Albu On Strategy

Book Review: Good Strategy/Bad Strategy: The Difference and Why It Matters, By Richard Rumelt

Is your strategy a mix of slogans and goals, or a set of objectives that offer solutions to key problems?  We reviewed Richard Rumelt’s book back in July 2011 when it was first released, and this seems like a good time to revisit some of his insights on the importance of having a strategy and how it guides decisions.

Rumelt brings over 45 years of academic and strategy consulting experience to his book.  He uses interesting stories and firsthand experiences to explain the logic of good strategy, while highlighting the pitfalls and fallacies you must avoid in bad strategy.  Rumelt states, “Bad strategy ignores the power of choice and focus, trying instead to accommodate a multitude of conflicting demands and interests. Like a quarterback whose only advice to his teammates is ‘let’s win,’ bad strategy covers up its failure to guide by embracing the language of broad goals, ambition, vision, and values.”

Let’s start with four pitfalls Rumelt tells us to consider to avoid bad strategy:

Failure to Face the Problem: A strategy is an approach to overcoming obstacles. If you fail to identify and analyze the obstacles, you don’t have a strategy.  This is why it is important to prepare an assessment that seeks to identify both internal and external critical issues that are obstacles to achieving the strategic objectives.

Mistaking goals for strategy: Setting metrics (KPIs) without a supporting strategy can mislead the organization. Rumelt cites a military general who may justly ask his troupes for “one last push,” but the goal still needs to be supported by a clearly defined strategy that will lead to winning.  A good strategy will create the conditions that will make the “push” effective and worthy of the effort required.  Strive to make strategy explicitly clear to everyone in the organization so that the effort by employees is supported by good strategic thinking.

Bad strategic objectives: A long list of projects cobbled together at a planning session, or a set of ideas that no one has a clue about what to do or how to get there, are signs of bad strategy. Good strategy, in contrast, focuses energy on a very few high impact objectives. And they build a bridge between the opportunities and obstacles and the needed action. This is a logical and practical approach to strategy development. Telling the story and connecting the dots so that everyone understands will help make strategy a part of everyone’s responsibility.

Fluff: Rumelt defines Fluff as a “restatement of the obvious, combined with generous sprinkling of buzzwords that masquerade as expertise designed to mask the absence of thought.”  An example of “Fluff” from a retail bank states: “Our fundamental strategy is one of customer-centric intermediation.” Sounds good, but leaves one guessing what to do next.  The clarity of the strategic message aides in communication.

As you might imagine, there are many reasons for bad strategy.  Rumelt suggests that the underlying factor contributing to bad strategy is lack of commitment to the hard work.   Good strategy, results from investing the time to make the hard choices to gain focus, and identifying obstacles and working out how to deal with them. Rumelt states that there are three key elements that make up good strategy.

  1. A diagnosis:An explanation of the nature of the opportunities and challenges.
  1. A guiding policy:The approach chosen to cope with or overcome the obstacles identified in the diagnosis and the chosen approach to taking advantage of opportunities identified. 
  1. Coherent action:Steps that coordinate with one another to support the accomplishment of the strategy.

Do not underestimate the value a good strategy can have on an organization’s performance.  As Rumelt argues, “A coherent strategy can be, by itself, a significant source of competitive advantage.  If you haven’t yet read Rumelt’s book, we would recommend you do, and feel free to contact us directly if you would like to learn more about how good strategy can make a difference in your company’s performance.

Posted in Book Reviews, Newsletter, Strategy Development.