Book Report - The Crux
How leaders become strategists… by Richard P. Rumelt
Introduction
Climbers call boulders “problems” and describe the tightest part as “the crux”
You have to solve the puzzle of the crux and have the courage to make delicate moves almost two stories above the ground
The concept of a crux narrows attention to a critical issue. A strategy is a mix of of policy and action designed to overcome a significant challenge. The art of strategy is in defining a crux that can be mastered and in seizing or designing a way through it
For organizations, the usual way through the crux will be via intense focus, bringing many elements of power and knowledge and skill to bear
For the strategists, focus is not just attention. It means bringing a source of power to bear on a selected target. If the power is weak, nothing happens. If it is strong but scared and diffuse across targets, nothing happens. If power is focused on the wrong target, nothing happens. But when power is focused on the right target, breakthroughs occur
The art of strategy is not decision making; it’s not finding your one true goal; it’s not setting higher and higher performance goals … you need to embrace the full complex and confusing force of the challenges
Part 1 - Challenged-Based Strategy and the Crux
The strategist seeks the crux – the one challenge that both is critical and appears to be solvable
When talking and writing about strategy, it seems better to say “challenges“
The crux of the challenge - think of a set of gnarly challenges as a large tangle of sticks and wire. It blocks your way forward. Find the right spot and cut one wire and the tangle will break and become manageable.
You don’t pick a strategy, you create it
GNARLY Challenges; with these, it’s important to Collect, Cluster, Filtering
Collect - make list of problems, issue and opportunities
Cluster - place problems and opportunities Into groups
Filter - One bite at a time
Insight into strategy is also greatly aided by having examined a broad repertory of past strategies
Strategy is a journey → this should be an ongoing process
All too often the crux of the challenge is not an external threat but a clash among our own ambitions
ASC = addressable strategic challenge
Wall Street doesn’t expect you to do anything new and value creating. You are going to have to surprise them
The Challenge of Growth
1. Deliver exceptional value to an expanding market
Omit needless activities
2. Simplify to Grow
3. Be quick
The first capable response often wins; not necessarily the first mover, but the first one to provide a competent reaction
4. Use mergers and acquisitions to speed and complement a strategy
5. Don’t overpay
6. Don’t grow the blob
7. Don’t fake it
Attacking the crux of a problem or challenge requires action. And that means making some activities, people, and departments more important than others
Strategy means asking, or making, people do things that break with routine and focus collective effort and resources on new, or non-routine, purposes
Part 2 - Diagnosis
Strategy is a form of problem solving, and you cannot solve a problem you have not understood. The strategist seeks to understand why certain challenges have become salient, about the focus at work, and why the challenge seems difficult
Two powerful tools are 1. Reframing and 2. Analogy // Building a mapping between your specific challenge and similar situations faced by others at different times and places
Steve Jobs was asked “What is strategy” He said, “I am going to wait for the next big thing” – That was the invention of the iPod, and then iPhone a few years later
He then disrupted his own best-selling product with the creation of the iPhone
Measurement is always a comparison
How to deal with disruption?
The real challenge is not that you don’t see it coming
It’s:
That is costs more to respond than it seems to be worth
That your organization lacks the necessary technical ability, financial strength, or organizational skills to respond
That it is the destruction of the whole ecosystems in which you live
And if you do not face any of these three sharp challenges, then you do not really have a disruption problem
Part 3 - Through the Crux
This section provides a focus on overcoming the crux of a challenge after it has been identified
In business competition, one cannot expect to make a profit without some source of advantage. We look for advantage in these basic places:
1. In information, knowing something that others do not
2. In know-how, having a skill, or patent, that others do not have
3. In position, having a reputation, brand, or existing market system that others cannot readily immediate or push aside
4. In efficiency, whether based on scale, technology, experience, or other factor that others cannot easily attain
5. In the management of systems, whether bridging complexity or moving with speed and precision, that others do not have
Coupling/Uncoupling
Ford’s industrial engineers figured out how to produce these items in volume, in good quality, on time, and at a low cost. That powered the amazing cost reductions in the Model T
The BCG renamed “learning by doing” as the “experience curve”
The challenge of organization dysfunction → sometimes the problem is us; it’s not the competition, or changing technology, but the organization’s inadequate ability to respond
The crux of such problems always lies with how leaders have designed the organization or with how they manage it
Inertia and size → mass has inertia. The greater the mass, the more force will be needed to change its speed or direction. Organizational inertia is normally the problem of large orgs
A successful large organization is one where managers have found structures and processes that address these difficulties
Nokia’s matrix —> slowed decision making, and helped insulate top management from the truth on the ground
Organizational issues can be resolved successfully using the principles of crux-strategy problem solving: diagnosis, reduction to a crux, performance concepts, and coherent action
3 important thoughts on change management:
The senior leadership team must commit to change, not just the words, but discomfort and outright pain of wrenching loose traditions
Complex organizations must be simplified before real change can be engineered
Once simplification has taken place, it is easier to see and comprehend the basic operations of business. This is when actual renewal can take place
It’s very hard to change a culture, and you can’t impose it. You’re dealing with people’s beliefs, people’s commitments, so it tends to be a multi-year process
WIth regard to driving change, the most innovative approach Gerstner developed was the creation of the Corporate Executive Committee (CEC)
Each member of the CEC was given full executive power over a particular change program (sales, IT, etc.)
Part 4 - Bright, Shiny Distractions
Don’t start with goals
When a leader sets a goal, it is actually a decision about what is important and where resources and energy will be allocated
But a goal set arbitrarily, without an analysis or understanding of a critical challenge or opportunity, is an unsupported goal
What is a good strategic goal:
Are the outcome of strategy, not its input
A business organization competes
A strategy is a decision about how and where and with home it will compete
Strategy is a considered judgement about what to do; it cannot serve all of our desires at once
Goals are decisions
A good objective:
Resolves ambiguity, defining a problem that is simpler to solve than the original overall challenge
Is one the organization knows how to achieve or can be expected to work out how to achieve
Represents a clear set of choices, narrowing focus, resolving conflicts, and helping define what shall be done and what shall not be done
Is not always something on which everyone agrees
Don’t confuse strategy with management
Motivating and measuring performance is the vital heartbeat of organizations that keeps the trainings running on time
But driving results is management work – not strategy work
Strategy work defines the goals and objectives to be sought (recognizing a challenge and understanding the difficulties in overcoming it. It produces policies, actions and objectives)
Management work is often called execution
SUCESS is the outcome of both good strategy and good execution
Don’t confuse current financial results with strategy
If investors are to stay with you through ups and downs, they must have trust in you as a person, in your strategy, and in your management system
Strategic planning grew out of US World War II activities
Long range planning can be useful when the key flows and events can be forecast and when the org has the grit to invest today for events whose timing and magnitude are uncertain
Working with a cascade of statements (vision, mission, value) is a feckless activities. They cannot really guide strategy
For many business, strategic planning has been a disappointment (with process and outcomes)
Final Thoughts
1. Strategy is problem-solving.
The terrible truth about strategy is its rarity. Company after company will claim that they have a strategy, but all they really have are ambitions and financial goals.
2. Strategy requires insight.
Most serious strategy problems are gnarly. That is, there is no clear definition of the problem and its structure.
“When we study a challenge, we should look for its central paradox, the core of what makes it difficult, the tension which might allow us to move to a solution, if resolved.”
3. Find the crux.
The essence of strategy is a concentration of effort, resources, and/or force if the opportunity is great or the opponent is weak. Without that concentration, there may be little gained. To gain that concentration, organizations must focus their efforts on only one or two critical challenges. When you try achieving too many things at once, policies and activities proliferate that work against each other—friendly-fire—that reduces overall effectiveness.
4. Strategy is a journey.
“Strategy is not a thing, or a paragraph on parchment that hangs on the wall. It is a journey with no fixed destination.”
The inescapable truth is that people, organizations, companies, countries, and even civilizations, face a continuing sequence of challenges. There can be no one approach, or “strategy,” for dealing with them all.
5. Don’t get distracted.
The enemy of effective strategy in companies is the 90-day derby: the cycle of quarterly earnings forecasts and revelations. If leadership thinks that the purpose of the company is to generate predictable, smooth earnings results, then you are being led astray. The economy is rife with uncertainty and no one can achieve “smooth” quarterly results without cooking the books. Strategy is not about always hitting the numbers. It is about solving critical challenges.
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