Good strategy requires more than financial targets. It’s an aspiration with a problem to solve.
Richard Rumelt, author of Good Strategy/Bad Strategy: The Difference and Why it Matters, opened CEO/Executive Team Network in Nashville this week with a discussion of strategy—and what it is not.
Bad strategy is not simply a strategy that doesn’t work, he said. It’s not a miscalculation.
You will know something is bad strategy if:
- It’s just fluff, like “we will strive for customer-centric intermediation.” (What does that even mean?)
- It’s just a bunch of financial targets;
- The actions are incoherent; or
- It’s an aspiration without a diagnosis of a problem. “If you don’t know what the problem is you can’t solve it,” said Rumelt, the Harry and Elsa Kunin Professor of Business & Society at UCLA Anderson.
“Another sign of a bad strategy is what I call a dog’s dinner”—a cooking mishap best left to your pet—he said. He shared an example of the “strategy” for a city in the Pacific Northwest. This city had 47 strategies and 178 action items. Action item number 122 was “develop a strategy plan.”
“A strategy is not a list of everything you’re going to do,” Rumelt stressed. “A strategy is a coherent mix of policy and action designed to surmount a high-stakes challenge.”
An essential kernel of a good strategy is overcoming a crucial challenge. In your strategy, there needs to be a diagnosis of your key challenge, a guiding policy and coherent action steps.
Most companies miss the diagnosis stage, Rumelt said. “Business people don’t like to acknowledge that they have a problem.”
Intense focus—on one or two priorities—is important for strategy. But having focus means making hard choices. “Focusing on A means doing less of B. That’s the hard part,” Rumelt said. “It means pushing aside whole things that could be.”
Theresa Witham is CUES’ managing editor/publisher.
CEO/Executive Team Network is a key gathering of CUES members each year.