Book Report - Good Strategy, Bad Strategy
How to create and implement a powerful, action-oriented strategy that gets results
Introduction
Good Strategy, Bad Strategy is a book by Richard Rumelt that highlights the difference between real strategy and bad strategy, which often becomes a collection of goals and wishful thinking. Rumelt argues that good strategy is characterized by a clear and coherent understanding of the problem, a guiding policy to address the problem, and a set of coordinated actions to implement the policy.
Rumelt provides a framework for developing good strategy, emphasizing the importance of focusing on a few key objectives, identifying and leveraging sources of advantage, and creating a "kernel" that encapsulates the essence of the strategy. He also discusses the role of leadership in developing and executing strategy, and the need to adapt and adjust strategies over time as conditions change. In this book, he focuses on a few frameworks:
The "kernel" of good strategy: Rumelt argues that good strategy can be boiled down to a simple, focused "kernel" that captures the essence of the strategy. This kernel should be designed to address the critical challenge facing the organization, and should provide a clear guide for action.
The "proximate objective": To develop a good strategy, it's essential to identify the most important objective that needs to be achieved in order to address the organization's critical challenge. This objective should be clear and specific, and should guide all actions taken by the organization.
The "diagnostic" approach to strategy: Rumelt suggests that to develop a good strategy, it's essential to conduct a thorough "diagnosis" of the organization's strengths, weaknesses, and the external environment. This diagnosis should provide a clear understanding of the critical challenge facing the organization, and should guide the development of the strategy.
The "virtuous cycle" of advantage: To sustain a competitive advantage, it's important to develop a virtuous cycle in which the organization's strengths reinforce each other, and the advantages are leveraged to achieve even greater success.
Random Thoughts/Quotes:
Part 1 - Good and Bad Strategy
In a case of Walmart, the network (not the store) became their basic unit of management
They gave each store manager authority to choose product lines, pick vendors and set prices
To detect bad strategy, look at these four pitfalls:
Fluff
Failure to face the challenge
Mistaking goals for strategy
Bad strategic objectives
Plan of attack for strategy
Pull together a small team of people and take a month to do a review of who your buyers are, who you compete with, and what opportunities exist.
The end result will be a strategy that is aimed at channeling energy into what seem to be one or two of the most attractive opportunities, where it looks like you can make major inroads or breakthroughs.
You'll have a very short list of the most important things for the company to do
To obtain higher performance, leaders must identify the critical obstacles to forward progress and then develop a coherent approach to overcoming them,
Effective leaders don’t chase arbitrary goals. Rather they decide which general goals should be pursued. And they design the subgoals that various pieces of the organization work toward
Strategy involves focus, and therefore, choice.
Strategy is scarcity’s child and to have a strategy, rather than vague aspirations, is to choose one path and eschew others
Charisma can lead to bad strategy… transformational leaders, though, unlock human energy by creating a vision of a different reality and connecting that vision to people’s value and needs.
The first step of making strategy real is figuring out the big a-ha to gain sustainable competitive advantage
A great deal of strategy is actually figuring out what is going on
Doing this well - more than explains a situation, it also defines a domain of action.
The idea that coordination , by itself, can be a source of advantage is a very deep principle – and under-appreciated.
Part 2 - Sources of Power
A good strategy draws power from focusing minds, energy and action
It may for example have more impact on public opinion to completely turn around 2 schools than make a 2 percent improvement in 200 schools
No one has an advantage at everything. You must press where you have advantages and side-step situations which you do not
Competitive advantage:
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 mix of the two - then you have a competitive advantage
Change can mean opportunity
Driving or skiing in the fog is unnerving without any source or intent. When a single recognizable object is visible in the midst, it can procure a sudden and comforting point of reference – a guidepost
An organization’s greatest challenge may not be external threats or opportunities, but instead the effects of entropy and inertia
First step in breaking this is simplification. This helps to eliminate complex routines
Part 3 - Thinking Like a Strategist
Good strategy is built on functional knowledge about what works, what doesn’t, and why
A new strategy is, in the language of science, a hypothesis, and its implementation is an experiment
Its competition with others that pushes us to edges of knowledge
A good strategy is, in the end, a hypothesis about what will work. It’s not a wild theory, but an educated judgment
In a changing world, a good strategy must have an entrepreneurial component. That is, it must embody some ideas or insights into new combinations of resources for dealing with new risks and opportunities
“I would advise you to make a list of the ten most important things you can do. And then, start doing number one.”
To create strategy in any arena requires a great deal of knowledge about the specifics. There is no substitute for on-the-ground experience
To guide your own thinking in strategy work, you must cultivate three essential skills or habits:
You must have a variety of tools for fighting your own myopia and for guiding your own attention
You must develop the ability to question your own judgment. If your reasoning cannot withstand a vigorous attack, your strategy cannot be expected to stand in the face of real competition
You must cultivate the habit of making and recording judgements so th you can improve
