#224: How to Spot Bad Strategy

Dear Friends

Today I am writing to a sonorous soundscape provided by a pod of Bryde’s Whales. They’re a few dozen metres offshore, breathing gently. They’ve been there for the last two days, surfacing, glistening, gliding, exhaling, inhaling, delighting; occasionally they arch gently, their tails breaking the bay’s still surface as they dive deep searching for food and fun. One hundred years ago they were hunted here. Whaling ended in False Bay in 1935.

Last week, we started exploring strategy through the prism of Richard Rumelt’s Good Strategy Bad Strategy: The Difference and Why It Matters (Rumelt is Professor Emeritus of Strategy at UCLA’s Andersen School of Management).

This week we look at how to identify bad strategy.

/strategy
Rumelt recounts meeting a potential client. The client spouts motivational cliches and ambitious goals, using phrases like ‘will to win’ and ‘work hard’. He’s set a target for his company to grow 20% annually while maintaining a 20% profit margin. Of course, he calls it ‘Strategy 20/20’. After all, it is what one must do.

When Rumelt questions what the company will do to achieve its ambitions, he reaches for Jack Welch, “We have found by reaching for what appears to be impossible, we often actually do the impossible”.

Defeated, Rumelt says, “If you continue down the road you are on you will be counting on motivation to move the company forward. I cannot honestly recommend that as a way forward because business competition is not just a battle of strength and will; it is also a competition over insights and competencies. My judgment is that motivation, by itself, will not give this company enough of an edge to achieve your goals”.

Motivation is important. Indeed, it is essential, as are ambitious goals, a will to win and working hard. None of them are strategy.

He gives us a quick way to spot bad strategy – “Executives who complain about ‘execution’ problems have usually confused strategy with goal setting. When the ‘strategy’ process is basically a game of setting performance goals—so much market share and so much profit, so many students graduating high school, so many visitors to the museum—then there remains a yawning gap between these ambitions and action. Strategy is about how an organization will move forward. Doing strategy is figuring out how to advance the organization’s interests”.

Use it together with Verne Harnish’s “The way to know if you have a strategy? Do you say ‘no’ 20 times more than you say ‘yes’” and you’ve got a 60-second test for your business’s strategy.

If you’ve got execution problems, and your ‘strategy’ has mostly said yes to the lobbying from each divisional head in your business, you probably have what Rumelt calls bad strategy.

Good strategy has an execution plan that concentrates resources.

He says, “Bad strategy tends to skip over pesky details such as problems. It ignores the power of choice and focus, trying instead to accommodate a multitude of conflicting demands and interests” and “Bad strategy may actively avoid analyzing obstacles because a leader believes that negative thoughts get in the way. Leaders may create bad strategy by mistakenly treating strategy work as an exercise in goal setting rather than problem solving. Or they may avoid hard choices because they do not wish to offend anyone—generating a bad strategy that tries to cover all the bases rather than focus resources and actions”.

Rumelt tells us to look for four warning signs:

1. Fluff, “… a form of gibberish masquerading as strategic concepts or arguments”.
2. When key challenges are not identified and defined – “When you cannot define the challenge, you cannot evaluate a strategy or improve it”.
3. When it is a “statement of desire rather than plans for overcoming obstacles”.
4. When you have ‘bad strategic objectives’ – they visibly fail to address or are disconnected from the critical issues or are simply not possible given the firm’s resources.

Assess your strategy:

1. Does it clearly define your business’s key challenges? Is that definition based on rigorous analysis?
2. Is it expressed in clear, actionable language? If it is a jumble of jargon, you can be reasonably confident it ain’t strategy.
3. Is a list of ambitious goals with no clear actions?

Rumelt concludes, “Bad strategy is long on goals and short on policy or action. It assumes that goals are all you need. It puts forward strategic objectives that are incoherent and, sometimes, totally impracticable. It uses high-sounding words and phrases to hide these failings”.

//self
Peter Drucker begins his classic leadership text The Effective Executive , “In forty-five years of work as a consultant with a large number of executives in a wide variety of organizations—large and small; businesses, government agencies, labor unions, hospitals, universities, community services; American, European, Latin American and Japanese—I have not come across a single ‘natural’: an executive who was born effective. All the effective ones have had to learn to be effective. And all of them then had to practice effectiveness until it became habit. But all the ones who worked on making themselves effective executives succeeded in doing so. Effectiveness can be learned—and it also has to be learned.”

Rumelt makes a similar point about why good strategy is so rare, “In general, people will not push further because the analysis of unstructured information is hard, time-consuming work that requires both a rich knowledge of facts and well-developed skills in logic, deduction, and induction”.

Drucker and Rumelt guide us in the same direction, being effective, and being truly strategic, are not gifts from the gods that some have, and others don’t, they are the product of constant, consistent intentional action and learning to improve our capabilities, knowledge, and awareness.

To be good strategists we need to understand the world we live in, our customers lives, the trends that shape both, and and and.

Good strategists immerse themselves in learning. They understand how they, and others, think so they can spot bias. They refuse to accept the easier answer. They ask why and what and how. Repeatedly. They formulate hypotheses and look for data to challenge or confirm them.

Good strategy is hard work. It is why there are so few.

(If you want to build your strategy muscle, these six books will help).

///soul
Antjie Krog is one of South Africa’s pre-eminent poets, activists and thinkers. In this Artefacts of Writing interview she reflects how she came “to take definite steps to resist becoming a celebrity”.

One trigger was, “when Time magazine published their list of best statesmen, great leaders of the 20^th century. I assumed Nelson Mandela would be there. But no, he was under icons. To my horror I realised that that was a castration of his powerful message. It no longer mattered what he said, he was simply the kind handsome black old man everybody likes to celebrate. The deep challenging values he held were of no importance. His celebrity status disempowered his life’s work”.

Like corporate jargon, the drive to celebrity disempowers us. We all encounter it. Most of us have some or other social media presence. The currency of those platforms are the crumbs of celebrity; likes, followers, shares – all ostensible measures of our influence.

Rumelt, Drucker and Krog remind us that meaningful action, that sustained strategic impact is forged in quieter more considered places.

Krog says, “Celebrity is a trap. It disturbs the focus of doing what has to be done.”

Good strategy needs good analysis. It is ongoing. Focus on what needs to be done, not on what sounds slick.

 All the best

Karl

PS: You can read more Peter Drucker here.