What you will learn from reading Good Strategy Bad Strategy:
– Why broad goals are never achieved.
– Why all good strategy starts with problem diagnosis.
– The 4 signals of bad strategy and how to avoid them.
Good Strategy Bad Strategy Book Summary:
Our good strategy bad strategy book summary takes the best points from Richard Rumelt‘s seminal work on strategy and distils them down so that you can take the key ideas away in less than 20 minutes.
If you’re looking for a good book strategy then good strategy bad strategy will not disappoint.
If you can’t stand the amount of fluff and buzzwords you hear on the news or from big corporations then this book is for you. This is the practical, no nonsense work on strategy. Read on.
What is strategy work?
The core of strategy work is always the same: discovering crucial factors in a situation and designing ways to co-ordinate and focus action to deal with the factors.
Strategic objectives tend to be visions and goals. However, these are objectives and desired end results. Not strategies. Simply being ambitious is not a strategy.
What is a good strategy?
It does more than take you forward to vision and goals. It is grounded in reality acknowledging the challenges faced and provides an approach to tackle them.
Bad strategy embraces language of broad goals, ambition and values.
Ambition is drive and zeal. Determination is commitment and grit. Innovation is discover of new ways to do things. Strategy selects the path, identifying how, why and where leadership and determination can be applied.
A good strategy contains a coherent set of actions.
A strategy that fails to define a variety of plausible and feasible immediate actions is missing a critical component.
Jes’s Note – Reminds me of James Clears point the Clarity is more important than motivation. If there isn’t clarity on next actions than action might not be taken.
Three core elements of strategy:
- Guiding policy
- Coherent action
Diagnosis – a good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of situation as critical.
Guiding policy – overall approach chosen to cope with or overcome the obstacles identified in the diagnosis.
Coherent actions – designed actions to carry out guiding policy, co-ordinated steps to work together in accomplishing guiding policy.
Game-changing insights come from re-framing. Re-framing the problem or situation.
The 4 signals of bad strategy:
- Failure to face challenge (misdiagnosis or no diagnosis)
- Mistaking goals for strategy
- Bad strategic objectives
A sign of true expertise and actionable insight is making a complex subject understandable.
A hallmark of mediocrity and bad strategy is unnecessary complexity. Fluff masks substance.
Facing Reality Leads to a Better Strategy:
When coming up with strategy never ignore elephant in the room, look for an insight into the reality of the situation.
Good strategy is like a lever, magnifying your efforts.
“Goal” expresses overall values and desires whereas, “objective” denotes specific operational targets.
The key to solving Underperformance:
When underperformance is identified as challenger is sets stage for bad strategy. **Underperformance is a result, the true challenge is reason for underperformance.
All analysis starts with consideration of what may happen, including unwelcome events.
Key question to ask in strategy work: “What is really going on here?”
They Key to Strategy – Good Diagnosis:
Good strategy tends to be based on the diagnosis promising leverage over outcomes.
A diagnosis is generally denoted by a metaphor, analogy or reference to a diagnosis or framework that has gained acceptance.
Most deep strategic changes are brought about by a change in diagnosis, a change in the definition of the companies situation. (Reframe)
Good strategy isn’t just ‘what’ you are trying to do, it is also ‘why’ and ‘how’ you are doing it.
The Guiding Policy:
The guiding policy directs and constrains action without fully defining its content.
A guiding policy creates advantage by anticipating the actions and reactions of others, by reducing the complexity and ambiguity in the situation, by exploiting the leverage inherent in concentrating effort on a pivotal or decisive aspect of the situation.
Coherence of action is the resource deployments, policies and manoeuvres that are taken should be consistent and coordinated.
Strategic ideas and actions should complement each other, not conflict, think about branding. Should address a specific challenge with all actions building on one another. Cohesion between departments.
Strategy is visible as coordinated action imposed on a system.
Anticipation can simple mean considering the Habits, preferences and policies of others. As well as various inertia’s and constraints on change.
The business strategist sense imbalances in pent up demand that has yet to be fulfilled or a robust competence developed in one context that can be applied to another.
Pretention vs reality yields leveragable insights.
Proximate objectives are feasible given resources available.
Strategy and Uncertainty – Create Optionality:
The more uncertain and dynamic a situation the more proximate a strategic objective should be.
The more uncertain the future the more you should “take a strong position and create options”. The aim being to increase ones mobility , increasing options available to them and decrease freedom of opponent, and impose certain relatively stable patterns that increase strength of oneself.
Thinking in Systems – Identifying Bottlenecks:
Look for bottlenecks in Chain link systems – when there is a weak link, a chain is not made stronger by strengthening the other links. For example, when assessing a properties potential, one should identify the limiting factors, such as a noisy highway.
As an investor one wants to find limiting factors that can be fixed, such as paint rather than factors that can’t be fixed such as highway noise. If you have a special skill or insight at removing limiting factors than you can be very successful.
Each part of the system had to be reconsidered and shapes to the needs of the rest of the system. Therefore systems should be designed to realise specific objectives. To get higher performance out of a system you have to integrate its competitive Kent’s and subsystems more cleverly and more tightly.
When someone says “Managers are decision makers,” they are not talking about master strategists, for a master strategist is a designer.
Trade off way of thinking about design should be central to strategy. A design-type Strategy is an adroit configuration of resources and actions that yields an advantage in a challenging situation.
Human capital doesn’t infer a competitive advantage as most companies have the same resource pool, it’s how you train, develop and use this resource to execute specific strategy.
Human nature means easy life produces laxity and associate success with recent actions. It should be evident that the current plenty is the harvest of planting seasons long past.
Lagging Measures – Hard to Identify sources of success:
Strategy is about the disconnect between current results and current action that makes the analysis of the sources of success so hard and ultimately so rewarding.
Good strategy looks past unimportant issues to identify what is fundamental. Sometimes threats to companies are not new specific products or competitive moves but changes that may undermine the logic of its design.
Focus has two meanings, first it denotes the coordination of policies that produces extra power through interacting and overlapping effects. Second, it denotes the application of that power to the right target.
When looking at buyers costs:
Think about cost of searching for the product, evaluating it, traveling to buy it or waiting for it to arrive, switching to it, installing it and learning how to consume it.
Deepening an advantage means widening this gap by either increasing value to buyers, reducing the cost or both.
Extensions should only be done when they are based on proprietary know how which can be applied to different markets and build on the specific businesses competencies.
It is a mistake to equate value-creating strategy with having a sustainable competitive advantage, as this ignores the process of engineering increases in demand.
Generating increases in demand relies heavily on marketing strategies and research into the value the product creates. This influence techniques need to be used.
An isolating mechanism inhibits competitors from duplicating your product or the resources underlying your competitive advantage.
Levergage predictable biases in forecasting:
Difference between frequently purchases products and durable products.
Durable products have initial rapid expansion than sales suffer a sharp drop as everyone has one. The faster the uptake is of the durable product the sooner the market will be saturated.
With change most predictions favour that market leaders will battle it out for supremacy. Negates the fact smaller business’s less entrenched and prone to inertia therefore this prediction isn’t always correct although it can be.
Guiding posts for change:
Rising fixed costs
Incumbent Inertia and Resistance:
I general you can expect incumbent firms to resist transition that threatens to undermine the complex skills and valuable positions they have accumulated over time.
Reinforces human nature with self justification and ego defensive behaviour. Inability to be a hyper realist and tackle uncertain/complex challenges. Falls to fallacy of because something worked in the past it will work in the future.
Organisational inertia generally falls into one of three categories:
- Inertia of routine
- Cultural inertia
- Inertia by proxy
Leaders must diagnose the causes and effects of entropy and inertia.
Change creates a gap between the old routine and then the needs of a new regime.
Attractor state is based on overall efficiency of industry, where the new way eliminates margins and inefficiencies attatched to the current standards.
New technology makes individuals or old way of doing things obsolete.
Two complements to attractor-state analysis are the indentification of accerlerants and impediments to movements toward an attractor state.
Accelerant – demonstration effect: the effect of in your face evidence on buyers perceptions and behaviour. Such as the idea that songs and videos were simply data was an intellectual fine point (known but implications not thought of) until people experienced ability to download, copy and share information.
Impediment including limitations physical and legislative.
Understanding the inertia of rivals maybe just as vital as understanding your own strengths.