Consider a successful business. Their method is nearly always straightforward and does not need a long pile of PowerPoint slides to convey. It doesn't appear in a "strategic management" tool, matrix, or scheme where you fill in the blanks.
Instead, the gifted leader has pinpointed one or two important issues: pivot points that may double the impact of an endeavor, and focuses and concentrates action and resources on them. The firm has devised a successful approach, and you can, too.
Enjoy the next 10 minutes with us to learn the difference between Good Strategy and Bad Strategy from Richard Rumelt.
Lesson 1: Bad Strategy is Vague and Ambiguous
Bad strategy avoids the irritating (but crucial) details, like the problem itself. It overlooks the need to focus on the best choice and instead seeks to meet a plethora of competing demands and interests.
As Rumelt puts it, "Like a quarterback, whose only advice to teammates is "Let's win," bad strategy covers up its failure to guide by embracing the language of broad goals, ambition, vision, and values."
The term "strategy" has become a grammatical appendage for many individuals in business, education, and government. Marketing has been renamed "marketing strategy," data processing has been renamed "IT strategy," and acquisitions have been renamed "growth strategy."
The gap between "strategy" and "implementation" is considerable when the strategy is described broadly and excludes action.
Bad strategy conflates strategy with achievement or goal. However, if the strategy is just a synonym for success, it isn't a meaningful notion. It can't be utilized effectively if ambition, drive, charismatic leadership, and creativity are mixed. That's not good.
Lesson 2: Bad Strategy is Fluffy
Fluff, according to Rumelt, is a type of nonsense that masquerades as strategic thoughts or arguments.
Fluff is a declaration of the obvious sprinkled liberally with jargon. Fluff is a collection of ambiguous words masquerading as expertise, thinking, and analysis.
Take the following quote from an internal strategy letter from a large retail bank: "Our fundamental strategy is one of customer-centric intermediation."
The term "intermediation" refers to taking deposits and then loans them out to others. "Customer-centric" might imply that the bank competes by providing better terms or services to depositors and lenders.
When the fluffy covering is removed, the message "Our bank's core strategy is to be a bank" appears.
Goals are confused with strategy in bad strategies. Many poor plans are little more than declarations of desire.
A bad plan has a lot of goals but no policy or execution. It thinks that setting objectives is all that is required. It proposes strategic goals that are illogical and, at times, completely unrealistic. To disguise these flaws, it employs high-sounding terms and phrases.
You don't have a plan if you don't identify and evaluate the hurdles. Instead, you have a long-term objective, a budget, or a wish list of things you'd want to happen.
Lesson 3: Bad Strategies are Prescriptive.
Prescriptive templates are frequently used to generate bad strategies.
The Vision: Fill in your own idea of how the school, company, or country will look in the future. Being "the greatest," "the leading," or "the most well-known" are currently trendy distinct visions.
The Mission: Fill in a politically acceptable, high-sounding statement about the school or company, or country.
The Values: Fill in the details with a statement about the company's ideals. Make sure they're not contentious.
The Strategies: Fill in some aspirations/goals, but refer to them as tactics.
Because of its simplicity, this method is frequently used. Spend a couple of hours in a room, fill in the blanks, and voila! You've devised a plan. Bad. Executives have discovered that using a template-style approach saves them the time and effort of assessing the real obstacles and possibilities.
Furthermore, no emotions are injured by framing strategy in terms of positives—vision, goal, and values. This presents a challenge for someone who wants to develop and implement an effective plan since they are surrounded by hollow language and terrible examples.
Lesson 4: Good Strategy is Innovative and Ambitious.
A good strategy, according to Rumelt, is sensitive to innovation and ambition, one that chooses the course to pursue and determines how, why, and where leadership and determination will be used.
A good strategy recognizes the obstacles that must be overcome and propose a plan to overcome them. A good strategy concentrates and combines efforts to deliver a powerful competitive punch or problem-solving effect the larger the difficulty.
A good strategy doesn't simply rely on existing strengths; it builds strength via its design coherence.
This is something that most organizations of any size do not do. Rather, they pursue several goals unrelated to one another or, worse, contradict one another.
Leaders who are willing and able to say no to a wide range of actions and interests are essential for good strategy. A company's strategy is as much about what it doesn't do as it is about what it does.
Lesson 5: The Kernel of Good Strategy: Diagnosis, Guiding Policy, Coherent Action
A good strategy, according to Rumelt, contains a fundamental logical structure that he refers to as the kernel.
A strategy's kernel consists of three components: a diagnosis, a guiding policy, and coherent action.
The guiding policy lays out how to cope with the difficulties identified in the diagnostic. It's like a road sign, indicating the general direction but not the specifics of the journey. Coherent activities are policies, resource commitments, and actions that are realistic and planned to carry out the guiding policy.
A good strategy isn't built around a single concept of advantage. Visions, missions, goals, plans, objectives, and tactics are not taken into account. It does not distinguish between corporate, business, and product strategy.
At the very least, a diagnosis identifies or categorizes the problem, connecting facts into patterns and recommending that some concerns be given greater attention while others are ignored.
When a diagnosis assigns a type to a problem, it opens up a wealth of information on how comparable situations have been handled in the past.
A change in diagnosis—a change in the description of the company's situation—causes the majority of profound strategic adjustments in the business.
The diagnosis should replace reality's complexity with a simpler tale that emphasizes the most important parts. We can make sense of the issue and continue problem-solving with this reduced picture of reality. A strong strategic diagnostic outlines a sphere of action in addition to explaining a problem.
The guiding policy lays forth a strategy for addressing the challenges identified by the diagnostic. It is called "guiding" since it directs action in specific directions without specifying exactly what must be done.
Goals, visions, or ideas of ideal end products are not good guiding policies. Rather, they outline a strategy for dealing with the issue and aid in eliminating less realistic options.
A guiding policy gains an advantage by predicting others' actions and reactions, minimizing the situation's complexity and ambiguity, and developing cohesive policies and actions that build on each other rather than canceling each other out.
Many individuals refer to the guiding policy as "the strategy" and leave it at that. This is a blunder.
Action, or doing something, is fundamental to strategy. Action must be at the heart of every strategy. It does not have to include all of the activities performed as events develop, but it must be clear enough to make sense.
The activities within the strategy's kernel should be consistent. That is, the deployment of resources, policies, and tactics should all be unified and consistent. The most fundamental source of leverage or advantage accessible in strategy is the coordination of action.
Strategic coordination isn't something that happens on the spur of the moment. It's the consequences of policy and design. A good strategy, in general, works by collecting power and directing it where it will have the most impact. In the short term, this might entail combining policies, actions, and resources to fight an issue or competitor.
Longer-term, it may entail judicious use of policies and resource commitments to create skills that will be useful in future competitions. In any instance, a "good strategy" is a method of increasing the efficacy of activities by identifying and using power sources.
Lesson 6: Leverage: I've got the power.
The strength of a good strategy comes from concentrating brains, energy, and action. When such attention is focused on a critical goal at the proper time, it can lead to a series of positive results. This is what Rumelt refers to as "power leverage."
In principle, strategic leverage results from a combination of anticipating and understanding what is most critical in a circumstance and then putting out a concerted effort.
The strategist may be aware of foreseeable features of other people's behavior that can be exploited. The primary anticipations in competitive strategy are frequent buyer demand and competitor responses.
Most strategic anticipation is based on the foreseeable "downstream" outcomes of previous events, current trends at work, predictable economic or social forces, or other agents' procedures to make elements of their conduct predictable.
Anticipation does not necessitate psychic abilities. In many cases, anticipating merely entails taking into account others' habits, preferences, and rules, as well as different inertia and change restrictions.
The strategist must recognize a pivot point that will multiply the impacts of concentrated energy and resources to gain leverage.
A pivot point is a natural or artificial imbalance in a system where a slight change might release much bigger pent-up energies. The pivot point in business might be an imbalance between a competitor's position and fundamental capabilities or between vision and reality.
Lesson 7: Find a Proximate Objective
Establishing a good proximal objective—one that is close enough to be feasible—is one of a leader's most effective weapons. A proximal goal is a target that the organization may anticipate hitting, if not completely overwhelming.
President John F. Kennedy's demand for the US to land a man on the moon by the end of the 1960s is seen as a daring step into the unknown. In reality, landing on the moon was a carefully planned near-term strategic goal.
To the layperson, Kennedy's goal seemed bold, yet it was quite close. It all came down to mobilizing resources and political determination.
The feasibility of a good proximal aim boosts organizational energy and attention. Your foresight will deteriorate as the scenario becomes more volatile. As a result, the more unpredictable and dynamic the environment is, the closer a strategic goal must be.
The immediate goal is driven by future forecasts: the more uncertain the future, the more important it is to "take a solid position and create choices," rather than looking far ahead.
High-level proximal objectives provide goals for lower-level units, which set their own proximate objectives, and so on, in a cascade of issue resolution at increasingly fine levels of details.