Good Strategy Bad Strategy: The Difference and Why It Matters Authored by Richard Rumelt

The word “strategy” come from military affairs. Unfortunately, humans have put more efforts, over more time, into thinking about war than any other subject. Much of this knowledge has very little to tell us about strategy in nonmilitary situations. In the particular way business firms compete is by placing their offers in front of buyers, each trying to offer more attractive deal. Despite all if we are careful about the level of abstraction, we can take certain fundamental lessons from military history and be the wiser for doing so.

Leaders may create bad strategy by mistakenly treating strategy work as an exercise in “Goal Setting” rather than problem solving.

The core of strategy work is always the same: discovering the critical factors in a situation, designing a way to deal with factors and focusing on the action.

Strategy mean not a laundry list-Most of managers not generate strategies, instead, they generate a laundry list of desirable outcomes and, at the same time, Ignore the need for genuine competence in coordinating and of focusing their resources. A good strategy requires leaders those are willing and able to say “NO” to a wide variety of actions and interests.

A good strategy is all about discover the insights-Insights is frame in the language of business strategy: Identify our strengths and weakness, identify competitors strengths and weakness, assess the opportunities and risk. The power of strategy derived from their discovery of a different way of viewing competitive advantage- A shift from thinking about pure military capability to one of looking from ways to impose asymmetric costs on an opponent.

Bad Strategy- Bad strategy is not mean of no strategy or strategy that fails rather than succeeds. It is an identifiable way of thinking and writing about strategy that has unfortunately not been gaining ground. Bad strategy is long on goals and short on policy or action. It presumes that goals are all we need. It put forward strategies’ objective that are incoherent and sometime totally impracticable. To detect a bad strategy, look for one or more of its four hallmark-

1. Fluff- Fluff is a form of gibberish masquerading as strategic concept and apparently esoteric concept that illusion of high-level thinking.
2. Failure to face the challenge- Bad strategy fail to recognize or define the challenge. When you cannot define the challenge, you cannot evaluate a strategy or improve it.
3. Mistaking goals for strategy- Many bad strategy are just ??statement of desire rather than plans for overcoming obstacles.
4. Bad strategic objectives- A strategy objective is set by a leader as mean to an end. Strategic objectives are “Bad” when they fail to address critical issues or when they are impracticable.

?When a true leader characterizes the challenge as underperformance, its sets the stag for bad strategy. Underperformance is a result. The true challenges are the reasons for the underperformance.

Why so Much Bad strategy?-Bad strategy is the active avoidance of the hard work of crafting a good strategy. There are many other pathways to bad strategy, but below three are the most common reason for bad strategies.

1. The unwilling or inability to choose- First One is common reason for choosing avoidance is the pain or difficulty of choice.
2. When leaders are unwilling or unable to make choices among competing values and parties, bad strategy is the consequence.?
3. Template-style strategy -A second pathway to bad strategy is the siren song of template-style strategy-filling in the blank with vision, mission, values and strategies. This path offers a one-size-fits-all substitute for the hard work of analysis and coordinated action.

THE KERNEL OF GOOD STRATEGY- Good strategy is coherent action backed by an argument, an effective mixture of thought and action with a basic underlying structure author called it “Kernel”, the Kernel contain three elements-

1. A Diagnosis- define the nature of challenge. A good diagnosis simplifies the complexity of reality by identifying certain aspects of the situation or issue.
2. A Guiding policy- This is an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis.
3. A set of coherent actions- that are designed to carry out the guiding policy. There are steps that are coordinated with one another to work together in accomplishing the guiding policy.

?In many large organizations, the challenge is often diagnosed as internal. That is the organization competitive problems many be much lighter than the obstacles imposed by its own outdated routines, bureaucracy, pools of entrench interests, lack of co-operation across units, and plain-old bad management. Thus, the guiding policy lies in the realm of reorganization and renewal. And the set of coherent action are changes in people. Power and procedure. In other cases, the challenge may be building or deepening competitive advantage by pushing the frontiers of organizational capability.

A Strategy Is A Hypothesis-Where dies scientific knowledge come from? A good scientist pushes to the edge of knowledge and then reaches beyond, forming a conjecture- a hypothesis- about how things work in that unknow territory. In the scientist avoids the edge, working with what is already well known and established, life will be comfortable, but there will be no innovation.

In the same way, a good business strategy deals with the edge between the known and the unknown. Again, it is competition with others that pushes us to edges of knowledge. Only there are found the opportunities to keep ahead of rivals. That uneasy sense of ambiguity we feel is real, it is the scent of opportunity.

Asking for a strategy that is guaranteed to work is like asking a scientist for a hypothesis that is guaranteed to be true.

Sustainable Competitive Advantage In Business-The term “competitive advantage” became a term of art of art in business strategy with Michael Porter’s 1984 insightful book of that title. Indeed, warren buffett has said that he evaluates a company by looking for “sustainable competitive advantage”.

The basic definition of competitive advantage is straightforward. If your business can produce at a lower cost than can competitors, or if it can deliver more perceived value than can competitors or a mis of tow, then you have competitive advantage.

Defining “Sustainability” is trickier. For an advantage to be sustained, your competitors must not be able to duplicate it. Or, more precisely, they most not able to duplicate the resources underlying.

Discerning The Fundamentals-The work of discerning whether there are important changes afoot involves getting into gritty detail. To make good bets on how a wane of change will play out we must acquire enough expertise to question the experts. As change begin to occur, the air will be full of comments about what is happening, but we must be able to dig beneath that surface ad discover the fundamental force at work.

Leaders who stay “above the details” my do well in stable times but riding a wave of change requires an intimate feel for its origins and dynamics.

The Guidepost- ?It is hard to show your skills as sailor when there is not wind. A guidepost is a single recognizable objective is visible in the mist and it provide a sudden and comforting point of reference.

Working with industry-wide or economy-wide changes is even more advanced than particle physics- understanding and predicting pattern of these dynamics is difficult and chancy. Fortunately, a leaders doesn’t need to get it totally right. The organization strategy merely has to be more right then competitors. If we can steer into fog of change and see 10 percentage more clearly than others, then we may gain an edge.

Organizational Inertia And Entropy –The property of mass-resistance to change in motion-is Inertia.

In business, inertia is an organization’s unwillingness or inability to adapt to changing circumstances. Even with change programs running in full throttle, it can take many years to alter a large company’s basic functioning.

Entropy, in science measures a physical system’s degree of disorder, and the second law of thermodynamic states that entropy always increases in a isolated physical system. Similarly weakly managed organization tend to become less organized and focused. Entropy makes it necessary for leaders to constantly work on maintaining an organization’s purpose, form and methods even if there are no change in strategy or competition.

First Idea is Always not A Best Idea-Facing Complex situation make most people uncomfortable. There to many variables, factors and many unknowns, not clear list of potential action. The more seriously we take it, the more we’ll see it as a real and difficult challenge that requires a coherent response. Under pressure to develop a way out, that first idea is a welcome relief.

The problem is that there might be better idea out there, just beyond edge of our vision. But we accept early closure because letting go of a judgment is painful and disconcerting.

To search for for a new insight, one would have to put side the comfort of being oriented and once again cast around in choppy waters for a new source of stability. There the fear of coming empty-handed. Plus, it is unnatural, even painful, to question out own idea.

Destroy or judge our own idea is not easy or pleasant, it takes mental toughness to pick apart one’s own insights.

Practicing judgement- In business as well politics, and in many aspects of military strategy. Most of the important judgement about people and anticipating their actions and reactions. Judgement begin with knowing ourselves, our ability and biases. Then it extends to knowing others and their reaction in response to information and challenges. Finally, there is judgement about large groups of people and markets- the domain of marketing & advertising experts and corporate management.

The same principle applies to any meeting we attend. What issue do we expect, who will take which position? Privately commit ourselves in advance to some judgement about these issues and we’ll have daily opportunities to learn, improve an recalibrate our judgement.

Social Herding & Inside View-When we don’t know about something, follow the behaviour of others, assuming that at least some of them know things that we don’t know. Unfortunately, everyone else assuming same. And this behavior develops “social herding”. Financial and economic crisis of 2008 at Europe was result of “Social herding”.

The inside view describers the fact that people tend to see themselves, their groups and projects as special and different. For example, statically proven that talking on cell phone while driving increases risk of accident five time as as being drunk. But inside view of the situation is “I am good driver; those statistics don’t apply to me”.

?Social herding pressure us to think that everything is “OK or not OK” because everyone else is saying same. The inside view presses us to ignore the lessons of other times and other places, believing that our company, our nation, our new venture or our era is different. Its is important to push back against these biases. We can do this by paying attention to real-world data that refutes the echo chamber chanting of the crowd and by learning the lessons taught by history and by other people in other place.

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