The “70% failure rate” has been exploited enough already. It’s time to stop beating this dead horse and give it a decent burial.
I get why it resonates with most of us. Strategy execution is hard. Some falls short of objectives and some fails outright. The more transformational the change the more likely that it will fail in some way.
We all abhor failure. Any failure feels like too much. It feels like 70%.
And I get why it is used—fear is a standard sales technique (I am recovering from this nasty habit myself). You know the drill: convince the leaders there is a high risk of failure unless they follow a different prescription. This is used internally to expand execution budgets as well as externally to tout execution services and solutions. Notwithstanding the intentions of either internals or externals, the origin of this legend was never a real statistic. Yes, you read that right. Where did the “70%” come from then? More on this below.
Furthermore, there is better data. In August 2013, The Economist published the first third-party (can anyone say “objective”) survey, “Why good strategies fail: Lessons for the C-suite.” How about we all do a three-point turn? What are the right questions to ask or conversations to have around success/failure?
First, how did we get here?
As I said above, as far as I can tell, the legendary failure rate is not an actual statistic.
Since I last wrote about this topic I was referred to an excellent article that attempts to track the source of this so-called data. The abstract of “Do 70 Per Cent of All Organizational Change Initiatives Really Fail?” (Journal of Change Management, Mark Hughes, 2011) hits it hard: “This article critically reviews five separate published instances identifying a 70 per cent organizational-change failure rate. In each instance, the review highlights the absence of valid and reliable empirical evidence in support of the espoused 70 per cent failure rate.”
Let’s review that: “the absence of valid and reliable empirical evidence.” Wow. That’s pretty amazing, don’t you think?
Hughes reviews each of the five instances—you will probably recognize some of them:
- “Reengineering the Corporation: A Manifesto for Business Revolution,” Hammer and Champy 1993
- “Cracking the code of change,” Harvard Business Review, Beer and Nohria, 2000
- “Sense of Urgency,” Kotter, 2008
- “Leading change management requires sticking to the plot,” Bain and Company, Senturia et al, 2008
- “The inconvenient truth about change management,” McKinsey and Company, Keller and Aiken, 2009
For each instance, Hughes provides the original reference verbatim and also provides some context. I highly recommend this article.
The bottom line is that we don’t know, from the sources cited, what the real failure rate was at that time. We only know what a handful of pretty smart and experienced consultants / academics estimated it was based on their limited exposure.
To be fair, many academics and consulting firms have run surveys. Some consulting firms even run them annually. Their data comes pretty close to 70%. The one that comes to mind is “Success Rates for Different Types of Organizational Change,” Martin E. Smith, Performance Improvement Journal, International Society for Performance Improvement, 2002.
This is a “meta survey.” In other words, Smith analyses 49 surveys and drives out median success rates (the median failure rate being, obviously, the rest). What is also useful about this survey is that it identifies by type of change (e.g., restructuring has a 54% failure rate, culture change has an 81% failure rate). With that, one can arrive at a median 70% failure rate. So, maybe one can argue that there is a real 70% failure rate, or there was sometime before 2002 (11 years ago).
What’s new?
In March 2013, The Economist’s Intelligence Unit, sponsored by The Project Management Institute, initiated a survey of 587 senior executives globally and then undertook a series of in-depth interviews with additional executives and academics.
The result was a current and objective (non-commercial) touch-point on what executives believe. As noted on the PMI website:
“Key findings include:
- 61% of survey respondents acknowledge that their firms struggle to bridge the gap between strategy formulation and day-to-day implementation
- 44% of strategic initiatives did not succeed in the last three years
- 51% percent of survey respondents say the leading reason for the success of strategic initiatives is leadership buy-in and support
- Rather than micro-managing, C-suite executives should identify and focus on the key initiatives that are strategically relevant”
So there it is. These executives believe the failure rate on “strategic initiatives” is 44%.
So while that’s a fair distance from 70%, it is still a very high risk.
The reality
So let’s review: we have looked at five original references that turned out to be opinions of thought leaders, a meta survey of 49 sources, and a survey of 587+ executives.
It seems odd, in this light, to realize that this is actually not primary research (i.e., real-time tracking of actual change initiatives on their performance against stated objectives).
This would be the real test, wouldn’t it? One hopes that inside of organizations there might be an appreciation for tracking success/failure and for improving strategy execution over time. Project management protocol calls for a Post Implementation Review and Lessons Learned, but this is rarely converted into organizational learning or harvested into enterprise best practices.
Proposal
Strategy execution is hard, damn hard. It often fails or falls short.
We may disagree on the degree of risk but no one can predict the probability of success or failure for a particular initiative/organization based on a general survey.
What if we all at least started this conversation from more relevant space? For example, “What is this organization’s experience with strategy execution? Let’s have a look at the data and see how we can help you improve your results.”
Maybe organizations would begin to think about establishing strategy execution as an organizational competency and managing it across the organization, and in working to improve their performance would drive better results to the bottom line. Now, that would be good for all of us.
Credits
Earlier this Fall, I facilitated a discussion entitled “What if it’s not true that “70% of change initiatives fail”?” in the Organizational Change Practitioners Group in LinkedIn and many experienced and insightful practitioners chimed in—some agreeing and some disagreeing. Around the same time Jennifer Frahm published an excellent post entitled “70% of change projects fail: Bollocks!”. Much of my thinking above has been informed by their contributions.
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Anyone still touting that stat is both amateur and did not do their homework. Thanks for putting it all in place Gail, so hopefully, we get rid of the “‘70%ers”.
Indeed, the only “70%er” I am interested in talking with is that executive who worries that this is the failure rate of their organization or their current strategic initiatives – and is prepared to do something about that.
…Maybe organizations would begin to think about establishing strategy execution as an organizational competency…
Now you’re talking my language!
I suggested doing this with our competency model and annual review. Shot down by the 70%ers. Will advocate for this stronger next time.
Yes! Imagine “strategy execution as an organizational competency”.
Then imagine that the organizations that anchor our economy are actually adaptable – flexible, nimble. This is not a current article but it makes the point “The Fortune 500’s Fallen Angels” https://money.cnn.com/2010/10/20/news/companies/Fortune_500_fallen_angels.fortune/:
“Only 62 companies have appeared on the list of America’s biggest corporations, ranked by revenue, every year since this magazine began publishing it in 1955. Another 1,952 have come and gone.”
When I hear statistics like this I cringe. I am all for newcomers elbowing their way into the Fortune 500 and I get it that a myriad of events can reduce an organization’s competitiveness, however it seems that the degree of failure (of both strategy and execution) it too high.
We should spend less time telling executives what general surveys estimate it is and more time helping them measure and improve their own. In many organizations taking on such a challenge would be considered career hara-kiri and yet it is exactly what we need courageous Boards and Leadership teams to get behind.
Many of us are not in positions in organizations to champion such an approach however we can all influence this in smaller ways. For me it begins with calling out the phantoms that distract us.
I am energized by your commitment. Sounds like you need a few more allies and perhaps a 5 or 10 year plan?
Gail, great review of the data (or lack of it) supporting a 70 percent failure rate of change initiatives. I appreciate your excellent insight that “no one can predict the probability of success or failure for a particular initiative/organization based on a general survey.”
We need to test ‘marketing’ for its underlying facts, like you have done. Thank you.
Thanks Phil.
To be clear, I don’t doubt that some organizations have a 70% failure rate, particularly on the most difficult and transformational strategies. And, of course there are more current surveys that peg the failure rate up there.
But all are surveys – none are primary data. This is rarely highlighted when the “70% failure rate” is declared. Further, the self-serving and egregious use of these statistics has been a stone in my shoe for a long time. The sales ‘formula’ has been beaten into us all (internals and externals) for a long time – and sounds remarkably like the formula for moving people through change – i.e. highlight and exacerbate the pain (“70% failure rate”), then show hope (“Our plan / capability / etc can save you”) and voila you get movement, i.e. a ‘sale’ or approval for your plan. However, at what price?
It seems to me that we are overlooking the obvious. Executives ‘know’, on some level, what their failure rate is. They know, or are processing as we speak, what they are willing to invest to insure against that. Rather than ‘tell, tell, tell’ surely we are better advised to engage them in the dialogue. Yes, they may not want to answer aloud in the early stages of the relationship so our questions might be rhetorical.
It just seems to me that we are aiming too low – we aim to get the next ‘project’ secured or approved – and in doing so we allow the systemic problems to remain. Sure, what if we allowed for a reference to the surveys as a way into the conversation, then focused on understanding that organization’s track record and the challenges they are facing, AND referenced the possibility of building organizational competency concurrently?
I worry that we are not helping organizations address their very real hurdles. Leaders may choose to address some of the issues in their silo, they may even build some capability in their division (often, sadly, beginning and ending with a PMO) however getting to Helene’s (and my) dream of a nimble enterprise, requires getting peers (often very competitive peers) across the organization to either envision and create a “strategy execution approach” together or to implement solutions developed in a different division (eg HR). I’d like to see leadership teams invest a little effort in figuring this out (as a change practitioner and as a shareholder and citizen). The timing will never be better time for such conversations – the line of sight on the economic cycle is as good as it is going to get and Boards are starting to wake up to these issues.
Alas, I got off on a roll – some organizations are doing this – more coming on these ideas.
I realize that I am preaching to the choir here. Few understand this as well as you do, Phil. Your energy re-ignites mine. Thanks for commenting.
Gail, I can always count on you for a thought provoking and well researched contribution to the change conversation.
Hi Molly. So great to hear from you. Thanks for commenting here. As with all the folks who have commented here, “it takes one to know one”. Our mission, if we choose to accept it, is to get the word out 🙂 Hope to connect with you soon. Gail
99% of all statistics are made up on the spot 🙂