August 2011 | Do You Have a Good Strategy or a Bad Strategy?

August 2011

Do You Have a Good Strategy or a Bad Strategy?

Strategy – how hard can it be? You define some goals, plan some to-dos, and then get it done. It sounds pretty easy. Except according to a June 2011 McKinsey article, it’s not.

In the article, strategy-guru Richard Rumelt breaks down the common elements of both bad strategies and good strategies.

Rumelt has identified several common reasons why companies find it so difficult to generate great strategies and why they usually come up with bad strategies:

• The top-priority problems are not clearly identified and they wind up solving a problem that turns out to be irrelevant in the bigger picture of success or failure in the marketplace.

• Goals are substituted for strategies – but the goal only defines the end-zone; a strategy provides a road-map describing how to actually get into the end-zone.

• Companies come up with an overwhelming list of to-dos and call it a long-term strategy. And then no one actually finishes any of the to-dos since the “strategy” is so long-term anyway.

• A blizzard of buzzwords and buzzphrases obscure the real meaning of goals and approaches as they are communicated throughout the company.

• Choices are not actually made and everything remains on the table as a potential option – for which there are never enough resources or time.

In contrast, Rumelt defines 3 common elements of good strategy, which he defines as “coherent action backed by an argument”. He argues that great strategies focus on just a few critical issues, not hundreds of different issues and details, and that they focus actions and resources exactly (and only) on those critical issues.

1. “A diagnosis”: a simplification of the hurricane of details inherent in the challenge or the opportunity and that focuses attention on the few critical aspects of it.

2. “A guiding policy”: a high-level description of approaches to resolve the challenge or drive value from the opportunity.

3. “Coherent actions”: specific, aligned activities that are focused on addressing the challenge or the opportunity.