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May
07 2013

Good Strategy, Bad Strategy

Syndicated from: balance-AND-results

The person who convinced me to join Goodreads, the site where readers review and make recommendations about the books they read, sent a link to a work called Good Strategy, Bad Strategy by professor/consultant Richard Rumelt. It is truly insightful and thought-provoking. If I were still in the business of consulting on strategy this is a book I’d keep handy. Much of the power of the work lies in just three areas although there’s lots more for the serious reader. First it calls attention to a good number of the many ways you can create bad strategy such as simply setting stretch goals in a variety of areas where you’d like to see better results without actually thinking through fully all the factors make them achievable or not. How many so-called strategy sessions have you sat through where everyone agreed you have to raise sales by 10% and then brainstormed how training and motivation of the sales force would do it. But if the market is shrinking, the product is tired, the public is moving on to something else, the competitors are beating your prices, the regulatory requirements are now working against you… this isn’t ‘strategy.’ Just understanding what isn’t strategy would be a huge step forward for many organizations. It would push them to go further to find an actual, useful strategy instead of stopping short than congratulating themselves on another good annual session. Second, he points out with lots of excellent examples, how strategy is situational. What would be good strategy for one competitor is poor for another even within the same industry. There is no such thing as a universally good strategy for a sector or an organization that can be simply copied or pulled off the shelf. This should be pretty self-evident, but clearly isn’t. So often, ‘strategy’ boils down to figuring out that your competitors are going to green packaging or some other new trend, so you should, too. Along the way Rumelt points out how organizations get bogged down in inertia in various ways – slow-changing culture, lack of insight into and willingness to move with real trends, etc. More nimble organizations take over. In the same chapter he talks about entropy as a problem – the tendency of systems to become increasingly disorganized if they aren’t properly maintained and if energy isn’t constantly invested to do so. The latter point is more subtle, but it ties in with key point number three – the need for coherence in strategy. He discusses this in various ways, but especially pointing out that choosing a strategy is pursuing a hypothesis about what will and what won’t work to give you an advantage in a particular situation. Depending on what competitors are doing you need to do something else that will give you an advantage, so you have to understand your competitors, but more importantly you have to think in two particular ways. First, what should you be doing AND NOT doing so as to differentiate yourself in a way that makes you stand out as valuable to some block of customers or candidates for hire. Second, how can you direct ALL your activities to support and improve on the ways you’ve chosen to stand out in and away from the ways you have rejected. Will your airline excel at short haul or long haul, passengers or freight, national or international? Or if you feel you are large enough to do it all, can you structure in a way that doesn’t confuse the people delivering each of those services and give each service the consistent, COHERENT supports it needs to thrive? The purpose of making choices is so you can consistently evolve your operations in a direction in which you can become expert, the number one or two leader. As many others have pointed out, this takes years to achieve effectively. You can’t be the cowboy who jumps on his horse and rides off in all directions. This is the point I try to make all the time with HR strategy within an organization as well. The exciting thing about the pretty much neglected topic of employment branding, to take one example, is pretty much exactly this. You can’t be all things to all people, a little bit of everything for everyone. You need to understand the types of people you want to hire and what attracts and retains THEM. You can’t simply copy what competitors do. You have to evolve as your target market evolves – to continue to attract them and satisfy them. Certain elements are fairly universal, but even then not totally. Most employees want a company that seems to assure stability of employment, but there are super-free-agents who really don’t think about that, who want excitement and big reward opportunities… and so forth. A key thing about a brand is what it is NOT. Google isn’t a work-at-home company, but Yahoo was much more so. Google looks for every possible way to offer on-site work under coherent, positive policies and it keeps looking and improving, avoiding deterioration of entropy. Yahoo distinguished its employment brand in part by work-at-home, but apparently did not do everything possible to line up all the aspects of that so that both employees and employer benefited. Maybe it was irreparably flawed or maybe it just didn’t get the strategic thinking it needed. Fixing a problem like that has to be difficult and has to involve more than sending a memo saying we’re ending the practice or it will leave a gaping hole in the overall plan. Bookmark and share this post More »

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