Have an ambition yet no strategy?

Agreed a strategy yet without challenge statements, roadmap or trade-offs?

Then according to Rumelt, you have a bad strategy.

Here, red10 ‘s Will Sudworth summarises Rumelt’s findings from Good Strategy Bad Strategy and shares experience in facilitating the co-creation of what Rumelt calls the Crux or Kernal of Strategy.

Honestly state problems, pivot to create/use strengths, easy to say

In his classic book Good Strategy, Bad Strategy, Rumelt opens with a story about Nelson.

Outnumbered and outgunned by Napoleon’s ships, yet believing them to be less experienced at sailing and less skilled in close-combat, Nelson’s strategy was to:

  • Attack on a day with lots of sea-swell.
  • Drive perpendicularly at their lines rather than the orthodox parallel lines, so as to force close-combat.
  • Take the highest risk with Nelson’s first few ships.

Whilst Nelson died that day, not one of his ships sank

Rumelt argues that this is GOOD strategy:

  • It’s open and honest about the challenges.
  • It creates new strengths through a change in viewpoint.
  • It is easy to remember and say.
  • The strengths in the strategy directly address the challenges.
  • The tradeoffs are clear.

Rumelt also argues that this GOOD strategy avoided the four hallmarks of BAD strategy

Hallmarks of BAD strategy

  1. Fluff, ie words that could mean anything.
  2. Failure to face the challenge, ie not being honest about the difficulties facing you.
  3. Mistaking ambition for strategic action, ie believing that positive mindset and vision is enough, rather than stating concrete actions. To quote a related book: Hope is not a strategy.
  4. Bad strategic objectives, which Rumelt further defines as:
    • Dogs dinner of “to do” lists, ie no focus.
    • “Blue sky” with no idea how to get there.
    • Judgement like “underperformance” without facts/logic on causes.
    • Believing that “common values” ARE the strategy.
    • Believing that a pattern of meetings, or ways of working, are the strategy.

The Crux = Rumelt’s Kernal
The bare bones of GOOD Strategy

Rumelt advises organisations to create strategies that have a kernal of three elements that he later calls The Crux, which became the name of his sequel book.

These three elements are:

  1. Challenge Statements that diagnose and explain the nature of the challenge, summarizing the critical elements
  2. Guiding Policy, an approach for coping and overcoming the challenges. Like guardrails on a bowling alley.
  3. A coherent set of actions that form a Roadmap

Rumelt calls these the Crux or the Kernal to make it clear that these are the bare bones of a GOOD strategy. All the other elements ARE needed, eg vision, values etc, yet these other are supporting players.

Exploring these three elements a little further…

1.   Diagnosis Challenge Statements

The key question to elicit the statements is “What’s going on here?”

A diagnosis is generally denoted by

  • A metaphor
  • An analogy
  • A reference to an accepted framework

red10 recently helped a client to create a handful of challenge statements, ie around five (plus or minus two) of them.

How did we generate these?
First we took a run up by recapping on

  • The latest company ambition
  • The last conversation we’d had on our departments ambition
  • Our latest insights from our customers

We then stopped, reflected, and on our own (to avoid groupthink): wrote lots of sticky notes, with one sticky for each possible Challenge Statement they could see.

We then clustered and discussed them, refined them, prioritised and sharpened them to align on the most important handful.

2. Guiding Policy

Romelt explains it like this:

Like the guardrails on a highway, the guiding policy directs and constrains action without defining its content. Good Guiding Policies are not goals or visions…rather they define a method…[that] anticipates…reducing complexity and ambiguity…exploits leverage…increases coherence”. Or aother way of putting it “without a guiding policy there is no principle of action to follow” and no actions that would be coherent.

Romelt gives this as an example of a Guiding Policy:

“Use cross-selling across the network”

A useful example that shows this well is a friend of his with a grocery store. His friend diagnosed the challenge as “a competition with the local supermarket, i.e. how did she draw customers away from a 24/7 lower cost competitor?”

She realised she had a choice on whether to prioritise one of her 2 core customer groups:

  • price-sensitive students
  • time-sensitive professionals.

There were more students, but the professionals spent more.

She settled on the guiding policy of “prioritising the busy professional who has little time to cook”

Examples of coherent actions that followed this principle, included:

  • Removing selling space for munchies to students and instead offering prepared high-quality take-home foods.
  • Professionals, unlike students, didn’t shop at midnight –  so she closed earlier and used the released resourcing for a busy spurt around 5pm when professionals shopped.

3.   Action Filled Roadmap

The client red10 were working with wanted to crowd source ideas for their Challenge Statements, given the Guiding Policy.

They did this by:

  • Sharing the Strategy at a Town Hall, and giving staff reflection time
  • Then brainstorming at each LT members team
  • Then arranging time for the LT to hear project-pitches, Dragon’s Den style, before prioritising, testing with customers and commissioning sponsored work
  • Building a coherent roadmap from this pipeline of projects

What else does Rumelt suggest?

Rumelt’s classic book then continues with thirteen chapters teaching strategy principles such as “sources of power” together with examples.

Rumelt encourages organisations to keep their strategy alive, and to refresh it out of step with the budget processes, so that it has decent time in its own right.

In Summary

We found that the Good Strategy Bad Strategy approach:

  • Works well for clients that can carve out significant time to invest in this, that is worth the return on investment
  • Works well for clients that want and appreciate a thoughtful, sequential and logical process allowing time to reflect and think

All thoughts and suggestions on this approach are very welcome…

Want to delve further?