Good Strategy/Bad Strategy: The difference and why it matters By Richard Rumelt
The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors.
Simply being ambitious is not a strategy.
good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them. And the greater the challenge, the more a good strategy focuses and coordinates efforts to achieve a powerful competitive punch or problem-solving effect.
Ambition is drive and zeal to excel. Determination is commitment and grit. Innovation is the discovery and engineering of new ways to do things. Inspirational leadership motivates people to sacrifice for their own and the common good.1 And strategy, responsive to innovation and ambition, selects the path, identifying how, why, and where leadership and determination are to be applied.
Rather, the term “strategy” should mean a cohesive response to an important challenge.
The kernel of a strategy contains three elements: a diagnosis, a guiding policy, and coherent action.
A good strategy has coherence, coordinating actions, policies, and resources so as to accomplish an important end.
After all, we are told that decentralization is a good thing. But the oft-forgotten cost of decentralization is lost coordination across units.
in the language of business strategy: identify your strengths and weaknesses, assess the opportunities and risks (your opponent’s strengths and weaknesses), and build on your strengths.
Fluff. Fluff is a form of gibberish masquerading as strategic concepts or arguments. It uses “Sunday” words (words that are inflated and unnecessarily abstruse) and apparently esoteric concepts to create the illusion of high-level thinking.
Mistaking goals for strategy. Many bad strategies are just statements of desire rather than plans for overcoming obstacles.
A strategy is a way through a difficulty, an approach to overcoming an obstacle, a response to a challenge.
If you fail to identify and analyze the obstacles, you don’t have a strategy. Instead, you have either a stretch goal, a budget, or a list of things you wish would happen.
A basic challenge for any military research organization is matching military problems with technological opportunities, including the new operational concepts those technologies make possible. Parts of this challenge are extremely difficult because: (1) some military problems have no easy or obvious technical solutions; and (2) some emerging technologies may have far-reaching military consequences that are still unclear. DARPA focuses its investments on this “DARPA-hard” niche—a set of technical challenges that, if solved, will be of enormous benefit to U.S. national security, even if the risk of technical failure is high.
DARPA’s surprising strategy has a shape and structure common to all good strategy. It follows from a careful definition of the challenge. It anticipates the real-world difficulties to be overcome. It eschews fluff. It creates policies that concentrate resources and actions on surmounting those difficulties.
Strategic objectives should address a specific process or accomplishment, such as halving the time it takes to respond to a customer, or getting work from several Fortune 500 corporations.
What I would advise is that you first work to discover the very most promising opportunities for the business. Those opportunities may be internal, fixing bottlenecks and constraints in the way people work, or external. To do this, you should probably pull together a small team of people and take a month to do a review of who your buyers are, who you compete with, and what opportunities exist. It’s normally a good idea to look very closely at what is changing in your business, where you might get a jump on the competition.
To help clarify this distinction it is helpful to use the word “goal” to express overall values and desires and to use the word “objective” to denote specific operational targets.
A good strategy defines a critical challenge. What is more, it builds a bridge between that challenge and action, between desire and immediate objectives that lie within grasp.
When leaders are unwilling or unable to make choices among competing values and parties, bad strategy is the consequence.
Strategies focus resources, energy, and attention on some objectives rather than others.
Strategy is the craft of figuring out which purposes are both worth pursuing and capable of being accomplished.
I do not know whether meditation and other inward journeys perfect the human soul. But I do know that believing that rays come out of your head and change the physical world, and that by thinking only of success you can become a success, are forms of psychosis and cannot be recommended as approaches to management or strategy.
Good strategy is coherent action backed up by an argument, an effective mixture of thought and action with a basic underlying structure I call the kernel.
The core content of a strategy is a diagnosis of the situation at hand, the creation or identification of a guiding policy for dealing with the critical difficulties, and a set of coherent actions.
A great deal of strategy work is trying to figure out what is going on.
“Without action, the world would still be an idea.”
A “threshold effect” exists when there is a critical level of effort necessary to affect the system.
To take responsibility is more than a willingness to accept the blame.
To concentrate on an objective—to make it a priority—necessarily assumes that many other important things will be taken care of.
Quality matters when quantity is an inadequate substitute.
Talking with real estate experts and contractors about home remodeling, I learned that in assessing a property’s potential, one should identify the limiting factors. If a house is near a noisy highway, that is a limiting factor.
There are portions of organizations, and even of economies, that are chain-linked. When each link is managed somewhat separately, the system can get stuck in a low-effectiveness state. The problem arises because of quality matching.1 That is, if you are in charge of one link of the chain, there is no point in investing resources in making your link better if other link managers are not.
In any organization there is always a managed tension between the need for decentralized autonomous action and the need for centralized direction and coordination.
By definition, winging it is not a strategy.
the greater the challenge, the greater the need for a good, coherent, design-type strategy.
At the core, strategy is about focus, and most complex organizations don’t focus their resources. Instead, they pursue multiple goals at once, not concentrating enough resources to achieve a breakthrough in any of them.”
Healthy growth is not engineered. It is the outcome of growing demand for special capabilities or of expanded or extended capabilities. It is the outcome of a firm having superior products and skills. It is the reward for successful innovation, cleverness, efficiency, and creativity. This kind of growth is not just an industry phenomenon. It normally shows up as a gain in market share that is simultaneous with a superior rate of profit.
the basis of success in many areas was shifting to software—to the cleverness of chunks of code written by small teams.
It is hard to show your skill as a sailor when there is no wind.
The first guidepost demarks an industry transition induced by escalating fixed costs. The second calls out a transition created by deregulation. The third highlights predictable biases in forecasting. A fourth marks the need to properly assess incumbent response to change. And the fifth guidepost is the concept of an attractor state.