Rumelt on Strategy (Strategy I)

One of the recent books that has made a strong impression on me is Richard Rumelt’s book on strategy – Good Strategy, Bad Strategy – and the reason is that it provides such a clear and effective mental model of what you need to do if you want to be a strategic thinker. Rumelt notes that there is a *ton* of really bad strategy around and that this has cast doubt over the whole idea that we should have strategies at all, but he then goes on to suggest a down-to-earth operationalized definition of strategy that really merits internalizing. This is the portal quote:

“A good strategy has an essential logical structure that I call the kernel. The kernel of a strategy contains three elements: a diagnosis, a guiding policy, and coherent action.”

Richard Rumelt, from Good Strategy Bad Strategy.

It is that simple. And yet, I think that many, many organisations tend to get it wrong in all three elements. First, very few bother to even do the diagnosis – ask the broad and ridiculously important question of “what is going on here” – and jump directly into objectives. Note that Rumelt does not mention objectives. He notes that the diagnosis needs to really grapple with obstacles to getting what you want.

This is key. If there are no obstacles, then you don’t need a strategy. You just need to wish for it and it will come true. Usually, that is not the case though – and a strategy is the best way of handling what stands between you and your goal.

Obstacles are best attacked through the identification of advantage. Rumelt, again:

“A good guiding policy tackles the obstacles identified in the diagnosis by creating or drawing upon sources of advantage. Indeed, the heart of the matter in strategy is usually advantage. Just as a lever uses mechanical advantage to multiply force, strategic advantage multiplies the effectiveness of resources and/or actions.”

Ibid.

Again – seemingly obvious, but really hard to find in the wild. Can you immediately tell me what your organisation’s sources of advantage are?

Second, few organisations understand what a guiding policy is, how it sums up the organisation’s attitude to the environment and obstacles identified in the diagnosis. A guiding policy is where you ensure that you are clear about what you will not do.

“Good strategy requires leaders who are willing and able to say no to a wide variety of actions and interests. Strategy is at least as much about what an organization does not do as it is about what it does.”

Ibid

The policy is what helps you discern what you will not do and what you will focus on. This is important. A guiding policy defines a stance, a position from which you will tackle your challenges. It almost reminds me of the different stances in martial arts – you can take any one of them to face your opponent and all of them express a different attitude and state of mind.

An aside: here there is an other observation that is interesting to think about — Miyamoto Musashi notes in the Book of Five Rings that the most difficult stance to face is that of no-stance, where it is impossible to discern what the opponent is thinking, or what diagnosis they have (indeed, the policy reveals the diagnosis, and the coherent actions reveal the policy – so when reverse engineering a strategy start from asking “what coherent action is my opponent taking?”).

Your stance then defines your actions and is the testing ground for proposed tactics — does the action resonate with the policy or is it incoherent? A lot of organisations will through the kitchen sink at the problem, exhibiting not only incoherence, but inconsistency over time as well. At the very limit this becomes a strategy – the madman’s stance, as developed by Thomas Schelling – but before you reach that point (where the enemy will be paralyzed by their inability to see any pattern in what you do) you will be grossly inefficient.

So few people get these three, seemingly simple, steps right. It is a nice exercise to think through and look at how they apply to you or any organisation you are interested in. Do they have a good strategy or a bad one?

A strategy, then, is a pattern, and at the limits the complete lack of a pattern is also a strategy – but broken, incoherent and inconsistent patterns are not strategic.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s