Rumelt says…
What was so great about this book?
I’ve just read Good Strategy Bad Strategy: The Difference and Why it Matters by Richard P. Rumelt. It’s a small book that you can read in a few hours. It’s clear and simple, real world, and honest.
This book frees you from the ‘cascading’ ‘avalanche’ of:
- Values
- Mission
- Vision
- Strategies
- Objectives
- Goals
- KPIs
Good strategy is rare. Most companies just have performance goals but no strategy to achieve them. Or they have fluffy aspirations.
Signs of bad strategy:
- Avoids identifying the company’s core problem
- Makes no hard choices, pushes those onto others
- Has no focus, company ends up with conflicting goals
- Is a list of outcomes (even big, hairy, audacious ones)
- Does not build on the competence and cumulative learning of the organization
- A ‘cascading’ ‘avalanche’ of fluffy Values, Mission, Vision, Strategy, Objectives, and Goals
What is good strategy?
- “It comes from top management identifying the problem and setting a path to addressing it.”
- “A coherent strategy can become a source of competitive advantage.”
- “The application of the scientific method.”
- “Presses where you have an advantage.”
- “Strength applied to the most promising opportunity.”
- “Good strategy has an objective that is close enough to be feasible.”
Three components of good strategy
- Diagnosis – Identifies the core challenge the company is facing
- Choice – Decides the direction the company will take and what direction it will stop moving in
- Action – Determines big picture actions to move in that direction, keeping the company focused
More thoughts on strategy
- Strength – Takes advantage of an existing strength, but reorganizes or redirects it in a coherent direction
- Choice – Makes a choice to focus energy and resources in that direction, to the determent of other choices
- Losers – Since good strategy must make a choice, a sign of good strategy is that there will be losers in an organization, areas where the company will retreat and pull back resources
- Beware of a “No losers” “strategy”, it is not
- Strategy is about testing and refining your hypothesis
- Based on scientific method of developing a hypothesis, running your test, honestly interpreting your results, re-testing with modifications
- Another author, Dr. W. Edwards Deming, called this the PDSA cycle – Plan, Do, Study, Act
- The objective should make a big difference and will likely address a limiting factor
- It should be able to help a company lay out, step-by-step what actions to take, what goals to shoot for
- Think outside of your organization from the customer and the competitors’ position
- Good strategy often simple, but takes time
Competitive success and wealth creation
- The joint outcome of the quality of an organization’s accumulated resources and its coordinated action
- By strengthening a competitive advantage or by increasing the demand for the scarce resources supporting it
To wrap up, the parts to good strategy:
- Diagnosis
- Choice (Author calls this guiding principles)
- Action (Author calls this coherent action)
Learn more about good strategy:
Good Strategy Bad Strategy: The Difference and Why it Matters, by Richard P. Rumelt
Transform Your Business with Dr.Deming’s 14 Points, by Andrew Stotz, PhD, CFA
Article by Dr. Andrew Stotz
