Good Strategy Bad Strategy · Richard P.Rumelt · 2011
I keep coming back to the core concepts of this book - Rumelt has done more that most to bring clarity to the vague concept of strategy. Expect to get better at assessing strategy, you’ll find yourself looking for a clear plan of action - that focuses effort - against a key point of leverage - that gives you the greatest chance of solving the core challenge.
Key Points
The Kernel: Strategy is defining a way to overcome a challenge. The kernel of a good strategy has three elements: a diagnosis, a guiding policy and a coherent action plan.
- A diagnosis identifies the nature of the biggest challenge to forward progress. The critical factors.
- A guiding policy is a cohesive response that focuses and coordinates actions to overcome the challenge. To achieve a powerful competitive punch or problem-solving effect. It signposts the way forward (but not too detailed).
- A coherent action plan is a feasible coordinated set of policies, resource commitments and actions designed to carry out the guiding policy.
Together the three elements describe the why (diagnosis), the what (the guiding policy) and the how (the coherent action plan.
Strategy shouldn’t be confused with blind ambition or determination. It’s also distinct from leadership, which is more about inspiring and motivating self sacrifice. Strategy is about figuring out what is worth pursuing, and what is capable of being accomplished
Good vs Bad Strategy
A good strategy defines a critical challenge, has focus, and builds a bridge between the challenge and possible actions. It focuses resources onto connected targets that build on one another and can be achieved with existing resources and competence. A good strategy includes significant meaningful insights about how to win and focuses energy and action at the right moment onto the pivotal objective.
In contrast, a bad strategy fails to face the problem and doesn’t address critical issues. It lacks focus, tries to do too much, and sets goals without a plan to overcome obstacles. It dedicates resources to unconnected targets, sets lofty desires without a practical chance of being implemented, and accommodates incompatible interests or conflicting goals. A bad strategy is often fluffy, restates the obvious, and uses buzzwords.
Good strategy is powerful because it’s rare that your opponent has a good strategy. They can often look simple and obvious in retrospect. Spotting bad strategy is the first step to learning to create good strategy.
Common Tactics
- Take advantage of windows of opportunity
- Apply strength against weakness and towards the biggest opportunity
- Leverage deception to make your competitor think you’re doing something they expect
- Create advantage by anticipating the actions and reactions of others
- Exploit the leverage of focused effort
- Create or draw on a source of advantage
How to create a good strategy
The diagnosis must simplify the overwhelming complexity of reality by identifying certain aspects of the situation as critical. It must identify the key challenge. Doing so can transform one’s view of the situation, bringing a radically different perspective. Once the challenge is clear, you can evaluate the effectiveness of the rest of the strategy. In business the challenge is often in dealing with change or competition.
The guiding policy must address the challenge. It must define the approach to overcoming the challenge. It guides action and sets direction without dictating what exactly should be done. Good guiding policies are not goals, visions or end states. They are methods. They reduce the complexity and ambiguity in the situation. The guiding policy creates policies and actions that are coherent - so that each builds on the other. Good policies exploit the leverage of focused effort and draw on a source of advantage.
The coherent actions are designed to carry out the guiding policy. To have punch, the actions should coordinate and build upon one another, focusing organisational energy. Coordination of action is the most basic source of leverage or advantage available in strategy. Proximate objectives do wonders for energy and focus.
Aspects of strategy
The power of leverage is focusing energy and action at the right moment onto the pivotal objective. Doing so can cause a cascade of favourable outcomes. Mastering leverage requires anticipation, focus and identifying the pivotal objective.
- Anticipation is predicting the behaviours of others, forecasting downstream results of events and spotting routines or patterns of behaviour.
- Focusing efforts on fewer objectives generates larger payoffs. Concentration is powerful because resources are limited, your attention is limited, your rivals will find it hard to match. Focus can help you overcome threshold effects, where a minimum force is required to affect the system.
- Identifying the pivot points that magnify the effect of effort is key. Look for a spot where a relatively small adjustment can unleash much larger pent-up forces
To discover power notice asymmetry. See what others don’t have. Use your advantages to impose disproportional costs on your competitor
Proximate objectives are close enough to be actionable. Naming targets you can reasonably expect to hit and even overwhelm. Does wonders for energy and focus. The more dynamic and uncertain the situation the more proximate a strategic objective must be.
Objectives can cascade down through hierarchies. High level proximate objectives create goals for lower level units, which in turn, create their own proximate objectives. They can cascade down hierarchies of problem solving at finer and finer levels of detail.
Skills come in hierarchies too. You may have to acquire one skill before moving onto something else. Layer skills like rungs on a ladder and you’ll be able to do some things others can’t. Concentrating on one thing, assumes many others will be taken care of.
Chain link systems are when performance is limited by the weakest link. For example the reliability of a system is only as good as the weakest component, an assembly line is only as fast as the slowest process. On chain link systems incremental change won’t work unless you’re focusing on the right place. You have to sequence change carefully, and may only see delayed results. E.g. Solve for Quality → Sales → Costs in that order. Ikea has many differentiating policies that combine in a chain link system to achieve something truly differentiated.
Strategy should be designed (not chosen) as problems are unstructured and systems complex. Premeditated strategy requires anticipating the thoughts and behaviours of others. Designing also requires the coordination of action.
If you don’t have many resources, you need to tightly coordinate them and make the most of them. Resources and tight coordination are partial substitutes. The greater the challenge, the greater the need for a good, coherent, design-type strategy that makes the most of your resources. The best strategies often come form those with little resources.
Press where you have an advantage. Nobody has an advantage at everything, most only extend so far and apply only in certain conditions.
Sustaining an advantage requires an isolating mechanism (patents, reputation, relationships, network effects, economies of scale, knowledge gained through experience)
The 4 ways to increase an advantage in business
- Deepen your advantage (increase value or reduce costs)
- Broaden the extent of the advantage (bring into new areas of competition)
- Create higher demand for the products or services (growing the number of buyers)
- Strengthen the isolating mechanisms that block easy replication or imitation
Exploit dynamic situations. Consider exploiting a wave of change (most industries are stable most of the time). In moments of industry transition strategy skills are most valuable. You strategy doesn’t have to be perfect, just better than your rivals. Industries are often in transition when fixed costs are rising, or regulation is changing.
How to improve your strategy and decision making
Think of strategy as a hypotheses and its implementation as an experiment. Update your strategy once results come in. Good strategy is an educated judgment, there are no sure things.
In a world of change and flux “more of the same” is rarely the right answer, even if it worked before. Treat anomalies as a chance to learn something.
Privileged information is valuable resource.
Don’t commit to your first idea. There are better ones.
Spend more time questioning your strategy than justifying it
Defining a problem and a potential solution is at the heart of strategy.
You can create better strategies by destroying your own. Convene a virtual panel of experts question your strategy - encourages you to create a better one.
Improve your judgement by committing strategy to writing. Pre-committing to a position allows you to evaluate your own judgement later.
Keep your head and don’t follow the crowd. Make an independent assessment of the situation
Subscribe Button Quick Links
You’re not just solving user problems, and the limitations of that approach · Article
The paradox of builders & users · Article
Why you should have a brag document · Article
How to design a value proposition · Tweet
An example of culture in practice from YC - partners cook for founders · Tweet
How I hire programmers (2009) · Article
AI capabilities are beginning to impact healthcare in a significant way · Paper
The Uncanny Valley· Masahiro Mori 1970
As robots or animations become more human-like, they reach a point where they elicit eerie or uncanny feelings among human observers. This phenomenon occurs just before the appearance becomes indistinguishable from a human, creating a valley in a graph of human likeness versus familiarity or comfort level. The theory suggests there is a dip in emotional response when an entity is almost, but not quite, human-like, leading to feelings of unease or discomfort. This concept has influenced design and research in robotics, animation, and interactive technologies, emphasising the importance of achieving a balance between human likeness and comfort in user experiences.
/w=3840,quality=90,fit=scale-down)
Book Highlights
The product vision describes the future you are trying to create. In what ways will you improve the lives of your customers? Marty Cagan · Empowered
“true productivity has to be measured relative to the outcomes of the overall system, not just the software. Just producing a lot of lines of code or function points is irrelevant; the real question is, How much improvement in customer outcomes has the development team generated? Mary and Tom Poppendieck · Leading Lean Software Development
A gradual change in an ambient beacon or display can also draw attention to a more complex display or dashboard. Amber Case · Calm Technology
Research Using data, user testing, and other research is perhaps the most compelling justification for our design decisions. I’ve found three common responses useful when research is used to inform our choices: “Validated by data” “Revealed in testing” “Supported by other research” Tom Greever · Articulating Design Decisions
Think of the crisis as the competition. This competition can be another product, service, or feature. It can be abstract, as in an alternative way that people currently solve their problems or meet their needs. Or it can also be something emotional, such as resistance to change or people not wanting to adopt something new. Donna Lichaw, Eva Lotta-Lamm · The User’s Journey
/w=3840,quality=90,fit=scale-down)
Quotes & Tweets
There’s an old phrase that says “what you’re doing speaks so loudly I cannot hear what you’re saying”. Robert Sharma
In many cases, what you hope to learn by reading books or listening to podcasts can only be learned by attempting what you fear. Some knowledge is only revealed through action. James Clear
Intensity impresses; consistency transforms. You don't need more intensity; you need more consistency. Shane Parish