You have probably been involved in some type of strategic planning effort either at work or in your personal life. You know the scenario: a group in your organization meets to come up with a strategy for a project, your association, church, or to meet a mandate to have a strategy. You spend most of the time brainstorming ideas and making a list of goals. Sometimes, you may do a SWOT analysis or similar effort to determine what affects your strategy and the organization. After some discussion, you probably have a strategic goal, some kind of value statement, and a laundry list of activities. The better plans have some set of metrics. The plan is released with much fanfare but is gradually forgotten until the next round of strategic planning.
We know that strategies are important and we put a great deal of effort and thought into our strategic planning. So, how do we make good strategy?
According to Rumelt (2011), we create bad or ineffective strategy because we don’t understand what good strategy really is. Strategy is one of those terms that has been so overused that it has lost its meaning. Like “communication,” “change,” “culture,” and “vision,” everyone thinks they know how to do good strategy but their understanding is built on misconceptions and folk theories. To really understand good strategy, we need to know the four characteristics of bad strategy.
Bad strategy has one or more of the following characteristics:
- Fluff – Vague buzzwords that are strung together to make the strategy sound impressive but there is no real substance.
- Doesn’t define the challenge – Have you read a strategic plan that sounds good but you wonder what the strategy is designed to fix? If the strategy doesn’t address a problem then what is the purpose of the strategy?
- A laundry list of goals – This is usually the result of brainstorming sessions that have lasted too long and everyone wants to go home now. The participants create a list of actions they want to accomplish but there is no connection to a problem or problems.
- Impractical or ineffective objectives – The strategic actions will be too difficult to implement (if not impossible) or the actions don’t help overcome obstacles (Rumelt, 2011, p. 42).
Knowing what bad strategy looks like helps you understand what good strategy is according to Rumelt (2011). Good strategy begins with the “kernel”:
- Diagnosis – A thorough examination and complete explanation of the challenge confronting the organization.
- Guiding Policy – The overall approach that will be used to confront the challenge.
- Coherent Actions – A set of coordinated actions that will implement the guiding policy to overcome the challenge identified in the diagnosis (p. 81).
There can be more to a good strategy but any additional elements must be built upon a solid kernel to be fully effective. This is because the kernel captures the essential nature of good strategy: it is a hypothesis (p. 228).
You create strategy to bring an organization forward into a better state or to help it overcome a challenge. The good strategy is an experiment that you run to test your understanding of the challenges and how to best take advantage of those challenges. That is why I urge you to add metrics to the strategic kernel. You need feedback to determine how accurate your diagnosis was, how well your guiding policy works, and if your coherent actions are fulfilling the guiding policy.
So, the next time you start to build a strategy, the very first question should be: do we understand the challenge(s) facing our organization? Do not go any further until all participants have fully defined and agreed upon the challenge the strategy will address. Then, determine the guiding policy that ties your actions together. Thus, when you brainstorm your list of strategic actions, you can eliminate those actions that will not advance the guiding policy thus saving you wasted effort and resources. Complete the strategy by building in some metrics.
This will not guarantee success but it will give you a much better chance. At least you will avoid the guaranteed failure that bad strategy always brings.
Rumelt, R. (2011). Good Strategy/Bad Strategy: The Difference and Why it Matters. New York: Random House.
Have you seen an example of good strategy that you can share, Bill?
Rumelt gives three examples in the first two chapters of the book:
1) Steve Jobs’ rescue of Apple in 1997.
2) Desert Storm
3) Wal-Mart’s Distribution System
Think I’ll add that book to my reading list, thanks.
@T. Jay – It’s a good read with some provocative statements. I think you will enjoy it.