PROFESSOR Rumelt teaches at UCLA’s Anderson School of management
and was described by the McKinsey Quarterly as “Strategy’s Strategist”.
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
Rumelt argues cogently and demonstrates convincingly that these are not
strategies, and by being mistaken for strategies they are at once unhelpful and
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.
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
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
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
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.
Insights: High -+--- Low
of Gateways consults internationally on leadership and strategy.