Good Strategy Bad Strategy

Snippets of Rumelt’s Good Strategy/Bad Strategy collected from Slack » Agendashift » #rumelt-strategy by Mike Burrows, Karl Scotland, and Thorbjørn Sigberg. Collected here by Martien van Steenbergen.

Sources:

• Good Strategy/Bad Strategy: The Difference and Why it Matters (official website)
• Amazon » Good Strategy Bad Strategy

Feel free to link to other pages. For example, guiding policy might have its own page, detailing on all its aspects.

Good Stategy

A good strategy includes a set of coherent actions—the punch in the strategy, not just “implementation details”.

A strategy that fails to define a variety of plausible and feasible immediate actions is missing a critical component. Executives who complain about “execution” problems have usually confused strategy with goal setting.

Strategy is about how an organization will move forward. Doing strategy is figuring out how to advance the organization’s interests.

Strategy Kernel

A good strategy has an essential logical structure called the strategy kernel, containing three elements:

1. strategy diagnosis—to replace the overwhelming complexity of reality with a simpler story, a story that calls attention to its crucial aspects;
2. guiding policy—to specify the approach to dealing with the obstacles called out in the strategy diagnosis; like a signpost, marking the direction forward but not defining the details of the trip; and
3. coherent action—to coordinate consistent action, consisting of:
   1. feasible coordinated policies;
   2. resource commitments; and
   3. actions designed to carry out the guiding policy.

Basic Strategy

The most basic idea of strategy is the application of strength against weakness. Or, if you prefer, strength applied to the most promising opportunity. Basic strategy misses two huge, incredibly important natural sources of strength:

1. Having a coherent strategy—one that coordinates policies and actions. A good strategy doesn’t just draw on existing strength; it creates strength through the coherence of its design."
2. The creation of new strengths through subtle shifts in viewpoint. An insightful reframing of a competitive situation can create whole new patterns of advantage and weakness. The most powerful strategies arise from such game-changing insights.

Bad Strategy

Hallmarks of bad strategy:

• fluff;
• failure to face the challenge;
• mistaking goals for strategy;
• bad strategic objectives.

Bad strategy:

• is an identifiable way of thinking and writing about strategy that has, unfortunately, been gaining ground;
• is not the same thing as no strategy or strategy that fails rather than succeeds;
• is long on goals and short on policy or action;
• assumes that goals are all you need;
• puts forward strategic objectives that are incoherent and, sometimes, totally impracticable;
• uses high-sounding words and phrases to hide these failings.

If you fail to identify and analyze the obstacles, you have either a stretch goal, a budget, or a list of things you wish would happen, not a strategy.

Entropy makes it necessary for leaders to constantly work on maintaining an organisation's purpose, form, and methods even if there are no changes in strategy or competition.

Business competition is a competition over insights and competencies in addition to a battle of strength and wills.

Leadership

Effective senior leaders:

• chase meticulously selected goals, not arbitrary ones;
• decide which general goals should be pursued;
• design the subgoals that various pieces of the organization work toward.

Indeed, the cutting edge of any strategy is the set of strategic objectives (subgoals) it lays out. One of the challenges of being a leader is mastering this shift from having others define your goals to being the architect of the organization’s purposes and objectives.

good strategy works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes.

…contained 7 “strategies,” 26 “tactics,” and 234 “action steps,” a true dog’s dinner of things to do.

Quite glad to read this. Structure and even meta model are no guarantee of coherence

Underperformance is a result of bad strategy. When a leader characterizes the challenge as underperformance, it sets the stage for bad strategy. The true challenges are the reasons for the underperformance. Unless leadership offers a theory of why things haven’t worked in the past, or why the challenge is difficult, it is hard to generate good strategy.

Vague goals are direct evidence of leadership’s insufficient will or political power to make or enforce hard choices. Put differently, universal buy-in usually signals the absence of choice.

The key innovation in this growing stream has been the reduction of charismatic transformational leadership to a formula:

1. develop or have a vision;
2. inspire people to sacrifice (change) for the good of the organization; and
3. empower people to accomplish the vision.

This conceptual scheme has been hugely popular with college-educated people who have to manage other college-educated people. It satisfies their sense that organizations should somehow be forced to change and improve while also satisfying their contradictory sense that it is awkward to tell other people what to do.

Strategy Diagnosis

strategy diagnosis for the situation replaces the overwhelming complexity of reality with a simpler story, a story that calls attention to its crucial aspects. This simplified model of reality allows one to make sense of the situation and engage in further problem solving. Furthermore, a good strategy diagnosis does more than explain a situation—it also defines a domain of action. Whereas a social scientist seeks a diagnosis that best predicts outcomes, good strategy tends to be based on the diagnosis promising leverage over outcomes.

A diagnosis is generally denoted by metaphor, analogy, or reference to a diagnosis or framework that has already gained acceptance.

Guiding Policy

guiding policy outlines an overall approach for overcoming the obstacles highlighted by the strategy diagnosis. It is “guiding” because it channels action in certain directions without defining exactly what shall be done.

You may correctly observe that many other people use the term “strategy” for what I am calling the “guiding policy.” I have found that defining a strategy as just a broad guiding policy is a mistake. Without a strategy diagnosis, one cannot evaluate alternative guiding policies. Without working through to at least the first round of action one cannot be sure that the guiding policy can be implemented. good strategy is not just “what” you are trying to do. It is also “why” and “how” you are doing it.

A guiding policy creates advantage by:

• anticipating the actions and reactions of others;
• reducing the complexity and ambiguity in the situation;
• exploiting the leverage inherent in concentrating effort on a pivotal or decisive aspect of the situation, and by creating policies and actions that are coherent, each building on and amplifying the other, rather than canceling one another out.

Coherency

coherent action—The actions within the strategy kernel should be coherent. That is, the resource deployments, policies, and maneuvers that are undertaken should be consistent and coordinated. The coordination of action provides the most basic source of leverage or advantage available in strategy.

The idea that coordination, by itself, can be a source of advantage is a very deep principle. It is often underappreciated because people tend to think of coordination in terms of continuing mutual adjustments among agents.

Strategic coordination, or coherence, is coherence imposed on a system by policy and design, not ad hoc mutual adjustment. More specifically, design is the engineering of fit among parts, specifying how actions and resources will be combined.

Focus

Focus—attacking a segment of the market with a business system supplying more value to that segment than the other players can.

The word “focus” has two meanings:

1. focus denotes the coordination of policies that produces extra power through their interacting and overlapping effects; and
2. focus denotes the application of that power to the right target.

Attractor State

An industry attractor state describes how the industry “should” work in the light of technological forces and the structure of demand. “Should,” means to emphasize an evolution in the direction of efficiency—meeting the needs and demands of buyers as efficiently as possible. Having a clear point of view about an industry’s attractor state helps one ride the wave of change with more grace.

TO DO: Investigate and define what attractor state for Lean, Agile, and Lean-Agile-related services looks like (assumed that's a good scope to consider).

Renewal

An organization’s greatest challenge may well be the effects of entropy and inertia, rather than external threats or opportunities. 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.

Culture

The word “culture” marks the elements of social behavior and meaning that are stable and strongly resist change.

The first step in breaking organizational culture inertia is simplification. This helps to eliminate the complex routines, processes, and hidden bargains among units that mask waste and inefficiency.

The simpler structure will begin to illuminate obsolete units, inefficiency, and simple bad behavior that was hidden from sight by complex overlays of administration and self-interest.

Once the bulk of operating units are working well, it may then be time to install a new overlay of coordinating mechanisms, reversing some of the fragmentation that was used to break inertia.

Martien (talk) 10:21, 28 November 2016 (UTC) So, develop a culture of change (oh, how lovely paradoxical). Perhaps by taking advantage of entropy, e.g. by making entropy > inertia. Evolve an entropic culture.

Scientific Method

An organization creates pools of proprietary functional knowledge by actively exploring its chosen arena in a process called scientific empiricism. good strategy rests on a hard-won base of such knowledge, and any new strategy presents the opportunity to generate it. A new strategy is, in the language of science, a hypothesis, and its implementation is an experiment. As results appear, good leaders learn more about what does and doesn’t work and adjust their strategies accordingly.

Given that we are working on the edge, asking for a strategy that is guaranteed to work is like asking a scientist for a hypothesis that is guaranteed to be true—it is a dumb request. The problem of coming up with a good strategy has the same logical structure as the problem of coming up with a good scientific hypothesis. The key differences are that most scientific knowledge is broadly shared, whereas you are working with accumulated wisdom about your business and your industry that is unlike anyone else’s.

Martien (talk) 10:21, 28 November 2016 (UTC) Do cross-industry patterns emerge despite of each industry’s uniqueness?