Strategy: Bad and Good – How can the mind distinguish?

I attended a UCT GSB seminar last week at the GSB campus in Portswood.

An interesting topic Strategy: Bad and Good – How can the mind distinguish? Presented by ex Prof from UCT/GSB (1995) Trevor Williams. Since then he has retired but did spend some time teaching at Sussex Wisconsin and later Hong Kong, and at INSEAD and LSE. During the late 1970’s he headed the Institute for Futures Research at Stellenbosch and published a Guide to Future Studies. He has had a focus for many years on Strategy and operational implementation thereof in business effectively. (He was a consultant at Booz Allen and Hamilton). Well, enough on Trevor Williams and on to the topic.

The talk covered a book by Richard Rumelt (2011) titled “Good Strategy/Bad Strategy The Difference and Why It Matters”. I decided to do a little additional reading on this book and hence this blog. You may find the comedian in me come to the fore but then that is who I am.

Rumelt started by saying that Good strategy is rare. Many organizations which claim to have a strategy do not. Instead, they have a set of performance goals. Or, worse, a set of vague aspirations. It is rare because there are strong forces resisting the concentration of action and resources. Good strategy gathers power from its very rareness. Business policy is used a lot in business today and Strategy applies to all organizations. Wow that was an interesting start.

This book has a number of parts to it. I will focus on two main parts, namely

  1. Bad strategy has four characteristics
  2. “The Kernel” of Strategy. (The crux of the book).

Rumelt say that Bad Strategy has the following characteristics:

  • Today much of strategy is full of “Fluff” that is meaningless information.
  • It Fails to face the problem/challenges and,
  • Goals are different to Strategy which results in bad strategic objective because of an incorrect focus and understanding of the real challenges and problems.

The “Kernel”

Rumelt goes on to say that a Good Strategy may not work.There are three important characteristics and essential elements for a good workable Strategy. He goes on to say that Good strategy has a basic underlying logic, a coherent action, backed up by an argument, an effective mixture of thought and action. Rumelt calls this basic underlying structure “the kernel”.

The kernel of a strategy thus contains three elements:

  • a diagnosis that defines or explains the nature of the challenge, sometimes called situational analysis(My words)
  • a guiding-policy for dealing with the challenge, and
  • a set of coherent-actions that are designed to carry out the guiding-policy. Sometimes called values or the way we do business (My words)

So let us unpack these three strategy elements a little.

  1. Diagnose the situation in detail and not just the now but look into the future. This is very important.
    Rumelt goes on to say that Good strategy is most times unexpected. It evolves. He also says that Good strategy is about applying power within your organisation against other organisation’s weakness (Competitors) We have to clearly understand the present and future challenges and problems. Only an in depth diagnosis can help us do this.
  2. The second characteristic is about Sources of power there are 9 that Rumelt mentions although later he contradicts this himself on the Growth one. This is the guiding policy for dealing with the situation/challenge.  Here are the nine source of power he mentions namely:-
    • Leverage of Kernel. (A good strategy may consist of more than the kernel, but if the kernel is absent or misshapen, then there is a serious problem.).
    • Creation of a proximate objective (A proximate objective names an accomplishment that organization can reasonably be expected to achieve.)
    • The Weakest link is important to note and counter (The poorer a firm’s resource base, the more it must depend upon adroit and clever coordination of actions )
    • Using Design (Competitive success is the joint outcome of the quality of an organization’s accumulated resources and the tight design of coordinated action.)
    • Focus (In formulating strategy, strategists engage in an internal quest for insight and an internal struggle against their own myopia- Use you head/mind)
    • Growth (He rebuffs growth as a strategy later in the book!)
    • Using advantage (You create wealth by actively strengthening a competitive advantage or by increasing the demand for the scarce resources supporting it.)
    • Using dynamics (Skillfully riding a wave of change. Changes in technology, law, costs, and buyer tastes are normally beyond the control of any competitor, but they can be harnessed.)
    • Inertia and entrepreneur (Good strategy anticipates and exploits inertia)
  3. The third and last characteristic is the Science of Strategy or as Rumelt says it is a set of coherent-actions designed to carry out the guiding policy.
    Winding the Crank that is where no conceptualization is needed. It is not like this?
    It is a Hypothesis then design a solution and then real world testing with final implementation.

In chapter 17 Rumelt says that as Strategist we should use our head. Avoid myopia. Sometimes you can rely on your gut as articulated in Gladwell’s book Blink. let us unpack this a little more.

There is talk about two ways of thinking namely the one most people naturally use, (System 1) which is reactive and then there is another, (System 2) which is the reflective brain. Each of us have been involved with many people over our lives. Try reflecting how they would have reacted in a similar situation you may be facing now!. Interesting though?? Remember try to Keep your head…. Don’t go with the crowd. A poem that has great meaning for me is……..“If you can keep your head when all about you are losing theirs and blaming it on you;”  IF by Rudyard Kipling. If you wish to read the full poem click here.

What can we learn from the book?

  • It presents a hypothesis of how we could look at strategy.
  • the book is practical and non theoretical
  • It follows a structured process that keeps you involved

The author states that this book does not offer simplistic formulas for success. Instead, it explains the logic of good strategy and the sources of power that talented strategists have tapped. And, it highlights the pitfalls and fallacies one must avoid.

If you were a Class of MBA’s students I could say

  • Avoid bad strategy
  • Avoid fluff
  • Identify challenges and problems
  • Avoid dreamy strategies
  • Identify source of power and where can that be applied
  • Don’t look for the simple answers and think hard about what might be involved. Think of other possibilities and avoid myopic thinking

Lastly if you were so inclined and very academically focused you could do a study of how this book on Strategy compares and relates to many other writers who have written on the topic,or compare this book to your own view and I would suggest the best test of all is how we could test it in the real world?

You be the judge and I would love your comments and views on strategy.

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