Bad Strategy

Strategy is a concept developed in warfare which if applied with comparable insight, concentration, courage and commitment is fundamental to sustained business success. However many so-called “strategies” are deficient, non-existent or just plain BAD. Sadly, unrecognized bad strategies take years to play through and deliver their destruction. Among our publicly listed companies, rural, finance and tourism sectors provide rich case studies.

Clearly, formulating good strategy is difficult, requiring insight and very skilled judgment. Having studied strategy at Masters’ level, consulted in the field for years, and been a constant advocate for strategy emphasis at board tables, I have kept up my CPD on the topic. A 2011 book, “Good Strategy / Bad Strategy” by Richard Rumelt, is one of the best business books of the year, as judged by the Financial Times this week. See goodbadstrategy.com

Rumelt argues that Bad Strategy ignores the power of choice and focus, trying instead to accommodate a multitude of conflicting demands and interests. It too often avoids the hard work of thinking and choosing by using prayer terminology of vision, mission, values and goals. While these are fine behaviours and aims, they fail to describe a set of practical actions to move forward.

Rumelt’s hallmarks of bad strategy comprise:

  • Failure to face the problem: A strategy is a way through a difficulty, a response to a challenge. Only by honest analysis of the real problem can a mitigating strategy be developed.
  • Mistaking goals for strategy: Just to state the goal is not sufficient. The leadership must create the plan, the conditions and the resources to enable its achievement. (Rumelt’s example is the Western Front of 1915-17, where Butcher Haig’s goal statements – “to the top of Passchendaele Ridge, lads!” – were not strategies and did not enable success.)
  • Bad strategic objectives: If objectives are fuzzy, scrambled, contradictory, or too many, they are not strategies. A long list is merely that. “Blue skies” objectives are just “nice-to-haves”. Good strategy works by focusing energy and resources on one (or maybe two) pivotal objectives, and by a powerful linkage between the challenge and the actions for achievement.
  • Fluff: weasel words, clichés, PC, total “bullshirt”

Two main causes of bad strategy are:

  • The inability to choose: Strategy involves focus and thus choice. Strategies formed from compromise are inherently weak.
  • Template-style strategy: Just to fill in the boxes is lazy thinking. The hard and intellectually honest work is to confront such questions as “Do we really have a competitive advantage? If not, why are we competing in this category?”

Rumelt closes by describing his Kernel of Good Strategy, comprising 1) A diagnosis, 2) A guiding policy, and 3) Coherent actions.

Seems like a smart and practical approach. Worth a go!