Keeping strategy relevant

PROFESSOR Rumelt teaches at UCLA’s Anderson School of management and was described by the McKinsey Quarterly as “Strategy’s Strategist”.

As revealed in the book, he mixes in very heady circles working with the highest levels in the American military, government and international business. The book includes descriptions of his conversations with Steve Jobs about Apple's turnaround, with Jacques Nasser on Ford’s brands and profits, and Shell’s scenario planning guru, Pierre Wack.

The title of this remarkable book sums up a central concept in Rumelt's approach to strategy – there is good strategy and bad strategy. And the absence of a good strategy is not neutral strategy, it is bad strategy.

It is commonplace for business leaders to equate platitudinous values with strategy: “We will be the leader in quality, delivery, and customer relations.” Equally, buzzwords and motivational slogans are confused with strategy, but so is the hope-filled pursuit of “big, hairy, audacious” financial goals.

Rumelt argues cogently and demonstrates convincingly that these are not strategies, and by being mistaken for strategies they are at once unhelpful and misleading.

Equally unhelpful and misleading are the definitions of strategy which overemphasise mere aspects of the process, such as competition. Central to so much work in the field of strategy is identifying one's competitors and competitive advantage.

While this may be relevant in certain strategic endeavours, it is certainly misleading when applied to the strategy of a government department, the military and even most commercial undertakings. What is the competitive advantage of Home Affairs? Who is the competition?   

Good strategy consists of an amalgam of three concerns that Rumelt calls “the kernel”.

The first is identifying the real nature of the challenge facing the enterprise. “We were the dominant player in the industry, but are now fifth,” is only a superficial description of the situation, not the real nature of the challenge. “Our schools are failing to educate our children” is similarly only descriptive. 

The identification of the real nature of the challenge requires deep analysis, with a view to finding levers that can be manipulated to address the real issues. We are facing competitors with world class systems, very deep pockets and a 30-year view of our industry.

The administration of education at the macro level is hindering the efficient use of teacher time and equipment. This strategic concern requires information, serious investigation and fact-based insight.  

The second aspect is the design of a guiding policy that produces the advantage that is required to overcome the challenge. Early in his career, Rumelt worked on the Voyager spacecraft to which he attributed his appreciation of integrated design.

If you want to optimise any aspect of the craft, you have to reduce some other feature to meet the weight budget. If you reduce the weight of the radioactive thermal power, you have less power to the radio which will require a more focused antenna, resulting in requiring more fuel for altitude control.

Each part of the system has to be reconsidered and shaped to meet the needs of the rest of the system. The guiding policy has to do the same: hiring more sales staff to meet the sales targets will mean less money for something else, such as quality control which may well affect sales.

The third aspect of the kernel is creating a set of coordinated actions to carry out that policy. If one thinks of the organisation as a supply chain, it is clear that the benefit to the whole will only come when the parts are all moving in the appropriate sequence and at the appropriate pace.

First, for example, we fix the quality issues and only then do we upgrade our sales staff to communicate this while simultaneously altering our marketing approach.   

If you are serious about your business, then you must have a serious strategy. Ultimately, a good strategy works by harnessing and applying power where it will have the greatest effect. 

This book is surprisingly accessible and clear. Not only does it provide the sharpest understanding of strategy formulation I have ever come across, but it also shows Rumelt’s astonishing grasp and integration of economics, finance, technology and history.

It is a call to go beyond the superficial and to address hard questions with honesty and a critical mind.

Readability:            Light --+-- Serious

Insights:                High -+--- Low

Practical:                High +---- Low

*Ian Mann of Gateways consults internationally on leadership and strategy.