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Tuesday, September 27, 2011

Good Strategy-Bad Strategy: Post #1: Overview

Good Strategy/Bad Strategy: The Difference and Why It Matters by Richard P. Rumelt (Crown Business, 2011)—reviewed by Steve Gladis, Ph.D., September 2011
Overview: A CEO’s primary job is to create value for stakeholders of a company—stockholders, employees, and customers. To do that, a CEO has to develop a vision of where s/he wants to take a company and then get everyone on board, focused on that possible future. Such a direction or path only becomes evident with a clear strategy—a way of getting from here to there—despite obstacles, barriers, and missteps along the way. Unfortunately, many companies and organizations either don’t have a comprehensible strategy or have one so full of air, puff, and buzzwords that there is no “there” there. Often, CEOs and other leaders will place a stake in the ground that’s purely a financial marker or hold up a sign that says “we want to be best in class,” whatever that means.
There are rafts of strategy templates to be found on the Web; however, Richard Rumelt—an engineer by training, a savvy academic from UCLA’s School of Management, and a management consultant with solid credentials—pooh-poohs such quick fix, surface treatments. Rather, he provides clear-eyed, practical insights into creating a solid strategic approach: “Good strategy is coherent action backed by argument, an effective mixture of thought and action with a basic understanding of what I call the kernel.” For Rumelt, the kernel consists of three key elements: 1) A diagnosis—a simplified explanation of the issue or challenge being faced; 2) a guiding policy—an overall approach to face the obstacles identified; and 3) a set of coherent actions—focused actions to implement the guiding policy. Achieving success through good strategy requires applying sources of power toward the challenge at hand. Rumelt offers a series of these sources of power in the later chapters, including leverage, dynamics, focus, design and advantage, among others. And, in the final chapters, he takes time to teach us all how to think more strategically, using the power of scientific and independent thinking—despite the powerful sway of the crowd. In all, Rumelt helps us take a new, clear, and intelligent look at strategy.

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