6 points about strategy.

“6 points about strategy”

Darrell Velegol, PhD

2024mar13

Setting strategy is NOT just setting goals! That is one line from “Good Strategy/Bad Strategy: The difference and why it matters” by Richard Rumelt, an A+ book for me. Here are 6 points I took from his 2011 book:

1. Bad strategy = a) fluffy words + b) failure to define and face challenge + c) mistaking goals for strategy + d) bad strategic objectives. Bad strategy is not simply the absence of good strategy. It has these four characteristics. Bad strategy is long on goals (“Our strategy is to be #1 in our markets!”), and short on policy (“We are going with projects that are “too safe”, and so we will emphasize higher risk projects, with higher margin.”). Bad strategy avoids the hard WORK of diagnosing and then formulating a correct good strategy. He thinks the 2008 financial bailout did not have a good strategy, because it had no diagnosis.

2. Good strategy = a) Diagnosis that simplifies the complex + b) guiding policy + c) set of coherent actions. Without diagnosis and finding the “pivot point”, your strategy is doomed to fail. Good strategy is NOT goal setting! And it tells you what NOT to do, as well as what TO DO. Good strategy focuses on steps, not slogans or goals, not just “working harder”, not just “believing bigger”.

3. Designer over decision maker. Sometimes we think we want a “decision maker” for hard choices. What we really need is a “designer” who can use a strategy to make a series of choices, across domains and across time. The designer sees the dynamic web of choices and their tradeoffs, and applies the strategy to choose well.

4. Hypothesis for focus. A good strategy can be seen as a hypothesis! It is an educated guess about the pivot point that will change the future. It FOCUSES the “punch”, rather than spreading resources.

5. Chain-link systems. If the strategy extends across multiple functions or domains (e.g., R&D, marketing, manufacturing, legal, supply chain), it becomes VERY hard for competitors to copy! You have effectively built a moat around your castle!

6. Pivot point. Any successful business must KNOW or SEE something that others do not. That’s the pivot point, your own little “secret”. Privileged information is accumulated, leading to the answer to Peter Thiel’s famous interview question: “What important truth do very few people agree with you on?” Find the anomaly.

I will write further about strategy in a future blog.