What is "Good Strategy" versus "Bad Strategy"?
A book review of the iconic Good Strategy/Bad Strategy by Richard Rumelt
The Digital Leader Newsletter — Strategies and Techniques for Change Agents, Strategists, and Innovators.
The “Jobs to Be Done” of Strategy
Have you ever pondered the "job to be done" by a truly effective strategy? Much like a well-designed product solves a specific customer problem, a well-crafted strategy solves particular organizational and market challenges. This week, we explore Richard Rumelt's "Good Strategy Bad Strategy: The Difference and Why It Matters" an essential book leading us to understand the "job" a good strategy should perform and how to avoid the pitfalls of strategy technique which does not do the right job.
Richard Rumelt's "Good Strategy Bad Strategy" provides a comprehensive look at what constitutes effective strategy and the pitfalls of poorly conceived strategies. Here's a summarized perspective on his views regarding strategy:
Kernel of Good Strategy: Rumelt argues that at the heart of any good strategy is a "kernel" which comprises of three elements:
Diagnosis: Understanding and identifying the challenge.
Guiding Policy: An approach to handle the challenge.
Coherent Actions: Steps that are coordinated to support the guiding policy.
Simplicity and Focus: A hallmark of good strategy is its simplicity and its focus on what's most crucial. It is about making tough choices and concentrating effort on one or a few objectives.
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.
A leader’s most important responsibility is identifying the biggest challenges to forward progress and devising a coherent approach to overcoming them.Bad Strategy: Rumelt outlines characteristics of what he terms "bad strategy":
Fluff: Use of buzzwords and jargon that mask the absence of a coherent strategy.
Failure to Face the Challenge: Not addressing or acknowledging the critical issues.
Mistaking Goals for Strategy: Simply setting ambitious goals without a clear plan or path to achieve them.
Bad Strategic Objectives: Setting vague or unworkable objectives.
Bad Strategy tends to skip over pesky details such as problems. It ignores the power of choice and focus, trying instead to accommodate a multitude of conflicting demands and interests.
Bad strategy is not just the absence of “good strategy”. Bad strategy actually creates harm by trying to be a team building, goal setting, mission confirming exercise. That is not strategy.
Bad strategy covers up its failure to guide by embracing the language of broad goals, ambition, vision and values. Each of these elements is, of course, an important part of human life. But, by themselves, they are not substitutes for the hard work of strategy.
Dynamics of Strategy: Strategy is not just about planning; it's also about adapting and responding to changing circumstances and market changes. Starting with the real challenges in a business, the complex situations without obvious solutions, is the heart of strategic choice.
Leverage: A good strategy works by focusing energy and resources on critical pivot points or leveraging points. Where do you have unfair advantages, or see an opportunity by understanding the limitations of a competitor or market change — this is leverage.
Strategic leverage arises from a mixture of anticipation, insight into what is most pivotal or critical in a situation, and making a concentrated application of effort.
Inertia and Entropy: Organizations tend to resist change, and without direction, they tend to move towards disorder. A good strategy helps to overcome these challenges.
An organization’s greatest challenge may not be external threats or opportunities, but instead the effects of entropy and inertia. In such a situation, organizational renewal becomes a priority. Transforming a complex organization is an intensely strategic challenge. Leaders must diagnose the causes and effects of entropy and inertia, create a sensible guiding policy for effecting change, and design a set of coherent actions designed to alter routines, culture, and the structure of power and influence.
The Importance of Analysis: Deep insights derived from careful analysis can provide a significant advantage. It's not about having more information but about deriving unique and actionable insights from that information.
Conversely, one can’t let analysis paralysis win the day — analysis must be done with tempo and constraints.
Rumelt's perspective on strategy emphasizes clarity, focus, and adaptability. He argues against generic "strategic" plans filled with buzzwords and emphasizes the importance of having a clear and actionable plan to address identified challenges.
Inspiration
Are you looking at your business with clear eyes, or are you avoiding tackling the reality:
Why aren’t our products or services as differentiated as they once were?
Why are our margins being compressed?
Why are our customers not loyal and are willing to switch to competitors?
Why isn’t our operating model adapting to our business dynamics?
Why are we slowing down with increased complexity, versus seeing the supposed benefits of scale?
These are the types of problems, the market reality, requiring fresh thinking and true choices, innovation, calculated resource allocation, experimentation and testing of hypothesis, and the willingness to make big bets.
Working backwards from the critical customer feedback; tackling the wicked problems in a business; seeking the unvarnished truth — allows us to have clear eyes. With clear eyes, we build a diagnosis, a guiding policy, and coherent actions to build hypothesis for solving.
This book is among a handful of books which have served as an inspiration and trusted playbook to me and how I tackle wicked business problems.
Thank you, Richard Rumelt, for passing your wisdom on in this timeless book.
Are you building strategy to tackle the wicked reality in your business, or just continuing with “bad strategy”?
Onwards!
John
About The Digital Leader Newsletter
John Rossman is an innovation coach and strategy advisor. He is the author of The Amazon Way and Think Like Amazon. The Digital Leader Newsletter is a weekly coaching session with a focus on customer-centricity, innovation, and strategy. We deliver practical theory, examples, tools, and techniques to help you build better strategies, better plans, and better solutions — but most of all, to think and communicate better.