This epic read on business strategy examines what defines good and bad strategy, what powers good strategy, and what strategic thinking is and how to do it.
Not small subjects! The value-per-page ratio is high throughout, as the whole book comes in at just under 300 pages.
The book is split into 3 roughly-equal-sized sections.
- Good and bad strategy
- Sources of power
- Thinking like a strategist
Exploring the definition of strategy might seem bland at first glance. When it’s the first time being exposed to a thoughtful description of the components of strategy, however, it’s quite tumultuous.
During the first section, I was forced to re-examine my perception about what “strategic” work is. I was confronted with a series of uncomfortable realisations about strategic work I’m responsible for in my work. I was put face to face with a definition of strategy that found my own work on strategy wanting. I was putting together a brief on a new brand strategy, and I cannot stress how much more robust that brief became through the challenges put forth in section 1.
Especially the parts of section 1 that deal directly with bad strategy were illustrative of some shortcomings that I had to rectify.
Section 1 also describes “The Kernel”, which author Richard Rumelt describes as the core of any good strategy.
The Kernel comprises of 3 elements:
- A diagnosis
- A guiding policy
- Coherent actions
A diagnosis that clearly describes the problems and challenges to overcome.
A guiding policy that describes the overall approach to overcoming the problems and challenges.
A set of coherent actions, aligned with the guiding policy, that are designed to further progress at overcoming the relevant problems or challenges.
This concept of a “core” of good strategy served as a powerful tool for me when describing the core of the brand strategy, and considering its validity as a true strategy.
Good strategy is unexpected
Richard Rumelt – Good Strategy Bad Strategy
Note: Assuming this statement is true, it’s striking. Rumelt brings up several examples where competitors could easily have anticipated a strategic response, but failed to. Even though good strategy is accessible to any business that so chooses, it’s so rarely used that even having a coherent strategy comes as a surprise.
Section 2 deals with where the power in a good strategy comes from.
Rumelt lists several sources of power, making this book worth picking up again whenever it’s time to reconsider where competitive advantage in one’s business really comes from.
One that really stuck with me was “Chain-Link Systems”. The idea that if a system is designed in such a way that it only works if duplicated 100%, and it’s sufficiently difficult or uncomfortable for the competition to duplicate 100%, it will yield no (effective) competitive gains for a competitor to copy only parts of the strategy. Rumelt gives Walmart as an example of such a system. The Walmart Network, combined with advanced computer-rigging and other large initiatives (go read the book again, page 116), made Walmart’s system extremely powerful, and extremely hard to copy from. Having many stores does not do much. Having smart warehouses does not do much. Having the massive store network run by algorithms; that makes a difference (that’s the abridged version).
Among others are finding and using existing leverage (small actions that may yield outsized results), proximate objectives, focusing, using existing advantages, and using market dynamics (hunting for inflection points or other market shifts).
The third and final section reads like a self-help manual for strategic thinking. It’s not bad, but it’s skimmable in the sense that a lot of the material is covered in more detail in other works. It’s good material, but it’s not the crown jewel of this piece.
One interesting note, which I’ve not come across in writing before, is this: Deduction is ONLY enough if you already know everything worth knowing. In most cases however, humans have imperfect/imbalanced information. So inductive reasoning is absolutely key in strategic thinking. Estimation, taking a guess, coming up with a hypothesis, experimenting. Whatever we might call it. It’s part of what makes a great strategy – combining inductive and deductive reasoning to puzzle out “The Kernel” of a strategy, and then getting to work.