What you will learn from reading The Crux:
– What is a strategy and how to properly think about creating a strategy.
– How to deal with strategic issues and how to meet a challenge.
– How to diagnose a problem when creating your strategic plans.
The Crux Book Summary:
The crux is another classic strategy book from Richard Rumelt. His first book Good Strategy Bad Strategy is also a must read for business owners and directors to think more strategically about the problems they face. If you’re interested in building your strategic thinking muscle then this book is for you.
The concept of a crux narrows attention to a critical issue. A strategy is a mix 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 seeing or designing a way through it.
Whether facing problems or opportunities, they focused on the way forward promising the greatest achievable progress-the path whose crux was judged to be solvable.
Rumelt uses the term crux to denote the outcome of a three part strategic skill:
The first part is judgment about which issues are truly important and which are secondary.
The second part is judgment about the difficulties of dealing with these issues.
And the third part is the ability to focus, to avoid spreading resources too thinly, not trying to do everything at once. The combination of these three parts lead to a focus on the crux-the most important part of a set of challenges that is addressable, having a good chance of being solved by coherent action.
How to act effectively:
Effective people gain insight through finding and concentrating attention on the crux of a challenge-the part of the tangle of issues that is both very important and addressable (which can be overcome with reasonable surety).
To act effectively, you must fully examine the mix of problems and opportunities, identify the crux, and take actions aimed at overcoming it. Ignoring it doesn’t work.
What is a strategy?
A strategy is a mixture of policy and action designed to surmount a high stakes challenge. It is not a goal or wished-for end state. It is a form of problem solving, and you cannot solve a problem you do not understand or comprehend. Thus, challenge-based strategy begins with a broad description of the challenges-problems and opportunities-facing the organisation. They may be competitive, legal, due to changing social norms, or issues with the organisation itself.
As understanding deepens, the strategist seeks the crux-the one challenge that both is critical and appears to be solvable. This narrowing down is the source of much of the strategist’s power, as focus remains the cornerstone of strategy.
Real-life strategy, whether your own or a company’s, is an ongoing process of dealing with critical challenges and deciding what consequential actions to take. Some challenges are long-term and broad in scope. Others are more immediate blockages, or sudden opportunities, encountered on the way forward. In all cases, strategy is the process of confronting and solving critical challenges.
Strategy should be an ongoing process. This concept of strategy allows a company to have a strategy process that is not a constant restatement of some vague overall purpose and intent. The strategy process becomes the much more entrepreneurial task of solving challenges and grabbing opportunities, as they appear, along the way. An organisation doesn’t face a single “battle” or even a single “war.” If it is to persist over time, it will face an ongoing series of challenges, each of which should be dealt with
How to be a strategist:
To be a strategist you will need to embrace the full complex and confusing force of the challenges and opportunities you face.
To be a strategist you will have to develop a sense for the crux of the problem the place where a commitment to action will have the best chance of surmounting the most critical obstacles.
To be a strategist you will need persistence because it is so tempting to grab at the first glimmer of a pathway through the thicket of issues.
To be a strategist you have to take responsibility for external challenges, but also for the health of the organisation itself.
To be a strategist you will have to balance a host of issues with your bundle of ambitions-the variety of purposes, values, and beliefs that you and other stakeholders wish to support.
To be a strategist you will have to keep your actions and policies coherent with each other, not nullifying your efforts by having too many different initiatives or conflicting purposes.
How to meet a challenge:
No one solves a problem they cannot comprehend and hold in their mind.
What is true is that to meet a challenge, you should first work to comprehend its nature. You cannot improve a failing school system unless you have a clear idea about why it is failing. To supply shoppers with a better shopping experience, you need to know about their wants, habits, and needs, as well as the technologies of selling. Don’t start with goals-start by understanding the challenge and finding its crux.
How to deal with Strategic Issues:
First, the best way to deal with strategic issues is by squarely facing the challenge.
Too many people start with goals and other visions of a desired end state. Start with the challenge, and diagnose its structure and the forces at work. Once you do that, your sense of purpose and the actions you consider will change. In that diagnosis, find the crux. That is the most critical part of the challenge that you can actually expect to solve. Don’t pick a challenge you cannot yet deal with-attack the crux of the situation, build momentum, and then reexamine your position and its possibilities.
Second, understand the sources of power and leverage that are relevant to your situation. To punch through the crux, you will use one or more of them. Willpower is not enough.
Third, avoid the bright, shiny distractions that abound. Don’t spend days on mission statements; don’t start with goals in strategy work. Don’t confuse management tools with strategy, and don’t get too caught up in the ninety-day chase around quarterly earnings results.
Fourth, there are multiple pitfalls when executives work in a group, or workshop, to formulate strategy. By starting with the challenge, and avoiding a too rapid convergence on action, a group can define the crux and design coherent actions to overcome it.
The weakness of current strategy thinking:
This weakness was well captured more than a decade ago by strategy authority Gary Hamel:
“Of course, everyone knows a strategy once they see one-be it Microsoft’s, Nucor’s, or Virgin Atlantic’s. Anyone can recognise great strategy after the fact. We also understand planning as a ‘process.’ The only problem is that process doesn’t produce strategy-it produces plans. The dirty little secret of the strategy industry is that it doesn’t have any theory of strategy creation.” (By “strategy industry” Hamel means the cadre of academics and consultants who opine about and are hired to work on strategy.)
The problem is that many people have not wrapped their heads around the crux of their situation. They focus on performance goals and outcomes rather than opportunities and problems.
Creating a strategy is not simply pure goal seeking or decision making, unless there are fairly well-structured causal connections between actions and results. If we knew how each possible chess move changed the probability of winning, it would be easy to step through a game. But we don’t have that kind of mapping. Instead, to play chess we memorise patterns of clever moves and search for the crux-the place where the patterns of forces may allow us to take advantage of an opponent’s (apparent) weaknesses.
Others try to deduce strategies from desired performance goals, such as “grow profitably by 20 percent each year for the next five years.” It doesn’t work that way because the goal, by itself, has no action implications. If you begin to add nuance, like “focus on the largest potential accounts,” that proposed action has a complex set of challenge-based implications hidden within it. Why haven’t we been going after larger accounts? What makes that harder? What changes have to be made to be able to sell to larger accounts?
There are always a bundle of ambitions:
The idea that a person or organisation has one or two primary driving goals is simply not true. It is a fantasy invented by economists and certain management thinkers.
The reality is that most people and organisations have “a bundle of ambitions.” That is, they have multiple intentions, visions of the future, and things they would like to see or achieve. Some things in this “bundle” conflict with one another-not all can be achieved together.
The basic forms of strategic challenge:
Richard Rumelt thinks of strategic challenges as arising in three basic forms: choice, engineering design, and gnarly.
A choice challenge occurs when we know the alternatives, but there are uncertainties and non-quantifiable aspects that make choosing among them difficult. Situations of strategic choice usually arise when there are large long-term commitments of capital or contract each at stake.
An engineering-design challenge arises when one has to create something new, but you have methods for evaluating your creation before implementing it. If you go to engineering school, you may learn how to analyse the stress on the steel members and cables of a bridge. Later, asked to design a new bridge, you probably copy a previous design. But when Norway asks for a design build offer on the world’s longest floating bridge, over the 550-meter-deep Bjørna fjord, you have to create the design-you have to imagine a way of shaping steel and concrete into a floating bridge. Unlike the choice challenge, there are no predefined alternatives.
A more difficult situation is the gnarly-design challenge. Here there are no given alternatives, and there are no good engineering-type models to test your designs against. There is no guarantee of a solutions and outcomes. You solve a gnarly challenge by beginning to dig into the nature of the challenge-in figuring out “what is going on here.” What is the paradox or central knot of the thing? What constraints might be relaxed?
Gnarly problems have the following characteristics:
There may be no clear definition of the problem itself. Studying various concepts of “the problem” and working to identify or choose a crux issue can be a large part of the work of creating a strategy. In many gnarly situations, there is not really a given “problem.” Rather, there is simply a sense of things going wrong or of opportunities just around the corner.
Most of the time you do not have a single goal but a bundle of ambitions, such as those I had when I was twenty-five or those I ascribed to Reed Hastings-that is, a group of desires, goals, intents, values, fears, and ambitions that may conflict with one another and that cannot normally be all satisfied at once. Forging a sense of purpose out of this bundle is part of the gnarly problem.
Alternatives may not be given but must be searched for or imagined. Much of the time the apparent alternatives-invade or blockade, acquire “BuyCo” or not-have been made artificially sharp by shortsighted staff or parties with vested interests. There are almost always other ways to proceed.
The connections between potential actions and actual outcomes are unclear. Opinions will differ sharply, even among experts, about the efficacy of various proposed actions. In gnarly situations, there are multiple interpretations of the facts and only weak connections between desired results and specific actions to be taken.
How to untangle gnarly situations:
Use the practical tools of collecting, clustering, and filtering to help untangle gnarly situations.
Collecting-making a list of problems, issues, and opportunities ensures that you are looking at all the issues, not just the first to come to mind. It will grow longer than you anticipate, just like what you need to take on vacation grows from your initial planning
Clustering places problems and opportunities into groups. When I work with a team in a Strategy Foundry (see Chapter 20), each participant works on identifying a challenge. We write them on the board or on cards and collect them all-usually about twelve or so. Often, these “challenges” are each really more than one challenge, so we break them apart. The groups produced by this clustering have fuzzy boundaries. The purpose is not to establish scientifically solid sets but to explore the ways in which challenges differ
Following collecting and clustering, you realise that there are too many issues, too many problems, and too many different interests at work. They need to be filtered. The first step is sequencing: bringing to the forefront those that seem to be immediate, while deferring attention on many where action can be deferred.
Once these challenges have been winnowed down, the next step in filtering is rating their importance and addressability. Importance is the degree to which the challenge either threatens the core values or existence of the enterprise or represents a major opportunity. Addressability is the degree to which the challenge appears to be solvable.
Finding problems allows for solutions:
Paradigm’s basic problems were that it had no effective control over manufacturing and that its largest customers were slowly growing firms. Once we had identified and focused on these issues, the group began to gradually generate ideas about how to deal with them.
Design > Deduction:
Importantly for us, Herbert Simon was fascinated by the difference between deduction and design. He explained that normal science is about understanding the natural world. “Design,” he argued, “on the other hand, is concerned with how things ought to be” in order to carry out human purposes.
He observed that it was “ironic that in this century,” natural sciences drove design considerations from the curricula of professional schools. He noted, “Engineering schools gradually became schools of physics and mathematics; medical schools became schools of biological science; business schools became schools of finite mathematics.”
Insight into strategy is also greatly aided by having examined a broad repertory of past strategies. And insight is helped by looking in the right places. Rumelt starts his own search for insight in the yet-to-be-questioned assumptions about how things work, in the asymmetries among interests and resources, and in the habits and inertia of others.
John Dewey wrote that the most reliable source of new design ideas is “reflection” on a “felt difficulty.” The key source of design insight is a clearheaded diagnosis of the structure of the challenge, especially its crux, by employing a tool kit of persistence, analogy, point of view, making explicit assumptions, asking why, and recognising your unconscious constraints.
There is a theory that people have difficulty seeing a subtle yet superior solution to a complex problem when there is an attractive, seemingly simpler alternative (a distraction).
Focusing in on the problem-looking only at a part, but in more explicit detail-can make parts of it clearer and easier to deal with. If you have a problem with the “customer experience,” looking just at the returns process, for example, may stimulate insights that can be used more broadly.
How to Grow a Business:
INGREDIENT 1: DELIVER EXCEPTIONAL VALUE TO AN EXPANDING MARKET
“Unremarkable,” you might say, yet delivering exceptional value to an expanding market is the basic formula for business success in the vast majority of cases
INGREDIENT 2: SIMPLIFY TO GROW
In high school Rumelt had to study William Strunk’s classic The Elements of Style. Strunk’s most incisive command was “Omit needless words.” In business, and other organisations, the parallel is “Omit needless activities.”
Activities, or whole chunks of business, are needless when they don’t generate a surplus. The resources they consume may or may not show up on financial statements. The resources may be money, public controversy, or management attention.
We are all bounded in the number of issues and challenges we can simultaneously address. Concentrating and simplifying the managerial task at the top yields the advantages of focus.
INGREDIENT 3: BE QUICK
Reaction time is critical in competitive situations. When a new opportunity or challenge arrives on the scene, the first capable response often wins: not necessarily the first mover, but the first one to provide a competent reaction.
Boyd’s insight was that being in the lead may be less important than having your opponent believe you are in the lead. Thinking you are behind can induce mistakes. Be oriented to the combat, and be fast to observe, decide, and act.
INGREDIENT 4: USE MERGERS AND ACQUISITIONS TO SPEED AND COMPLEMENT A STRATEGY
There have been literally hundreds of studies on the impact of mergers and acquisitions on corporate performance and value. The results of these studies are mixed. Looking at total dollar value gives a negative result because the very largest deals are the worst.
So, is there any hope to add value by acquisitions? Yes, of course.
The fundamental ingredient of the secret sauce of adding acquisitions to growth is to keep it focused-only use acquisitions to speed and deepen your basic competitive strategy. Don’t use acquisitions to simply bulk up revenues or earnings. And, above all else, don’t buy complex, multi-product, heavily staffed companies that will take years to untangle. And, even above that, don’t ever engage in a “merger of equals.” If you do, the infighting over who is in charge of what will go on for years.
My strong advice for a company seeking profitable growth is to restrict your purposes to two: to acquire skills and technologies (including growing platforms) that are complementary to the existing strategy and that would be hard to create internally and to provide a broader and stronger market access for the target’s products.
INGREDIENT 5: DON’T OVERPAY
One reason so many research studies keep showing negative returns to acquiring firms is that acquirers are overpaying for what they get.
The basis of profitable growth is to deliver exceptional value in a growing market. Acquisitions that deepen value or speed its expansion across buyers are very worthwhile (at the right price!). As Forbes contributor David Trainer observed: “Executives seek and execute acquisitions that have little to do with shareholder value because they help boost metrics such as sales, EPS [earnings per share], or EBITDA that determine their bonuses. In addition, a big acquisition will put the company in a peer group with larger competitors, which also tends to boost executive pay,
INGREDIENT 6: DON’T GROW THE BLOB
The “blob” is the complex interconnected structure at the heart of so many older organisations. It is fairly bureaucratic and has numerous policies and norms that have evolved over many years. I have worked with some companies in this category who would like to accelerate their growth. Much of my advice is to simplify, weed the garden, and focus. When they won’t go down that path, my advice becomes, “Don’t grow the blob.”
INGREDIENT 7: DON’T FAKE IT
The evidence is that managers and analysts prefer smoother earnings. But the stock market doesn’t really care. Manipulating earnings to be smoother messes up accounting results and wastes time and energy. Spend your IQ on something else.
Coherent actions support one another. At the simplest level, coherence means that actions and policies do not contradict each other. In the best of cases, coherence comes from actions working synergistically to create additional power.
What is difficult about this:
There was nothing really strategic about the plan. Just as everyone’s New Year’s resolution is to exercise more, every corporation’s plan says, “Invest in the growing segments of the market.” It was just business as usual. My next question is almost always of the form: “What about all this is difficult?”
I asked “Why is this difficult?” to shift attention from unsupported goals to recognising obstacles and difficulties since that is the beginning of strategy
How to Diagnose a problem:
Diagnosis is basically a process of focusing on challenges and asking “what” and “why” over and over again.
In diagnosis the strategist seeks to understand why certain challenges have become salient, about the forces at work, and why the challenge seems difficult. In this work, we use the tools of analogy, reframing, comparison, and analysis in order to understand what is happening and what is critical.
Analogy and reframing:
One of the most common tools of diagnosis is analogy making connections to similar situations. The trick to using analogy well is access to more than one or two additional situations, to understand the logic in these other situations, and to check on how that logic maps to the current situation.
A properly chosen analogy can open the door to new insight. At the same time, the largest obstacle to creating a clearheaded diagnosis of a situation is the tendency to get wrapped in unseen webs of unconscious analogy and bias.
To be clearheaded is to be aware of the concepts, analogies, frameworks, models, and other assumptions being used to simplify and structure the situation.
Measurement is always a comparison. We measure the distance to the moon by a comparison to the standard meter or to the Greek standard foot. We measure profit in comparison to last year or to revenue (net margin) and so on.
Looking at existing data in new ways can reveal problems or opportunities. For example, most business firms have a cost accounting system that classifies products by type and has some way of assigning direct labor, raw materials, and factory-overhead costs to each class. Changing the logic of the classes can yield new insights.
Analysis and Frameworks:
There are a wide variety of tools available for help in analysing business situations. Each tool gains its power by making assumptions and narrowing attention to just a few factors, or even just one, in a situation. The assumptions that give the tool its power may or may not be valid in a particular case. As you try to diagnose a complex situation, a sharp tool may help, or it may lead you astray to a misdiagnosis of the crux. These tools are double-edged-use with care.
A reanalysis of data can, in some situations, turn an existing diagnosis on its head.
Each framework pulls attention to some aspects of the situation rather than others, and each alters the balance of power within the organisation. Technical capital budgeting lends power to people who are skilled in finance and calculation. Portfolio balance frameworks redeploy power back to the top where they have the ability to label you a “dog.”
Tools like capital budgeting, the BCG matrix, and disruption theory can be helpful in analysing situations. And there are many more value-chain analysis, willingness-to-pay modeling, multinomial logic models of competition, McKinsey’s 7S framework, the Blue Ocean Strategy Canvas, scenario development, benchmarking, product life cycle, root-cause analysis, and more. Each narrows attention to just a few factors or issue, or even just one. And each tool is built on assumptions. Ignore those assumptions at your peril
The challenge of ‘disruption’:
The real challenge of “disruption” is not that you don’t see it coming, The real challenges are:
(A) that it costs more profit to respond than it seems to be worth
(B) that your organisation lacks the necessary technical ability, financial strength, or organisational skills to respond
(C) that it is the destruction of the whole ecosystem in which you all live
Sources of Business Advantage:
In business competition, one cannot expect to make a profit without some source of advantage. We look for advantage in four basic places: in information, knowing something that others do not; in know-how, having a skill, or patent, that others do not have; in position, having a reputation, brand, or existing market system (for example, distribution, supply chains) that others cannot readily imitate or push aside; in efficiency, whether based on scale, technology, experience, or other factor that others cannot easily attain; and in the management of systems, whether bridging complexity or moving with speed and precision, that others do not have.
In each case, we look for an important asymmetry, one that can be turned to advantage, between you and competitors.
To create advantage, one has to bring together and couple skills and ideas that have not yet been combined. That normally means combining or bringing together activities that have different knowledge or experience bases.
In many consumer products, the challenge is creating models or brands with differences coupled to different customer groups. The crux of such challenges is gaining a realistic understanding of real customer behaviour, wants, and needs.
Strategic Business Decisions:
Tight coupling is an individual entrepreneurial act. By contrast, uncoupling is normally an industry phenomenon, occurring when previously combined or integrated activities are taken on by specialised firms. Here the advantage comes from taking one of the newly specialising positions early, leaving behind those trying to preserve the old integrated system.
Deintegration is the force behind the huge wave of outsourcing to “supply chains,” with both manufacturing and knowledge-based skills such as coding moving offshore to lower cost locations. An important example is the deintegration of most semiconductor production to specialised chip makers. Originally, companies like Fairchild, Texas Instruments, IBM, Motorola, and others designed and produced their own memory and processor chips. Today, by contrast, only Intel and Samsung maintain strong in-house chip-production facilities.
The strategic issue with experience is the degree to which it can drive an advantage over competitors. Just as is the case for simple scale economies, beyond a certain point, factors other than accumulated experience become decisive. Experience does matter. The more stable the activity, the more complex the process, the more continued operation can lead to increases in efficiency.
Isn’t scale the goal?
The most easily thought-of mechanism to achieve greater efficiency or market control is scale. If a business is bigger, won’t its costs be lower?
Yes and no. Samsung produced 295 million smartphones in 2019, compared with runner-up Apple at 197 million. Since Samsung is more vertically integrated into chips and screens, you might think that its greater volume and integration would give it a strong “scale”
and integration edge. But Samsung sells 150 different model phones, while Apple sells only 3 models. Most of Samsung’s so-called scale is spent on making very low-cost, low-profit phones for the developing world. Consequently, Samsung grabs only 17 percent of global phone profit, whereas Apple gets 66 percent. So in this case bigger does not seem to be better.
What is a business model?
The combination of the Internet and network effects pushed many companies into giving their services away, potentially a Bertrand competition trap. The question in such a business is “How will it get paid?” The term of art, business model, arose as a way of answering this question.
In essence, a business model explains where revenue will be earned when services are provided free of charge. The basic Internet business models are on-page advertising, advertising based on user information, free use with premium paid tiers of service, and pure subscription.
Difference between goals and strategy:
A goal set arbitrarily, without an analysis or understanding of a critical challenge or opportunity, is an unsupported goal. By contrast, a good goal is the result of effective strategy work that targets certain actions that will move the organisation forward.
To avoid confusion, it is best to call this an objective to distinguish it from an unsupported goal. Unsupported goals, like hitting a specific profit target in the next twelve months, are Dilbert-style corporate management, because such goals are disconnected from the reality of the situation.
The question “What should a business strive to accomplish?” is, logically, not much different from the question “What should a person strive to do in life?” And that question has bedeviled philosophers for twenty-five hundred years. Should people seek faith, honor, truth, justice, power, wealth, balance, or simply happiness?
Strategy is a considered judgment about what to do. It cannot serve all of our desires at once. Our strategy defines which broad interests can be advanced and which cannot in the current situation. Having decided on a way forward—a strategy—we can then fashion the specific goals that will guide its implementation.
The instant a value is expressed as a specific goal, especially a metric, it implies a stream of actions. Setting a specific metric is deciding what is important.
By contrast, a good goal, or good objective, flows out of a process of problem solving. A good objective has the form of a task-set up operations in Australia, work with a particular customer to solve a product quality problem, create a breakaway team to focus on developing a better waterproof coating, and so on. Starting with unsupported goals-like gain market share-lacks entrepreneurial insight and tries to get performance by flogging the system.
The pop-psychology belief is that goals motivate. Stupid arbitrary goals don’t motivate achievement. They motivate cynicism and fabrication.
The difference between management work and strategy work:
Management work and strategy work are two different things. A collection of goals or metrics is not a strategy. A strategy is a reasoned argument about the forces at work in a situation and how to deal with them. Don’t let the metrics drown out thought.
Motivating and measuring performance is the vital heartbeat of organisations that “keeps the trains running on time.” You cannot improve most operations without measuring efficiency. To better the customer experience, you need to know what is happening. How long does it take to install our software on a client’s system? Having a concrete goal can be a powerful motivating device. “Get some exercise each day” is vague. “Thirty minutes a day on the treadmill” is concrete and more likely to be followed.
The problem with Agency theory:
Making shareholder value and return the North Stars of corporate purpose was an expression of economists’ newly formed agency theory. This starts with the assumption that managers (agents) will not work very hard (they will “slack”) and will make self-interested decisions unless there are incentive arrangements to align the interests of owners and managers.
Unfortunately, agency models don’t address issues more complex than motivation-issues of belief, diagnosis of the situation, and judgment about importance. If the critical issues are obvious waste and abuse, then incentives can help reduce inefficiency. But incentives go only so far.
Business advice hasn’t changed:
In accounting, Professor David Hawkins grinned and said, “Every business case has the same solution: increase sales, cut costs, and make the bastards work harder.” Skip ahead more than a half century to 2020, and consider the instructions of the CIO Wiki: “In order to maximise shareholder value, there are three main strategies for driving profitability in a company: (1) revenue growth, (2) operating margin, and (3) capital efficiency.
Mission Statements don’t work:
Working with a cascade of “statements” about vision, mission, value, and strategy is a feckless activity, lacking a logical backbone, and having no evidence of being enduring. They cannot really guide strategy. Your commitment to basic values will be illuminated by your actions, not statements framed on the wall.
Neither the high sounding statements of global purpose nor the profit oriented statements are of any use for the kind of problem solving strategy being espoused in this book. If you accept that strategy is a form of problem solving, that it is a journey, and that it is a response to challenges, then mission statements are not helpful in strategy work. They are a waste of time and effort.
You don’t need a vision or mission statement to lead a business. You decide and create your actual mission as you design and implement your strategic response to change and opportunity. Your publicly expressed mission is more advertising and social signaling than guidance; it will change with shifts in fashion and leadership
Key Concepts from Richard Rumelts Strategy Foundry:
Deferred judgment in the foundry has two meanings. The first, recognised by psychologists, is deferring judgments about good and bad or important and unimportant. Letting facts and information accumulate without putting them in these kinds of bins helps generate more information.
Deferred judgment in the foundry also means holding off on action plans until after judgments about which challenges are critical and which are actionable.
Think again can be a powerful tool. In strategy sessions it usually means restating the challenge in different terms, encouraging a shift in point of view. Or it means looking at the proposed actions and asking if there aren’t other and more effective ways of acting.
Ask the question
What about all this is difficult?” This line of thinking is very helpful in evaluating and analysing challenges. Executives have a relatively easy time identifying challenges. But addressability is more complicated. The question that often breaks this into pieces small enough to think about is “Why is this hard?”
Use a red-team
When creating a strategy, a red-team exercise forces the group to evaluate “frame risk”-the chance that the way they think about the world and competition is wrong or critically incomplete. The trick about frame risk is that our frames cannot tell us if they are wrong; we have to do that with human judgment. If our frame of the situation was obviously wrong, we would not be using it. The only way to see what is wrong with our current “best” model is to have a group shift points of view, attack it, and try to take it down.
Use reference classes
A reference class is a group of comparable situations or companies or challenges.
Strategy is an ongoing journey. To bring that concept to life, executives should take the time to write down the key assumptions underlying their strategy. The heart of moving from difficulty to action is making assumptions. Unfortunately, some of these may be wrong. Unless we commit to making them explicit, and checking their accuracy as events unfold, it becomes very hard to adapt. Strategic navigation is the process of making assumptions explicit and then checking them as events unfold.