Why Successful Businesses Fail: The Role of Execution

Why do seemingly successful businesses suddenly go bust? Is Strategy the problem or is it Execution? Let’s pause here for a second. If we agree that Strategy is the pathway to a destination and as such must be adapted as circumstances shift. then... Clearly the problem is Execution. Of course this is not true in all cases. There are some flawlessly executed bad strategies. But for today, let’s stay with Execution So what is execution? To borrow an expression from Music, execution can be described as the art of making business melody. To create musical melody different instruments come together combining pitch, rhythm, tempo and beat. Well, this is the same in a company.

Your business solves problems for your customers. But you are using various resources from other people; time and skills from your employees; funding from your investors; inventory from your suppliers and so on. These stakeholders are contributing to creating melody for your customers

You are creating value for your customers while meeting the needs of everyone who is contributing to the process. So Melody is also about balance. Often what goes wrong in execution comes from focusing exclusively on the needs of one group to the detriment of others. Think low prices to please consumers which may destroy whole supply ecosystems or driving up valuation to please investors through cutting corners on safety and drastically reducing staff salaries. But be careful. Balance does not mean equal consideration at all times. There are times when the needs of a particular stakeholder group matters more and should take precedence. But that period never lasts so long that everyone else suffers for it. Value in any value chain is never static. It moves fluidly up or down the value chain in response to external stimuli. Knowing when to give more to one group and when to recalibrate back to balance is how to run a healthy business. We have covered the principle of melody and balance, now let’s look at the tactical part of execution.

That brings us back to our opening question Why do seemingly successful businesses suddenly go bust? No business goes bust suddenly. In Ernest Hemingway’s famous words, ‘it happens slowly, then all at once’. Good marketing and financial reporting may paint a rosy picture on the surface while dysfunction and imbalances eat away silently beneath. We all differ in our style of managing people and resources so I will not go there. You do you. However, regardless of your style, you should have metrics you monitor to tell you how healthy your business really is. Your metrics should cover the core of your business and what creates value for all your stakeholders. You remember the balanced score card? Let me share just two of my favourite metrics. For Customers - Net promoter score is good but I combine it with repeat purchase rate and referrals. Why? If your customer thinks you are doing such a great job then they will purchase again or at least refer someone to you. For employees, annual employee surveys are good but they come too late. I prefer a weekly sentiment survey. I expect work to be challenging, sometimes difficult and overwhelming but the thought of work should never fill an employee with such dread that they hate coming to work. Weekly sentiment surveys tell me who likes their work, who loves their work and who hates their work.

Have questions, comments or want to suggest a topic for the series? Send Juliet Anammah a short email at info@cgandrstrategy.com Disclaimer The content in this blog is intended to provide helpful and informative material on the subjects addressed.

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