netflix’s star continued to rise, Blockbuster could have taken time to rethink its operations and evaluate the impact of the internet and other technologies on the future of content consumption. Instead, Blockbuster remained reliant on what had worked in the past, to the detriment of its future. 

See More: Towards A More Environmentally Friendly Analytics Strategy

Building a Strategic Plan for Success

So how can a company shift gears with its strategic plan to prevent another failure? The pace of the world has significantly accelerated even since Blockbuster’s liquidation a decade ago, and even if the days of peak COVID-19 disruption are over, some of its ripple effects are here to stay. 

First, strategic planning should no longer be a once-a-year exercise — or even once a quarter. Continuing economic uncertainty and rapidly-shifting priorities mean evaluating a company’s strategy should be an active component of a business’s everyday operations. There are a few key questions to ask as part of this analysis:

• How is your current strategy serving your goals? 
• Are there outside factors that are quickly jeopardizing or affecting your strategic initiatives? 
• How can those factors be mitigated or even turned into strengths? 
• What about competition and their moves? 
• Are there changes that can be made to gain or maintain market share? 

Second, planning should incorporate flexibility and a framework for quick accommodation of new opportunities or challenges. To look at our Blockbuster example, internet usage had already exploded by the year 2000, with StatistaOpens a new window reporting about 43% of the US population could access the internet at the time. Even if not all of those people were regular users, internet usage was clearly trending in the right direction, proving that there was some kind of customer behavior that was shifting (and, in this case, a pain point being addressed: Netflix did not charge late fees, whereas Blockbuster charged them by the day). 

If the strategic plan Blockbuster was following had room to explore what was happening and how consumers were feeling about fees instead of remaining comfortable, then perhaps we would be living in a very different media landscape. Pivoting quickly is no longer a luxury: it is a necessity. A plan that recognizes that offers a company a much stronger competitive advantage. 

Finally, seek innovation and new ideas from more than just leadership, and be willing to integrate what you hear. Employees at the edge of your company—as described in Professor Rita McGrath’s book  ‘Seeing Around CornersOpens a new window ‘ —those closest to the customer and the problems they’re facing —see things that you might not. They may have a better understanding of how to improve your processes to meet your goals in a way that actually addresses their customer’s pain points. Provided employees understand what your strategy and goals are—which requires consistent, effective communication from leadership—they can offer new insights. 

There is, in fact, one Blockbuster store remaining in Bend, Oregon, and they credit their survival to building a community of fans both in the area and around the world. That’s in part driven by nostalgia for the days of going to a video rental store. Owners say that they regularly get tourists visiting just to sign up, the store even sells locally-made merchandise inspired by its status, and in 2020, you could even use Airbnb to have a sleepover in the last Blockbuster. But on top of that, the store offers a seven-day rental policy, meaning that customers from the wider county area (which has a relatively low population density of just over 65 people per square mile) don’t have to make a trip back into Bend quickly to return films. During the pandemic, they offered curbside pickup. They’ve held events to raise money for causes like suicide awareness. 

And, of course, there are over 21,000 movies to choose from, with the luxury of no loading times as you switch from title to title. 

Choosing Flexibility Over Infallibility

What thoughts could top-performing stores in 2000 or 2004 have offered? How could Blockbuster have made it easy for their employees and franchisees to share and evaluate these ideas side-by-side? That kind of thinking is essential, too. If employees have to jump through hoops just to be heard, they won’t make the effort. If it’s easy to share thoughts without worrying about retaliation, and employees see that others’ thoughts have been used, then a company’s strategic plan can be stronger. 

Of course, the best strategy of all is to build a plan that will never fail. Unfortunately, that’s a rarity in business — as I said earlier, being able to predict the future is simply impossible. However, with regular re-evaluation of your strategic plan, flexibility in that plan, and looking beyond leadership for ideas and insights into how your plan can be made better, then you will have learned from a plan’s failure — and made the next one less likely. 

What best practices do you follow to ensure the success of your strategic business plans? Share with us on  FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window . We’d love to hear from you!

Image Source: Shutterstock

MORE ON STRATEGIC BUSINESS PLANS

• Three Key Pillars of a Successful IT Plan
• Old Tech Dies Hard: The Growing Risks of Legacy Systems