Friday, March 3, 2017

Richard R. Rumelt "Good Strategy/Bad Strategy | The Difference and Why It Matters"

Continuing to analyze my failures in 2016, I decided that strategic thinking is the next thing I should develop. At this point, I thought that strategy is a set of goals, and strategic thinking is the ability to choose and set the right goals. "Good strategy, Bad Strategy" showed me the better point of view.

Talking about the book itself, it reminds me all the non-fiction literature that I've previously read. Tonn of examples proving the theory and authors statements fills more than the half of a book. Examples here are the cases of different companies which are very interesting, especially the one about Starbucks's history. The author shows the bad strategies, explains why they are bad and then builds the theory of a good strategy, and this will be a topic of this post. I will not say anything about bad strategy except that the bad strategy is the lack of one or more aspects of good strategy. And yes, like in the "Art of war" the good strategist should have all aspects of a good strategy to win, otherwise, he is weak.

The strategy should have a kernel. The kernel consists of a set of goals, guiding policy and actions to achieve the goals. Since goals are self-explanatory, the guiding policy is a set of rules that you need to follow to achieve your goals. For example, for the USA in the cold war, the guiding policy was to focus on technologies to develop an attacking potential. The goal was to defeat the USSR. When you defined the goal and guiding policy then it is time to define the set of actions that you need to do at the start. It is not necessary to plan the actions from start to finish, but it is necessary to understand what you should do first. That is how the kernel of your strategy will look like.

From my point of view this is quite obvious after you read about it, but when I first thought about the strategy I thought only about the goals. When you set your goals you don't understand how to achieve it. I tried to define the set of actions that should lead me to the goal, but it was kind of random, like walking blindly in the fog. What I was lacking is the guiding policy which would help me with choosing the right actions.

The kernel is the essence of strategy, but the most important thing is how to define the kernel? First, you need to understand your goals, and this is the most difficult thing. There are some rules about the goals. The most important thing - they should have a foundation. You can set the blue sky objectives, like improve some metrics by 20%, but this goal is random. Why this metrics? Why 20%? First, you need to understand what will move your business forward. You can analyze your rivals and check, why are they so successful? What did they do? What did they focus on? You need to understand your market (and this can be not only about a business but about any real-life problems), what problems are there, what value can you give to your clients? Then you should think about your strengths. In which areas are you strong? How your strengths can satisfy your clients (solve their problems)? You need to rely on your strength - because it is the only thing that can help you to win the battle. The very important thing is to understand what problems do you have now. What can prevent you from achieving your goal? For example, you decided, that you want to widen your network to the different country. If you don't have good operation processes you will not be able to do this. So the first goal will make the processes in your local shop to be automatic and well organized. If your local shop can successfully control itself, then you can focus on different things, like starting the new shop.

The next thing is a focus. If you have a lot of goals you will not achieve any of it. The difficulty here is that you need to sacrifice something to focus only on one thing. You need to choose and the choice can be hard. That is why you need to understand what is the most important thing that you can do right now. And this is usually the question of detecting the problems. And talking about the problems you always have a lot. You need to find the majority of them and then decide with which should you do right now. How? The questions above should help you. Detect what will help you to dominate and find the problem that intervenes it. Very important thing that usually finding the one problem will be enough for your brain. But in the real life, you need to find more than one. Rumelt talking about the panel of experts in your head. Imagine that there are four or five people whom you trust. When you define the problem they start to discuss it and tell is it important or not. After they finished the discussion, try to find the next problem and discuss it again this way. That will help you to trick your brain and detect the correct problems.

This book revealed a couple of things that I knew about but didn't want to think about. It changed my view on a strategy and helped me to plan better and to retain the focus. This book is not small but full of interesting cases and thoughts, so I recommend it to anyone who wants to upgrade their strategy skills.

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