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Book review: Good strategy / bad strategy

This review first ran in the Dec. 19th edition of The Hamilton Spectator.

Good Strategy Bad Strategy: The Difference and Why It Matters

By Richard Rumelt

Crown Business

$33

Not to put a damper on the holiday season but what’s the worst that could happen to your organization in 2012?

Maybe it’ll be the year of the exodus, with customers and clients defecting to competitors and upstarts. Maybe 2012 will be the year of disappearing margins thanks to soaring costs and sinking revenues. If you’re government funded, brace yourself for the year of fiscal restraint and budget cuts. This could also be the year that disruptive technology renders your business model obsolete. Or maybe the threat will come from within, whether it’s early onset of organizational inertia or wholesale disengagement among the rank and file.

With any luck, your strategic plan makes passing mention of the stormy weather headed your way. If you’re truly blessed, your plan marshals your organization’s greatest strengths to tackle the biggest threat you’re about to face in 2012.

But if your plan’s an unholy mess of muddled motherhood statements and an exhausting laundry list of competing projects and priorities, you’re ringing in the new year saddled with a bad strategy.

“A good strategy does more than urge us forward toward a goal or vision,” says Harvard educated author and management consultant Richard Rumelt.  “A good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them. And the greater the challenge, the more a good strategy focuses and coordinates efforts to achieve a powerful competitive punch or problem-solving effect.”

Rumelt says the problem with bad strategy is that it serves up a big-picture overall direction divorced from any specific actions. There’s no competitive punch. This creates a yawning chasm between strategy and implementation. “If you accept this chasm, most strategy work becomes wheel spinning. A strategy that fails to define a variety of plausible and feasible immediate actions is missing a critical component.”

Along with a failure to face the challenge at hand, bad strategy is stuffed with fluff or what Rumelt calls inflated and unnecessarily abstruse Sunday words. Fluff is used to create the illusion of high-level critical thinking. The obvious gets restated with a heavy dose of buzzwords.

Rumelt warns we’re susceptible to leading our organizations down three well-travelled paths to bad strategy.

The first is a failure to choose. Good strategy is as much about what your organization decides not to do as it is about what it chooses to do. Any coherent strategy invests resources toward some ends and away from others. To have a focused strategy, you need to make tough choices and hard calls. Egos will get bruised. Pet projects will get shelved. Fiefdoms will shrink. The refusal to choose is how you wind up with an unworkable laundry list of projects that scatter scarce resources to the wind.

“A long list of ‘things to do’ often mislabeled as ‘strategies’ or ‘objectives’ is not a strategy,” says Rumelt. “It is just a list of things to do. Such lists usually grow out of planning meetings in which a wide variety of stakeholders make suggestions as to things they would like to see done. Rather than focus on a few important items, the group sweeps the whole day’s collection in the ‘strategic plan’. Then, in recognition that it’s a dog’s dinner, the label ‘long term’ is added so that none of them need to be done today.”

Along with an inability or unwillingness to make hard choices, a second pathway to bad strategy is the siren song of strategy templates peddled by an army of consultants and authors. These templates have organizations fill in the blanks for a unique vision of the future, a high-sounding mission, non-controversial values and some aspirational goals masquerading as strategies. “This path offers a one-size-fits-all substitute for the hard work of analysis and coordinated action,” says Rumelt.  “You will find pious statements of the obvious presented as if they were decisive insights.”

And the final common pathway to bad strategy is what Rumelt calls New Thought. It’s the mistaken belief that all you need to succeed is a positive mental attitude. You know you’re a New Thought follower if you have motivational posters on your office walls reminding you to reach for the impossible or that quitters never win and winners never quit.  

New Thought followers are also big on the absolute need for everyone in an organization to fully commit to a shared vision. But Rumelt says ascribing the success of companies like Apple “to a vision shared at all levels, rather than to pockets of outstanding competence mixed with luck, is a radical distortion of history.”

A belief that you can think your way to success is a form of psychosis says Rumelt and one that he cannot recommend as a sound approach to good strategy. “The doctrine that one can impose one’s visions and desires on the world by the force of thought alone retains a powerful appeal to many people. Its acceptance displaces critical thinking and good strategy.”

This is a brilliant and challenging book and one of the best from 2011. Rumelt is wickedly smart, pulls no punches and doesn’t suffer fools gladly. His book is also a must-read if you want to rewrite your strat plan and better prepare for the risks and opportunities headed your way in 2012. Make this a last minute addition to your holiday wish list.

 

One Comment Post a comment
  1. Let’s talking about hidden effects of lowering prices. When you lower your price you will decrease your reputation. This means that your customers will think that you have lowered prices because of the low quality that they will receive. A factor that affect your business.

    December 22, 2011

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