The Four Major Characteristics of a Bad Strategy

As an avid reader and someone who is always striving to acquire and apply knowledge and principles on enterprise risk and performance management, I recently purchased a copy of the book Good Strategy Bad Strategy by Richard Rumelt.

He is one of the world’s most influential thinkers on strategy and management and has always challenged dominant thinking.

A lot has been written and published around the topic of business strategy and management but have found Rumelt’s book as thought provoking , engaging and a must-read for every business leader out there seeking a solid understanding of the power of good strategy.

According to Rumelt, the core of strategy work is discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors.

It is the leader’s responsibility to identify the biggest challenges being faced by the organization and frame a coherent approach to overcome them.

A good strategy honestly acknowledges the challenges being faced and provides an approach to overcome them.

The greater the challenge, the more a good strategy focuses and coordinates efforts to achieve a powerful competitive force or problem-solving effect.

Unfortunately, the majority of managers still cannot differentiate a good strategy from a bad one.

What most organizational leaders refer to as strategy is in fact not. They tend to equate strategy with financial goals, buzz-words, ambition and success.

According to Rumelt, executives who complain about “execution” problems do so because they are confusing strategy with goal setting.

This approach continues to increase the gap between good strategy and the hodgepodge of things people label strategy.

Strategy is about how an organization will move forward and figuring out how to advance its interests.

So how do leaders end up with bad strategy and derailing the rest of organization? Bad strategy is not simply the absence of good strategy.

Rather, bad strategy is a product of specific delusions and leadership dysfunctions, and this the area where most leaders need to improve.

In order to improve their effectiveness at judging, influencing and creating strategy, they must learn to spot bad strategy.

A bad strategy is characterized by the following four characteristics:

Fluff: Rumelt defines fluff as a form of gibberish concealed as strategic concepts or opinions.

Instead of stating the obvious using simple and clear to understand words, leaders tend to use over-inflated and obscure words, statements and complex drawings to appear knowledgeable and analytic.

These difficult-to-understand words aid nothing to what the organization is trying to achieve. They fail to address the real challenges being faced by the business.

A symbol of true expertise and insight is having the ability to make a complex subject simple to understand. A symbol of mediocrity and bad strategy is unnecessary complexity.

Failure to face the challenge: A good strategy shows a way through a difficulty, overcomes an obstacle and positively responds to a challenge. On the contrary, a bad strategy fails to recognize or define the challenge.

When a leader fails to define or recognize the challenge, this makes it difficult to evaluate the quality of the strategy to be implemented and differentiate a bad strategy from a good one.

Many at times, leaders are faced with the obvious challenges but they tend to ignore the big elephant in the room.

They come up with various strategic plans that are mere stretch goals.

In most organizations, it is common practice to come across typical statements such as, increase the company’s market share in each market; cut costs in each business or increase revenue and profit.

Inefficiencies within the organization cannot be merely sorted by investing in new equipment or pushing managers to grow market share.

Failing to identify and analyze the obstacles in the face of the organization results in leaders having either stretch goals, a budget or a list of things they wish to see happen.

A good strategy comes to grip with the fundamental issues and problems threatening the existence of the organization or achievement of its strategic objectives.

It follows from a careful definition of the problem, anticipates the real-world difficulties to be dealt with and creates policies that focus resources and actions on overcoming those difficulties.

Mistaking goals for strategy: Unfortunately, it is common practice to see a list of organizational goals mistaken as key strategies to pave the way forward for the business.

The majority of these goals have got nothing to do with strategy. They are simply performance goals and 3-5 year rolling budgets put together with market share projections.

Strategic objectives should address a specific process or accomplishment such as halving the customer response time.

Many leaders fall in the trap of believing that by motivating their subordinates, they will achieve their goals. This wishful thinking is misleading and has far-reaching consequences.

It is therefore imperative for leaders to be aware that business growth is not attainable simply through motivation alone. Business competition is not just a battle of strength and drive but also a competition over insights and competencies.

There is nothing amiss with planning and setting goals. In fact, planning ensures resources are available when they are needed and helps management detect surprises, both good and bad, and devise coherent strategies to contain the foe and exploit the opportunities.

To achieve sustainable higher performance, leaders need to identify the critical stumbling blocks to move ahead and then develop a coherent approach or strategy to overcome them.

For example, this may require product innovation, new approaches to distribution or change in organizational structure.

Bad strategic objectives: Strategic objectives are bad when they fail to address critical issues or when they are unrealistic. It is the leader’s responsibility to constantly adjust the strategic gap between goals and objectives.

A good strategy focuses efforts and resources on one or a select few important objectives whose achievement will lead to a host of positive outcomes.

In Good Strategy Bad Strategy, Rumelt identifies two types of bad strategic objectives that need dealing with – Dog’s Dinner Objectives and Blue-Sky Objectives.

Organizations that have a dog’s dinner set of strategic objectives are in a complete mess of issues. Their leaders are constantly coming up with a long list of “to do things” mistakenly labelled as strategies or objectives.

And these long lists of things to do are a product of long boring meetings where leaders push issues forward and label them medium-term or long-term because they realize they cannot deal with them immediately.

On the other hand, blue-sky objectives are simple repetition of the desired state of affairs or of the challenge. Leaders successfully identify the key challenges and propose approaches to overcome them but achieving the strategic objectives is immensely difficult.

No one has a clue of how the strategic objectives can be achieved. If the leader’s strategic objectives are just as difficult to achieve as the original test, then little value has been added by the strategy.

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5 Replies to “The Four Major Characteristics of a Bad Strategy”

  1. Excellent post! You have encouraged me to review and re-evaluate our corporate strategies. Very useful and relevant information. I look forward to following your blog. All of your topics are immediately relevant to any growing organization. You hit the issues with a bulls-eye, without the “fluff.” Thanks Peter!

    1. Hi Angela,

      Thanks for dropping by and sharing your comments with the community. In today’s dynamic, uncertain and volatile economic climate, every organization needs to be agile and resilient. “What got you here, won’t get you there”. As such, it is imperative that you regularly assess and evaluate your corporate strategies. The maxim “Too good or too big to fail” no longer applies. Surprises are happening each day. How many corporate titans do you know that have recently gone bust because of poor strategy executions or were not prepared for the recent global financial catastrophe? At their prime, these players were once regarded as the “Georges of the jungle” but not anymore.

      Regards,

      Peter

  2. Peter, great blog. You’re the first person I’ve seen who points out the emphasis I underscore repeatedly, that being that strategy is all about growth, moving the organization forward. Most strategic plans I see get confused, decidedly so, about that.

    Rodney

  3. Congratulations, a great piece, readable and genuinely helpful.

    The four elephant traps highlighted can easily derail strategy-making. They are useful watch-outs for even the most experienced senior teams, and I say that as a strategy consultant working with some of the world’s leading blue chips.

    Getting senior teams to face up reality, identifying and tackling the real challenge is often in itself hugely challenging! It takes a bit of courage to name the ‘elephants in the room’; teams find this emotionally uncomfortable and fear the consequences. But when a team learns to do this effectively, understanding how to challenge one another’s thinking constructively, the result is usually transformational in some way – for the individuals, for the team, and for the strategy .

    Best wishes

    Richard

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Leading in Uncertain Times

One of the biggest challenges facing business leaders today is making the right decisions that will ensure their organizations succeed, survive, and remain competitive in an increasingly uncertain and complex environment.

A recent post, The best way to lead in uncertain times may be to throw out the playbook, by Strategy+Business has several good points.

The article is about the COVID-19 pandemic, how global companies navigated through the crisis, and how best to prepare for future disruptions. Here are some key points and my comments.

  • Rather than follow a rigid blueprint, executives must help organizations focus on sensing and responding to unpredictable market conditions.
    • Comment: Senior leaders play a vital role in providing clarity about the organization’s strategic direction, creating alignment on key priorities to ensure the achievement of enterprise objectives, and ensuring the business model is continuously evolving to create and capture value in the face of uncertainty. They must not rest on their laurels and stick to the beliefs and paradigms that got them to where they are today and hope they will carry them through tomorrow. Regulatory changes, new products, competition, markets, technologies, and shifts in customer behavior are upending many outdated assumptions about business success. Thus, the businesses you have today are different from the ones you will need in the future hence the importance of continuously sensing changes in the global economy. Employees and teams often feed off the energy of their leaders and tend to focus their attention where the leader focuses attention. If the leader is comfortable with current business practices and rarely embraces the future or challenges the status quo, then the team is highly likely to follow suit.
  • When it became clear that supply chains and other operations would fracture, organizations began scenario planning to shift production sources, relocate employees, and secure key supplies.
    • Comment: Instead of using scenario planning to anticipate the future and prepare for different outcomes, it seems most of the surveyed organizations used scenario planning as a reactionary tool. Don’t wait for a crisis or a shift in the market to start thinking about the future. The world is always changing. As I wrote in The Resilient Organization, acknowledge that the future is a range of possible outcomes, learn and develop capabilities to map out multiple future scenarios, develop an optimal strategy for each of those scenarios, then continually test the effectiveness of these strategies. This does not necessarily mean that every change in the market will impact your business. Identify early warnings of what might be important and pay closer attention to those signals. In other words, learn to separate the signals from the noise.
  • The pandemic forced the organization’s senior management team to re-examine how all decisions were made.
    • Comment: Bureaucracy has for a very long time stood in the way of innovation and agility. To remain innovative and adapt quickly in a fast-changing world, the organization must have nimble leadership and an empowered workforce where employees at all levels can dream up new ideas and bring them to life. Identifying and acting on emerging threats and potential opportunities is not the job of the leader alone but every team member. To quote Rita McGrath, in her book Seeing Around Corners, she writes, “Being able to detect weak signals that things are changing requires more eyes and ears throughout the organization. The critical information that informs decision-making is often locked in individual brains.” In addition to the internal environment, the leader must also connect with the external environment (customers, competitors, regulators, and other stakeholders), looking for what is changing and how.
  • It’s worthwhile for leaders of any team to absorb the lessons of sense-respond-adapt, even if there is no emergency at hand.
  • Sensing: Treat the far-flung parts of your enterprise as listening stations. The question leaders must ask is, “What are we learning from our interactions beyond the usual information about costs and sales?” Train your people to listen for potentially significant anomalies and ensure that important information is not trapped in organizational silos.
    • Comment: Cost and sales data are lagging indicators that reveal the consequences or outcomes of past activities and decisions. Although this information can help leaders spot trends by looking at patterns over time, it doesn’t help understand the future and inform what needs to be done for the numbers to tell a different story. In addition to lagging indicators, pay attention to current and leading indicators and understand the relationship between these indicators and outcomes.
  • Responding: Improve communication across intra- and inter-organizational boundaries. Leaders should view business continuity as an essential function that acts as connective tissue for the enterprise.
    • Comment: In addition to creating mechanisms that allow the free flow of information both inside and outside the organization, decision-makers should also be comfortable receiving information that challenges their personal view of the world, even if it’s not what they want to hear. Create a culture of psychological safety where people are not afraid to share bad news for fear of getting punished, but rather are acknowledged and rewarded for speaking up. Leveraging the diversity of thought enables leaders to anticipate the future as an organization, decide what to do about it collectively, and then mobilize the organization to do what’s necessary.
  • Adapting: Challenge assumptions, and question orthodoxies. There’s always the temptation to mitigate threats simply by applying existing practices harder and faster. One way to get at those deeper issues and encourage double-loop learning is to ask, “What needs to be true for this to be the right approach?”
    • Comment: In an increasingly uncertain environment, it’s difficult to survive and thrive with an old business model or outdated technologies. Many businesses fail because they continue doing the same thing for too long, and they don’t respond quickly enough and effectively when conditions change. As a leader, stay curious and connected to the external environment, look for market shifts, understand what needs to be regularly refreshed and reimagined, adopt new technologies and capabilities, and adapt in ordinary times but also during times of transition. Unfortunately for many leaders, it’s just more convenient for them to continually downplay the fact that conditions are changing than take the appropriate course of action that drives business success.

How are you preparing your organization for potential future disruptions?

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The Collaborative Organization

These days the term collaboration has become synonymous with organizational culture, creativity, innovation, increased productivity, and success.

Let’s look at the COVID-19 pandemic as an example. At the peak of the crisis, several companies instructed their workers to adopt remote working as a health and safety precautionary measure.

Two years into the pandemic, they are now asking their employees back to the office full time or are planning to adopt a hybrid model.

The need to preserve our collaborative culture and accelerate innovation are two of the top benefits being cited by organizational and team leaders for bringing workers back.

Collaboration is indeed essential for the achievement of team goals, functional objectives, and the overall success of the organization.

Today’s breakthrough innovations are emerging from many interacting teams and collaborative relationships.

When teams, functions, and organizations collaborate, the whole is greater than the sum of its parts; group genius emerges, and creativity unfolds.

But, what makes a successful collaboration? What are the key enabling conditions?

  • It extends beyond the boundaries of the organization. Business success is a function of internal and external relationships. Instead of viewing your business in vacuo, understand that you are part of an ecosystem. External to your organization, who do you need to partner with to enhance your value creation processes, achieve/exceed your objectives, or successfully execute your strategy?
  • Ensure the objectives are clear and there is shared understanding by everyone. Unclear objectives are one of the topmost barriers to team and organizational performance.
  • Foster a culture that encourages opinions and ideas that challenge the consensus. People should feel free to share their ideas and not hold back for fear of others penalizing them or thinking less of them. Collaboration is hindered when one or two people dominate the discussion, are arrogant, or don’t think they can learn anything from others.
  • Groups perform more effective under certain circumstances, and less effective under others. There is a tendency to fixate on certain topics of discussion amongst groups which often leaves members distracted from their ideas. To reduce the negative effects of topic fixation, members of the group should be given periods to work alone and switch constantly between individual activity and group interaction.
  • Effective collaboration can happen if the people involved come from diverse backgrounds and possess complementary skills to prevent conformity. The best collective decisions or creative ideas are often a product of different bodies of knowledge, multiple opinions, disagreement, and divergent thought processes, not consensus or compromise.
  • New technologies are making collaboration easier than ever, enabling us to increase our reach and broaden our network. Although new technology helps, it will not make your organization collaborative without the right culture and values in place. First, define what you want to achieve through collaboration then use these tools to promote creative collaboration.

How else are you championing collaboration within your organization to create value and succeed?

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Preparing for Geopolitical Shocks

Geopolitical instability has steadily increased over the past years, and uncertainty in the global economy is at an all-time high. Thanks to globalization and advances in technologies, we now live and work in a tightly interconnected world, one in which the boundaries that previously separated domestic from global issues have disappeared.

Threats are no longer confined to traditional political borders, social structures, and geographic boundaries. Geopolitical shifts have dramatically altered the global economic landscape and brought politics and business together.

The rise of China as an economic and politically influential power has threatened the dominance of the United States as the world’s largest economy. Although the opening of China and a market of 1.4 billion people have benefited both countries, it has also intensified competition and sparked U.S. economic and technological espionage accusations against China, leading to strained relations between the two giants.

U.S. companies operating from China have felt the impact of this tense relationship. The opposite is true for Chinese companies in the U.S.

Across Europe, national populism is on the rise and now a serious force. In 2016, the United Kingdom shocked the world when it voted to leave the European Union, generating reverberating effects across markets.

Banks and financial services companies that once benefited from the EU passporting system have had their cross-border banking and investment services to customers and counterparties in the many EU Member States impacted, causing them to reimagine their value proposition models.

The recent invasion of Ukraine by Russia is another example of a geopolitical event that has had devastating effects on human livelihood and businesses. Although the conflict between the two countries has risen over the years, I think it’s fair to say that few political analysts, governments, and businesses predicted a war to happen.

The war has created a humanitarian crisis, rattled global commodity and energy markets, caused prices to soar, and forced many international companies to temporarily suspend their Russian activities or completely cut ties with the country.

Global supply chains which are already fragile and sensitive due to the COVID-19 pandemic are now facing new challenges in the aftermath of the Russia-Ukraine crisis. Multilateral economic sanctions have been imposed on Russia. A state of affairs that was unthinkable months ago and is now threatening to derail the nascent global economic recovery from the COVID-19 pandemic.

Given the global domino effect of geopolitical events and the shrinking of the distance between markets and politics, the need to better understand and more effectively mitigate geopolitical risk has become more urgent. The business impacts, whether direct or indirect, vary by company type and industry sector.

Your company may not be able to prevent wars between nations, but you can anticipate and better prepare for geopolitical shocks:

  • Integrate strategy, risk, and performance decision-making. Consideration of risks to business success is an important part of the strategy selection and execution process, not an afterthought.
  • Develop a better understanding of geopolitical trends and how they are changing. For example, what are the megatrends in business, politics, and technology that are making geopolitical risks more diverse, prevalent, and consequential?
  • Assess the links between these geopolitical events and business performance. What are the events that matter most to your business? For example, how might current global political trends pose physical, business, and reputational risks to your parent organization?
  • Anticipate how these trends are likely to play out in the short, medium, and long terms, and develop mitigation strategies for each geopolitical scenario. Proactively anticipate and plan for radically different worlds, instead of reacting to problems as they arise
  • Review your mitigation strategies as the world changes. Are they effective enough in case of a major shock?
  • Develop capabilities for continuous learning to anticipate, address, and recover from geopolitical crises.

What do you think?

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