Why Good Strategies Fail: Execution Gaps, Organizational Misalignment, and Strategic Renewal

Earlier articles in this module (06 to 09) assumed that a well-made strategy has a reasonable chance of being carried out. This article tests that assumption.

When results fall short, at least four different things may have gone wrong. The strategy may have been mistaken, built on a misreading of customers, competitors, or the organization's own capabilities. It may have been sound but poorly coordinated, with units failing to deliver what they owed one another. The organization may have been misaligned, its structure and rewards encouraging behavior that served some other goal. Or it may have been unable to renew itself, holding on to a formula after the conditions that supported it had changed.

Real cases usually mix several of these, but they are worth separating because each calls for a different remedy. Rewriting a strategy does nothing about a broken incentive system, and better incentives cannot rescue a strategy built on a wrong reading of the market. The verdict of "poor execution" merges all four.

Presentations on strategy execution often open with a statistic: 70 percent, or nine out of ten, strategies fail. The figures are repeated so widely that they seem established. They are not.

Carlos Cândido and Sérgio Santos (2015) traced the studies behind these claims and found published estimates ranging from 7 to 90 percent. Most of the higher figures came from consulting firms whose methods could not be examined, and the authors noted that inflated failure rates can serve as marketing. The 90 percent attributed to Walter Kiechel's articles in Fortune (1982, 1984) came from interviews, with no method described. Another figure was distorted in transmission. Ram Charan and Geoffrey Colvin (1999) estimated that about 70 percent of the CEO failures they had observed stemmed from bad execution. That is a claim about why failures happen, not how often strategies fail, yet Kaplan and Norton (2001) cited it for the broader claim. The review concluded that most estimates rest on evidence that is "outdated, fragmentary, fragile or just absent," and warned against using the 70 to 90 percent figures "to justify any course of action, whether in research or in management practice." Mark Hughes (2011) reached a parallel verdict on the claim that 70 percent of change initiatives fail: tracing five published sources for it, he found no valid and reliable empirical evidence.

Selected rows from Cândido and Santos's (2015) Table 1; the selection is this article's. For Mankins and Steele, the failure definition is the one Cândido and Santos applied. Studies in this table are cited as reported in that review.

The spread says less about execution than about measurement. The studies define failure differently, count different units (a single project or a company-wide plan), and rarely sample at random. The defensible conclusion is modest: implementation is often hard, many initiatives fall well short, and nobody knows the overall rate. A consultant who opens with "90 percent of strategies fail" is making a case for intervention, not reporting a finding.

If the size of the problem is uncertain, its location can still be studied. Donald Sull, Rebecca Homkes, and Charles Sull (2015) surveyed 7,600 managers in 262 companies across 30 industries, mostly large firms in volatile sectors such as financial services, telecommunications, and oil and gas, a third of them based in emerging markets.

Their central finding cuts against the usual picture of execution as cascading objectives down the hierarchy and rewarding performance against them. By the respondents' own account, that vertical machinery worked: more than 80 percent said their goals were limited in number, specific, measurable, and funded. The breakdown was horizontal. Managers said they were three times more likely to miss a commitment because another unit failed to support them than because their own team fell short, and only 20 percent thought their formal systems for cross-unit commitments worked well. Understanding was also thinner than communication. Nearly 90 percent of middle managers felt the strategy was communicated often enough, yet barely half could name a single top priority. Eight in ten said their companies were too slow to exit declining businesses or kill failing initiatives.

These figures need context. They are self-reports from managers whom participating companies nominated as critical to execution, collected by researchers who also advise firms on execution. The sample does not represent managers in general, and the survey shows where managers perceive breakdowns, not how much repairing coordination would improve performance.

The pattern is nonetheless consistent with earlier field research. Working with senior teams through a method they called organizational fitness profiling, Michael Beer and Russell Eisenstat (2000) identified six "silent killers" of implementation: a top-down or laissez-faire senior management style, unclear strategy and conflicting priorities, an ineffective senior team, poor vertical communication, poor coordination across functions and businesses, and inadequate leadership skills further down the line. As the label suggests, these were barriers people recognized but seldom raised openly.

Coordination failures happen even when everyone pursues the same strategy. Misalignment is different: structure, measures, rewards, and culture push people toward outcomes other than the stated strategy, so the strategy actually pursued differs from the one in the documents. The classic statement is Steven Kerr's "On the folly of rewarding A, while hoping for B" (1975), whose examples run from universities that hope for teaching but reward publication to companies whose reward systems paid for behavior management said it did not want. His conclusion was blunt: "Managers who complain that their workers are not motivated might do well to consider the possibility that they have installed reward systems which are paying off for behaviors other than those they are seeking" (Kerr, 1975, p. 781).

A documented case: Wells Fargo's Community Bank. In September 2016 Wells Fargo paid $185 million in penalties to the US Consumer Financial Protection Bureau (CFPB), the Office of the Comptroller of the Currency, and the Los Angeles City Attorney. According to the bank's own analysis, as reported by the CFPB, employees had opened roughly 1.5 million deposit accounts and applied for roughly 565,000 credit card accounts that may not have been authorized by customers. The independent directors' April 2017 investigation report, based on 100 interviews and a search of more than 35 million documents, is the main source for what follows.

The retail strategy was openly built on selling more products to existing customers, and a decentralized structure inherited from the 1998 merger with Norwest gave business lines wide autonomy under the slogan "run it like you own it." The Community Bank's sales model called for significant annual growth in products sold. Senior regional leaders repeatedly argued that the goals had become unrealistic and generated products customers neither needed nor used, while senior management "tolerated low quality accounts as a necessary by-product of a sales-driven organization." Sales-integrity allegations rose fairly steadily from 2007 to a peak at the end of 2013, and the share of new accounts customers actually funded fell from about 90 percent in 2005 to below 80 percent in 2012. Roughly 5,300 employees were dismissed for sales-practice violations between 2011 and March 2016, a figure the board says it first learned from the settlements.

Read through the alignment lens, each element pointed the same way. The structure housed risk management and HR inside the business line, so the functions best placed to challenge the sales model sat within the unit running it. The rewards made product counts the visible test of performance, and high sellers were the people praised and held up as models. The culture combined deference to business-line leaders with tight control of bad news, so information reached the top filtered and minimized. The board's own summary: "While there is nothing necessarily pernicious about sales goals, a sales-oriented culture or a decentralized corporate structure, these same cultural and structural characteristics unfortunately coalesced and failed dramatically here."

Two readings of the same case. The regulator told it as Kerr's folly in pure form: "Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses," said CFPB Director Richard Cordray. The board's investigation drew a finer line. Employees who engaged in misconduct "most frequently associated their behavior with sales pressure, rather than compensation incentives," although incentives contributed by over-weighting sales against service. If pay were the main driver, changing the bonus plan would be enough. If the driver was pressure from managers, including fear of dismissal, the remedy must also reach how goals are set and enforced and who may question them. Kerr's category of hypocrisy applies as well: leaders who accepted low-quality accounts as the price of growth were arguably getting what they were willing to pay for.

The source deserves scrutiny too. Commissioned by the board to assess management, the report faults the board on only three points: it should have centralized risk management earlier, demanded more concrete plans, and pressed harder for new Community Bank leadership. Its account of events is well documented, but its judgment of the board is that of an interested party.

The Wells Fargo report contains a detail that leads to the third failure pattern. The former chief executive was slow to challenge the sales practices partly because he was "relying on Wells Fargo's decades of success with cross-sell." The formula that had worked longest was the hardest to question, and research on strategic renewal explains why that pattern is common.

Dorothy Leonard-Barton (1992) studied 20 development projects in five firms, among them Ford, Chaparral Steel, and Hewlett-Packard. She defined a core capability as the knowledge set that distinguishes a firm and gives it competitive advantage, with four dimensions: employees' knowledge and skills, technical systems, managerial systems, and the values and norms that run through the other three. Each dimension, she argued, has a downside. "Core rigidities are the flip side of core capabilities," she wrote. "They are not neutral; these deeply embedded knowledge sets actively create problems" (p. 118). Hewlett-Packard's long record of successful instrument development rested on "next-bench" design, in which engineers based their decisions on the needs of colleagues at the next bench (p. 119). Those colleagues were not typical personal-computer users, so the HP 150 project lacked the knowledge it needed. The product ended up resembling a terminal and, in her words, "was more successful as one than as a personal computer" (p. 122).

Donald Sull (1999) gave the pattern its best-known name. Comparing industry leaders whose fates diverged, including Firestone and Goodyear in the shift to radial tires, he argued that successful firms facing change suffer less from paralysis than from "active inertia," the tendency to persist in established patterns of behavior: strategic frames become blinders, processes harden into routines, relationships become shackles, and values turn into dogmas. A related study (Sull, Tedlow and Rosenbloom, 1997) adds that the tire incumbents did invest in radials, but their commitments to employees, customers, and communities shaped how. Inertia often looks like energetic activity in the wrong direction.

A documented case: Polaroid and digital imaging. Polaroid is often cited as a company that simply missed the digital revolution. Mary Tripsas and Giovanni Gavetti's (2000) study shows something more instructive. It formed an electronic imaging group in 1981, and by 1989 was devoting 42 percent of its R&D spending to digital imaging technologies. By the end of the decade its sensors produced 1.9 million pixels when most competitors' produced 480,000, and a working prototype digital camera existed by 1992. What held the firm back were senior managers' beliefs: that customers wanted a physical instant print, and that the money was in film, not hardware. One of the new hires recalled senior management's objection to a camera promising 38 percent margins: "Why 38 percent? I can get 70 percent on film." The PDC-2000 camera was not announced until 1996, by which time more than 40 firms were selling digital cameras. A medical imaging system that fitted the film-based model received about $120 million a year in development spending, against $30 to $40 million for the electronic imaging division. On 12 October 2001, after a steep fall in revenues, Polaroid announced that it had filed for Chapter 11 protection.

What resisted change at Polaroid was less its technology than the frame through which managers judged it. Tripsas and Gavetti are careful, though, not to claim that different beliefs would have saved the company. Polaroid was weak in low-cost electronics manufacturing and fast product development, and they note that it is unclear whether it could have built those capabilities. Senior managers' doubts about competing with consumer-electronics firms were not baseless. The lesson is narrower and more useful: an organization can hold the capability a new strategy needs and still not use it, because the beliefs that made it successful decide which projects look promising.

Everything so far assumes that strategy is formulated first and executed second. Henry Mintzberg and James Waters (1985) questioned that assumption by comparing what organizations intended with what they actually did. They distinguished deliberate strategies, "realized as intended," from emergent strategies, "patterns or consistencies realized despite, or in the absence of, intentions" (p. 257), and placed real strategies between the two poles. Two further distinctions matter here. An unrealized strategy is an intention that was not carried out. A realized strategy can still be "unsuccessful in its consequences" (p. 260); their example is the American escalation in Vietnam, carried out as intended and still a failure. Only the first is an execution failure. The second is a failure of the strategy, however faithfully implemented. They also argued that defining strategy purely as intention "effectively precludes the notion of strategic learning" (p. 270), because attention fixes on realizing intentions and signals from the environment are blocked out. A departure from the plan may be the organization learning.

For diagnosis, this cuts both ways. A plan that depends on cross-unit cooperation the organization has never achieved, or on resources it will not reallocate, is not a good strategy poorly executed. It is a strategy that left the organization out. Yet Mintzberg and Waters did not dismiss planning. Deliberate strategy, they wrote, is "hardly dysfunctional," and where environments can be understood and predicted it may be right to pursue intentions with determination: strategy formation "walks on two feet, one deliberate, the other emergent" (p. 271). Used loosely, emergence can excuse any outcome. The formulation/execution distinction is best kept as a tool for locating a breakdown, not for assigning blame to one level of the organization.

Both kinds of failure discussed above, misalignment and stalled renewal, can be seen in Bangladesh. Both examples below are real and dated; the interpretations are this article's.

A national policy and its incentives. Bangladesh's export policies have long named diversification beyond ready-made garments (RMG) as an aim, and the Ministry of Commerce's Export Policy 2024-2027 sets out measures for non-garment sectors "with the objective of product diversification." Yet the World Bank's 2022 Country Economic Memorandum, Change of Fabric, found RMG at 83 percent of merchandise exports in FY2020, as dominant as it had been for two decades, and attributed this "at least partly" to the trade regime. Para-tariffs roughly doubled average tariffs, from 14.7 to 28.8 percent in FY2021, making domestic sales more profitable than exports for many non-garment manufacturers, while RMG enjoys, through a special bonded warehouse facility, what amounts to a free-trade regime for imported inputs. Policy hopes for diversification while incentives reward garments and, elsewhere, selling at home. The causal claim should be held loosely: the World Bank itself notes that poor compliance with buyers' environmental and social standards may also explain weak leather exports. The RMG share is the World Bank's FY2020 figure; check later Export Promotion Bureau data before using it.

A company-level case: the Bangladesh Jute Mills Corporation. The state-owned BJMC shows the exit and renewal problems of Section 5 in a Bangladeshi enterprise. Official data reported by The Financial Express in July 2020 put the mills' cumulative losses at Tk 106.74 billion (about Tk 10,674 crore), and the textiles and jute secretary said they had made a profit in only four of the previous 44 years. The minister was blunt: "Items that cost Tk 100 to produce are sold for Tk 70 in the country." That month the government halted production at all 25 BJMC mills and allotted Tk 50 billion to settle the dues of about 25,000 workers. Exit did not end the cost. In April 2024 The Daily Star reported that 2,517 employees remained on the payroll at about Tk 3.56 crore a month, with losses of Tk 843 crore over 2021-2023 while the mills stood idle, and six of 14 leased mills producing. In June 2026 the minister said nine of the 14 leased mills had resumed production and that the rest were expected to restart by December 2026.

Two readings are possible, and the evidence here does not settle between them. Judged commercially, decades of selling below cost are the slow exit that eight in ten managers in the 2015 Sull survey reported in their own firms. But a state enterprise may carry employment and social goals, and Kerr's fourth cause, other values deliberately overriding efficiency, describes a choice rather than an accident. The question then becomes whether those goals could have been met at lower cost. Either way, the case shows how long an organization can persist in a losing pattern, and how slowly renewal proceeds even after the decision to exit.

The four short assessments below follow this article's four alignment dimensions. Rate each statement for one strategy your organization is implementing now. Each part is scored separately, from 4 to 20, so the lowest score shows where to look first. The statements and score bands are this article's own teaching tool, drawn from the research discussed above. They are not a validated instrument.

Reading the results. Compare the four scores instead of reading any one alone. A low Part B score alongside high scores elsewhere suggests a strategy that is understood and resourced but rewarded against, the Wells Fargo pattern. A low Part D score in a long-successful organization points toward the renewal problems Leonard-Barton and Sull describe. Because understanding thins with distance from the top (in the Sull survey, from just over half of top team members to 16 percent of frontline supervisors), have people at several levels complete it and compare. A low score shows where to look, not what is wrong.

The setting is real and is drawn from the Wells Fargo directors' 2017 report. The options and the commentary on each are this article's teaching material, written with a hindsight the directors did not have.

It is early 2014. Newspaper articles in late 2013 described improper sales practices at Wells Fargo branches in Los Angeles, and sales practices have been raised with the board as a noteworthy risk for the first time. Management assures the risk committee that monitoring is being stepped up and the abuses are subsiding. The Community Bank's sales model is credited with decades of growth, and its head has a strong financial record.

What the exercise is designed to show. Each option is defensible on some reading of the evidence available in 2014. What separates them is whether the board treats the information reaching it as part of the problem. Misalignment of the Wells Fargo kind tends to filter the evidence that would reveal it.

The practices below are this article's synthesis of the research, not a tested program.

1. Manage commitments between units as seriously as targets within them, making them specific, visible, and reviewed.
2. Audit what the reward system pays for. Kerr's first step was to "find out what behaviors currently are being rewarded." Ask how a new target could be met while damaging the strategy.
3. Give bad news a route that bypasses the plan's owners, through independent control functions and data the board reads directly.
4. Reallocate and exit deliberately. BJMC shows how costly delayed exit becomes.
5. Test the assumptions behind past success, as a guard against core rigidities.

Each depends on senior leaders being willing to hear that their strategy, not only their staff, may be at fault.

Module 02 began with strategic thinking and ends with the question of why strategies do not deliver. The evidence supports a more precise answer than "poor execution." Nobody knows how often strategies fail, and the popular figures deserve to be retired. Where breakdowns can be located, they occur between units more than down the hierarchy, in reward systems that pay for something other than the stated strategy, and in the beliefs and routines that made an organization successful. Wells Fargo, Polaroid, and BJMC differ in almost every respect, yet in each the established formula was what decision-makers found hardest to abandon.

What remains unresolved is who performs the diagnosis. Each pattern here is easiest to see from below and hardest to see from the top, where the strategy was chosen and the authority to change it sits. The people who must act on a diagnosis are often the people it implicates. How leaders come to learn that their strategy may be the problem is a question of governance and leadership, which later modules take up.

Select a strategic initiative that fell well short of its stated goals. It may come from an organization you know well, which you may disguise, or from a publicly documented case with primary sources such as regulatory findings, board reports, or annual reports.

Prepare a report of 2,500 to 3,000 words that:

1. states the intended strategy as it was set out at the time, with evidence, and defines what "falling short" means in this case;
2. assesses whether the shortfall reflects flawed formulation, poor coordination, misalignment, failure to renew, or a combination, weighing the evidence for and against each;
3. maps the organization's structure, measures and rewards, culture and information flows, and resource allocation against the strategy, identifying specific points of misalignment;
4. evaluates at least one competing interpretation of the failure, including the possibility, following Mintzberg and Waters, that part of the gap reflects emergent learning; and
5. recommends changes, with their costs, the resistance they are likely to meet, and the evidence that would show whether they worked.

Use at least five academic sources, including at least three from this article's reference list. Do not use failure-rate statistics unless you can trace them to a study with a stated method. Every factual claim about the organization should be traceable to a document or interview you could produce if asked. Where information is missing, say so and explain how the gap limits your analysis.

Assessment rubric (100 marks)

1. Beer, M., & Eisenstat, R. A. (2000). The silent killers of strategy implementation and learning. Sloan Management Review, 41(4), 29–40. https://sloanreview.mit.edu/article/the-silent-killers-of-strategy-implementation-and-learning/
2. Cândido, C. J. F., & Santos, S. P. (2015). Strategy implementation: What is the failure rate? Journal of Management & Organization, 21(2), 237–262. https://doi.org/10.1017/jmo.2014.77
3. Hughes, M. (2011). Do 70 per cent of all organizational change initiatives really fail? Journal of Change Management, 11(4), 451–464. https://doi.org/10.1080/14697017.2011.630506
4. Kerr, S. (1975). On the folly of rewarding A, while hoping for B. Academy of Management Journal, 18(4), 769–783. https://doi.org/10.5465/255378
5. Leonard-Barton, D. (1992). Core capabilities and core rigidities: A paradox in managing new product development. Strategic Management Journal, 13(S1), 111–125. https://doi.org/10.1002/smj.4250131009
6. Mintzberg, H., & Waters, J. A. (1985). Of strategies, deliberate and emergent. Strategic Management Journal, 6(3), 257–272. https://doi.org/10.1002/smj.4250060306
7. Sull, D. N. (1999). Why good companies go bad. Harvard Business Review, 77(4), 42–52. https://hbr.org/1999/07/why-good-companies-go-bad
8. Sull, D., Homkes, R., & Sull, C. (2015). Why strategy execution unravels—and what to do about it. Harvard Business Review, 93(3), March 2015. https://hbr.org/2015/03/why-strategy-execution-unravelsand-what-to-do-about-it
9. Sull, D. N., Tedlow, R. S., & Rosenbloom, R. S. (1997). Managerial commitments and technological change in the US tire industry. Industrial and Corporate Change, 6(2), 461–500. https://doi.org/10.1093/icc/6.2.461
10. Tripsas, M., & Gavetti, G. (2000). Capabilities, cognition, and inertia: Evidence from digital imaging. Strategic Management Journal, 21(10–11), 1147–1161. https://doi.org/10.1002/1097-0266(200010/11)21:10/11<1147::AID-SMJ128>3.0.CO;2-R (case details checked against the authors' pre-publication version, Harvard Business School Working Paper 00-067, May 2000: https://www.hbs.edu/ris/Publication%20Files/00-067_cdcafdf1-d946-44ec-96ad-558ad606477d.pdf)

Case and policy sources

• Independent Directors of the Board of Wells Fargo & Company. (2017, April 10). Sales practices investigation report. Full text as filed with the US SEC (Schedule 14A additional materials): https://www.sec.gov/Archives/edgar/data/72971/000119312517118654/d375947ddefa14a.htm
• Consumer Financial Protection Bureau. (2016, September 8). Consumer Financial Protection Bureau fines Wells Fargo $100 million for widespread illegal practice of secretly opening unauthorized accounts. https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-fines-wells-fargo-100-million-widespread-illegal-practice-secretly-opening-unauthorized-accounts/
• Polaroid Corporation. (2001, October 16). Form 8-K, with press release of 12 October 2001 announcing voluntary Chapter 11 petitions. https://www.sec.gov/Archives/edgar/data/79326/000091205701535609/a2061198z8-k.txt
• "BD lost Tk 40b export earnings for BJMC: Minister." The Financial Express, 3 July 2020. https://thefinancialexpress.com.bd/economy/bangladesh/bd-lost-tk-40b-export-earnings-for-bjmc-minister-1593782751
• "Govt to shut down 25 jute mills." Prothom Alo (English), 2 July 2020. https://en.prothomalo.com/bangladesh/government/govt-to-shut-down-25-jute-mills
• "BJMC racking up losses for payroll burden." The Daily Star, 8 April 2024. https://www.thedailystar.net/business/economy/banks/news/bjmc-racking-losses-payroll-burden-3585251
• "9 state-owned jute mills back in production, rest to reopen by Dec: minister." The Daily Star, 29 June 2026. https://www.thedailystar.net/news/the-parliament-watch/parliament/news/9-state-owned-jute-mills-back-production-rest-reopen-dec-minister-4211426
• World Bank. (2022). Bangladesh country economic memorandum: Change of fabric. World Bank. https://doi.org/10.1596/38229
• Ministry of Commerce, Government of the People's Republic of Bangladesh. Export Policy 2024-2027 (English version). https://mincom.gov.bd/pages/policies/export-policy-2024-2027-english-version-f6bfc2-69403139c4774958d7b41ce2

Kiechel (1982, 1984), Nutt (1987), Charan and Colvin (1999), Doyle et al. (2000), Mankins and Steele (2005), Kaplan and Norton (2001), and the Economist Intelligence Unit (2013) are cited as reported in Cândido and Santos (2015); they were not consulted directly. The diagnostic, the case exercise options and commentary, the comparison table selection, and the list of practices in Section 10 are original teaching material for this series, not findings reported by the sources above.

Next in The Human Capital MBA series: Module 03, Human Resource Management Foundations, opens with Article 11.