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.