Book Review: Richard Rumelt

Good Strategy / Bad Strategy: the Difference and Why it Matters

What makes a good strategy? And how do I execute it? These are questions that many people face, whether they work for a business or in government. There are few things that we at Bizaline are more passionate about: collectively, we've been involved in the drafting and execution of hundreds of strategies in dozens of organisations. In doing so, we use the principles from Good Strategy/Bad Strategy: the Difference and Why it Matters by Richard Rumelt - professor of Business & Society at UCLA. A delightful book, full of examples on how to do strategy right - but also of all that can go wrong. And there's a lot of that. Bizaline is happy to share the book's most important lessons with you.

"Since your resources are limited, you can only achieve the maximum effect when you stack them, rather than moving them in diffuse directions."

Lesson 1: Strategy means making choices

Before we talk about good strategies and bad strategies, we should talk about what strategy actually is, because that can be a source of a lot of confusion. Richard Rumelt describes in his book how many organisations have strategies which are indistinguishable from goal-setting ("our strategy is to grow by 20% each year") or amorphous fluff disguised as strategic concepts ("we professionally restore value-added methods of empowerment in order to collaboratively supply competitive data," that kind of stuff). A real strategy is a coherent approach answering the most important challenge your organisation is facing. Since your resources are limited, you can only achieve the maximum effect when you stack them, rather than moving them in diffuse directions. A strategy should help you make those choices: which measures fit the strategy, but also: which ones don't? If your strategy can't help you clarify that, you'll probably need to polish it further.

Lesson 2: Good strategies are a holy trinity

For Rumelt, a strategy should be more than simply a description of something your organisation does ("we focus on growing markets in China." A good strategy is a kind of three-step programme. First, you must analyse a challenge, obstacle or problem (for example an opportunity, threat or weakness you identified in your SWOT-analysis). Next, you select an overarching approach for your strategy. Finally, that results in a strategic planning of actions. A good strategy has to encompass all three elements. A diagnosis without an approach is merely a problem. And measures without an overarching direction are often diffuse, undifferentiated and ineffective. Only with the 'holy trinity' of strategy, you'll have a complete and executable strategy. "Good strategy," Rumelt writes, "is not just what you're doing but also why and how." 

"Good strategy," Rumelt writes, "is not just what you're doing but also why and how." 

Lesson 3: Strategy is top-down, not bottom-up

So far so good, but once you've clarified what a strategy is: how do you pick a good one? The other day, I asked this in a workshop for a Dutch municipal government. "It's simple," one of the participants answered. "First, we make an inventory of all our measures, and then the strategy emerges from that." That sounds more logical than it really is. "All our measures" refers to an enormous and varied portfolio of efforts in most organisations, which have often developed over the course of various management styles and change programs. Trying to distill a strategy from that dog's dinner usually doesn't give you much of a handle on a clear solution or path to your goal. Choosing a strategy is a top-down process of structured decision-making. What is our challenge? What direction do we choose? What measures fit that direction? Only by approaching strategy top-down can it help you critically evaluate which efforts might not be the best use of your time. Even if that sometimes leads to difficult emotions...

"Trying to distill a strategy from a dog's dinner of measures usually doesn't give you much of a handle on a clear solution or path to your goal."

Lesson 4: Kill your darlings

Those emotions, Rumelt writes, are one of the most significant reasons why many organisations can't seem to select and execute a good strategy. "Bad strategy flourishes because it floats above analysis, logic, and choice, held aloft by the hot hope that one can avoid dealing with these tricky fundamentals and the difficulties of mastering them." It is, in summary, especially avoidant behavior that leads to bad strategy. Selecting and effectively executing a strategy (unfortunately) means you might have to discontinue projects and efforts which people are attached to or have invested in. Especially when those people are also in leadership roles within your organisation, power dynamics can easily result in a watered-down amorphous consensus statement instead of a clear strategic choice. The biggest challenges in strategic execution are often not logical or substantive, but organisational, political and psychological. Other than strategic consultants, it can be a good idea to involve a coach or process facilitator in your strategic planning. 

As a contract manager, you'll want to have access to the most recent state of affairs in the concession at any time.

Lesson 5: Focus on the right things

“A good strategy draws power from focusing minds, energy, and action. That focus, channeled at the right moment onto a pivotal objective, can produce a cascade of favorable outcomes," Rumelt writes. Strategic leverage emerges when you have clear insight in the pivotal factors in the situation, and when you focus your efforts there. Where should you intervene to achieve the maximum effect? A useful tool to create this clarity is the KPI tree: an overview of all the factors and the degree to which they impact the results of your organisation, department or project. If you can map which changes have the largest impact on your results, you can design your strategy accordingly. Leading indicators can help you anticipate future developments, while lagging indicators clarify the 'pivot points' where you should intervene for maximum effect. That way, you can realise an effective strategic execution and you maximise the chance of your efforts bearing fruit. 

Bizaline is a consultancy company from Utrecht helping organisations with their strategic planning and execution using OGSM. We love helping businesses and governments reach their goals for a better world. Curious? Please don't hesitate to send us an e-mail at info@bizaline.com.

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Antoinette Wieman

Managing Partner

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