What It Takes to Make Good Strategy
It has been my mission to build my knowledge of strategy, and this has happened both by design and by fate. I have deliberately chosen to immerse myself in relevant books, and the universe has kindly brought to me the kind of work that has enabled me to put what I have learned to the test. I have been involved in strategy work for more than 20 years and have learned what I know through experience, experimentation and learning from others – much as we learn most of what we know. However, it is a vast subject and it takes the work of many years before one can be regarded as an expert – at least 10000 hours!
In the course of my search and research, I have had the immense pleasure of reading Richard Rumelt’s fantastic book, “Good Strategy, Bad Strategy: The Difference and Why it Matters”. This series of articles is inspired by this book, but includes my own thoughts and experience and the thoughts and experience of others.
In this series of articles, I will consider:
- A clearly articulated challenge that must be overcome
- Clear policy which determines what we will do and will not do, and which clarifies where we need to throw our resources (people, time, budget, etc.)
- A clear set of actions that are congruent with the guiding policy and address the challenge directly.
- Some ideas for performing that analysis – what information should one look for, where might one look;
- The idea that strategy is:
- A process and not an event;
- A series of experiments;
- Learning;
- Ongoing and iterative.
What is the work of making strategy?
You can run an organisation pretty well and make a good living without ever bothering to take the time and effort to craft a coherent strategy. There is more than enough material that forecasts the doom of businesses that do not have a coherent strategy. However, think of the vast majority of businesses of all sizes that are unable to produce a strategy document – and yet they muddle along turning a profit and surviving passably well. I would say that the majority of organisations I have worked with have been unable to show me their strategy when I ask to see it (in my work as an executive coach).
The problems with muddling along include:
“No, no… we have a strategy. It’s to grow our market share.” That’s not a strategy. That’s a sort-of vague objective or intention. It does not identify:
If your “strategy” is to grow market share, you are creating some risky business. First of all, market share and business growth are theresult of a good strategy that is well executed. Secondly, if everyone is pushing for market share, do not be surprised if people do bad business that grows your market share in the short-term and damages your business in the long-term. Let’s just say that you are in the business of selling capital equipment and you are being pushed to grow market share. In pursuit of this, you offer your customers guaranteed buy-backs in five years time when the equipment is up for replacement. Can you see the problem here? How can you guarantee a buy-back with no knowledge of what the market conditions will be in five years time? Will there be a market for your second-hand equipment – which you contractually have to buy back? Does that mean that you will now be in the used equipment business – in competition with your new business? How can that work well? In the absence of good strategy, unintended consequences abound.
Perhaps in pursuit of market share, your salespeople negotiate sales that grow your market share but which, long-term are going to cost you money? What is the point of growing market share without ensuring that you are doing profitable business? There is nothing wrong with wanting to grow market share – but that is the result of executing a good strategy. And perhaps it is not desirable to dominate the entire market. Perhaps you just want to dominate a particular part of the market – where the good business and good profits are?
So what is strategy work?
In the language of Richard Rumelt, the “kernel of a good strategy” is:
In the next article, I will explore the scourge of fill-in-the-blanks template strategies – that pass for strategy but which are really about as much use as a chocolate frying pan!
If you would like to discuss how I can help you and your team craft your strategy and hone your strategic thinking, contact me using the form below and I will set up a Zoom meeting with you.
In the course of my search and research, I have had the immense pleasure of reading Richard Rumelt’s fantastic book, “Good Strategy, Bad Strategy: The Difference and Why it Matters”. This series of articles is inspired by this book, but includes my own thoughts and experience and the thoughts and experience of others.
In this series of articles, I will consider:
- What is the work of making strategy?
- The scourge of template strategies – the fill-in-the blanks strategies that consist of mission, vision, values, objectives, strategies and tactics;
- The imperative that we must perform good analysis in order to make good strategy;
- The idea that good strategy must include:
- A clearly articulated challenge that must be overcome
- Clear policy which determines what we will do and will not do, and which clarifies where we need to throw our resources (people, time, budget, etc.)
- A clear set of actions that are congruent with the guiding policy and address the challenge directly.
- Some ideas for performing that analysis – what information should one look for, where might one look;
- The idea that strategy is:
- A process and not an event;
- A series of experiments;
- Learning;
- Ongoing and iterative.
What is the work of making strategy?
You can run an organisation pretty well and make a good living without ever bothering to take the time and effort to craft a coherent strategy. There is more than enough material that forecasts the doom of businesses that do not have a coherent strategy. However, think of the vast majority of businesses of all sizes that are unable to produce a strategy document – and yet they muddle along turning a profit and surviving passably well. I would say that the majority of organisations I have worked with have been unable to show me their strategy when I ask to see it (in my work as an executive coach).
The problems with muddling along include:
- Scattered energy, some of which goes into efforts or businesses that turn a profit, but much of which gobbles up these profits in support of unprofitable activities. An example of this is the organisation that has pursued growth (as a strategy?) through acquisitions. Some of the businesses turn a fine profit, and some of them limp along draining those profits and being subsidised. By the way (and I’m not an expert here), why were those businesses for sale in the first place? Is there a better than even chance that you pay too much for an acquisition and are then committed – so you hang on to it for too long?
- Lack of clarity about who you are and what you do – and even more important, what you don’t do – the result of which is an organisation that is a mish-mash of all sorts of activities and initiatives which sort-of hang together, but don’t really.
- Poor or overly-centralised decision-making – it becomes really difficult for people at various levels of the organisation to make autonomous decisions because they have nothing against which to measure the options. As a result, all the power and decision-making sits at the top of the organisation and all the potential and brainpower in the organisation is stifled or underutilised.
- Half-hearted performance – an organisation without a clear strategy will always underperform in relation to its potential.
“No, no… we have a strategy. It’s to grow our market share.” That’s not a strategy. That’s a sort-of vague objective or intention. It does not identify:
- What market or niche;
- What the challenge is that must be overcome in order to grow market share;
- At what cost you are prepared to grow your market share;
- What you will and will not pursue in order to grow market share;
- How you will grow that market share?
If your “strategy” is to grow market share, you are creating some risky business. First of all, market share and business growth are theresult of a good strategy that is well executed. Secondly, if everyone is pushing for market share, do not be surprised if people do bad business that grows your market share in the short-term and damages your business in the long-term. Let’s just say that you are in the business of selling capital equipment and you are being pushed to grow market share. In pursuit of this, you offer your customers guaranteed buy-backs in five years time when the equipment is up for replacement. Can you see the problem here? How can you guarantee a buy-back with no knowledge of what the market conditions will be in five years time? Will there be a market for your second-hand equipment – which you contractually have to buy back? Does that mean that you will now be in the used equipment business – in competition with your new business? How can that work well? In the absence of good strategy, unintended consequences abound.
Perhaps in pursuit of market share, your salespeople negotiate sales that grow your market share but which, long-term are going to cost you money? What is the point of growing market share without ensuring that you are doing profitable business? There is nothing wrong with wanting to grow market share – but that is the result of executing a good strategy. And perhaps it is not desirable to dominate the entire market. Perhaps you just want to dominate a particular part of the market – where the good business and good profits are?
So what is strategy work?
- It is about identifying the critical factors in your organisation’s situation – the most important challenges that you face;
- Designing a powerful response to these challenges – either leveraging a powerful competitive advantage, or solving a critical problem;
- Making tough choices, deciding what you will and will not do, and determining where to focus your efforts and resources;
- Figuring out what needs to be done to advance your organisation’s interests.
In the language of Richard Rumelt, the “kernel of a good strategy” is:
- An accurate diagnosis of the situation;
- A guiding policy;
- Coherent action.
In the next article, I will explore the scourge of fill-in-the-blanks template strategies – that pass for strategy but which are really about as much use as a chocolate frying pan!
If you would like to discuss how I can help you and your team craft your strategy and hone your strategic thinking, contact me using the form below and I will set up a Zoom meeting with you.
