Sayan Chatterjee in his book Failsafe Strategies describes three basic risks that can derail any strategy: demand risk, competitive risk and capability risk.
Simply, demand risk is about offering something that others don't like, competitive risk is when others would be able to outperform the organisation and finally, capability risk the inability to deliver what is offered.
While Chatterjee is saying something that appears obvious, many organisations fail to address these basic elements in their strategic formulation and hence suffer the consequences of failure. This issue is not only applicable to for profit organisations but is equally applicable to others such as governments, political parties and regulators. However, the dimensions of these strategic risks could differ given the differences in value creation processes of these not for profit organisations.
While offering something that people would not buy sounds crazy, this could happen if the organisation has no real feel of the sentiments on the ground. Having no access to real information or information received has been filtered could be among the reasons. Making decision without the necessary facts is dangerous but getting those facts may not be easy if not properly planned and with the necessary investment.
Some organisations underestimate the capabilities of their competitors or overestimating theirs. Some may not even have a clue as to who their competitors are? In this present world where business models appear to be among the important competitive elements, many organisations are not even clear is to their own business model and how value is created. Others could disrupt the supply chain or change value propositions offered to seize market share. In the context of a country, changes made may not be sufficient as other countries are moving forward faster.
Capability to deliver is always an issue to any organisation as all organisations are operating with limited resources. Resources are not limited to money but could include smart and honest people with the right know how and skills. Competition for talent appears to be one of the difficult battles faced by organisations. Given the portability of talents, many countries which devalue their currencies to maintain competitiveness in export will be losing talents as smart people are selling their talents elsewhere for better value.
So, whenever we assess any offer in any circumstances, we have to consider whether those making the offer know what we want, can do better then others and are really capable to deliver what they promise. Or, could they be promising something which are beyond their capabilities to deliver so that they do not have to do so when they get what they want from you. Collectively, we are the boss!
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