Friday, September 23, 2011

Good Strategy Bad Strategy: The Difference And Why It Matters By Richard Rumelt

Good Strategy Bad Strategy: The Difference and Why It Matters

Good Strategy Bad Strategy: The Difference and Why It Matters
By Richard Rumelt

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Product Description

Clears out the mumbo jumbo and muddled thinking underlying too many strategies and provides a clear way to create and implement a powerful action-oriented strategy for the real world
 
Developing and implementing a strategy is the central task of a leader, whether the CEO at a Fortune 100 company, an entrepreneur, a church pastor, the head of a school, or a government official. Richard Rumelt shows that there has been a growing and unfortunate tendency to equate Mom-and-apple-pie values, fluffy packages of buzzwords, motivational slogans, and financial goals with "strategy." He debunks these elements of "bad strategy" and awakens an understanding of the power of a "good strategy."

A good strategy is a specific and coherent response to—and approach for overcoming—the obstacles to progress. A good strategy works by harnessing and applying power where it will have the greatest effect in challenges as varied as putting a man on the moon, fighting a war, launching a new product, responding to changing market dynamics, starting a charter school, or setting up a government program. Rumelt's
nine sources of power—ranging from using leverage to effectively focusing on growth—are eye-opening yet pragmatic tools that can be put to work on Monday morning.

Surprisingly, a good strategy is often unexpected because most organizations don't have one. Instead, they have "visions," mistake financial goals for strategy,
and pursue a "dog's dinner" of conflicting policies and actions.

Rumelt argues that the heart of a good strategy is insight—into the true nature of the situation, into the hidden power in a situation, and into an appropriate response. He shows you how insight can be cultivated with a wide variety of tools for guiding your
own thinking.

Good Strategy/Bad Strategy
uses fascinating examples from business, nonprofit, and military affairs to bring its original and pragmatic ideas to life. The detailed examples range from Apple to General Motors, from the two Iraq wars to Afghanistan, from a small local market to Wal-Mart, from Nvidia to Silicon Graphics, from the Getty Trust to the Los Angeles Unified School District, from Cisco Systems to Paccar, and from Global Crossing to the 2007–08 financial crisis.

Reflecting an astonishing grasp and integration of economics, finance, technology, history, and the brilliance and foibles of the human character, Good Strategy/Bad Strategy stems from Rumelt's decades of digging beyond the superficial to address hard questions with honesty and integrity.

From the Hardcover edition.

Product Details
  • Amazon Sales Rank: #5936 in eBooks
  • Published on: 2011-07-19
  • Released on: 2011-07-19
  • Format: Kindle eBook
  • Number of items: 1
Editorial Reviews

Amazon.com Review
Clears out the mumbo jumbo and muddled thinking underlying too many strategies and provides a clear way to create and implement a powerful action-oriented strategy for the real world
 
Developing and implementing a strategy is the central task of a leader, whether the CEO at a Fortune 100 company, an entrepreneur, a church pastor, the head of a school, or a government official. Richard Rumelt shows that there has been a growing and unfortunate tendency to equate Mom-and-apple-pie values, fluffy packages of buzzwords, motivational slogans, and financial goals with "strategy." He debunks these elements of "bad strategy" and awakens an understanding of the power of a "good strategy."

A good strategy is a specific and coherent response to—and approach for overcoming—the obstacles to progress. A good strategy works by harnessing and applying power where it will have the greatest effect in challenges as varied as putting a man on the moon, fighting a war, launching a new product, responding to changing market dynamics, starting a charter school, or setting up a government program. Rumelt's
nine sources of power—ranging from using leverage to effectively focusing on growth—are eye-opening yet pragmatic tools that can be put to work on Monday morning.

Surprisingly, a good strategy is often unexpected because most organizations don't have one. Instead, they have "visions," mistake financial goals for strategy,
and pursue a "dog's dinner" of conflicting policies and actions.

Rumelt argues that the heart of a good strategy is insight—into the true nature of the situation, into the hidden power in a situation, and into an appropriate response. He shows you how insight can be cultivated with a wide variety of tools for guiding your
own thinking.

Good Strategy/Bad Strategy
uses fascinating examples from business, nonprofit, and military affairs to bring its original and pragmatic ideas to life. The detailed examples range from Apple to General Motors, from the two Iraq wars to Afghanistan, from a small local market to Wal-Mart, from Nvidia to Silicon Graphics, from the Getty Trust to the Los Angeles Unified School District, from Cisco Systems to Paccar, and from Global Crossing to the 2007–08 financial crisis.

Reflecting an astonishing grasp and integration of economics, finance, technology, history, and the brilliance and foibles of the human character, Good Strategy/Bad Strategy stems from Rumelt's decades of digging beyond the superficial to address hard questions with honesty and integrity.

Amazon Exclusive: Walter Kiechel Reviews Good Strategy Bad Strategy

Walter Kiechel is the author of The Lords of Strategy. Until January 2003, Kiechel served as editorial director of HBP and senior vice president in charge of its publishing division, with responsibility for the Harvard Business Review; HBS Press, the company's book-publishing arm; the newsletter unit (which he helped start in 1996) as well as HBP's video, reprints, and conference businesses

Considering the source, this is a shocking book. For over 40 years Richard Rumelt has made distinguished contributions to the field of strategy, in his theorizing, teaching, and consulting. Now comes the deponent to tell us that what purports to be strategy at most organizations, not just companies but not-for-profits and governments as well, hardly merits the name. Instead it represents what he calls "bad strategy"--a list of blue-sky goals, perhaps, or a fluff-and-buzzword infected "vision" everybody is supposed to share.

Refreshing stuff this, seeing the corporate emperor revealed not in his imagined suit of armor but rather in something resembling a diaphanous clown suit. Rumelt drives the point home with a simple explanation for why most organizations can't do "good strategy": the real McCoy requires making choices, feeding a few promising beasties while goring the oxen of others at the management table.

But the jeremiad, fun as it is--and it is fun, Rumelt has a good time punching holes in the afflatus of bad strategy--isn't my favorite part of the book. That would be the second section, with the slightly daunting title "Sources of Power." To be useful to a practitioner, a book on strategy needs not only a straightforward framework but also a certain craftiness, a set of ideas that prompt the reader to think "What a neat idea" or "How clever of them." Rumelt has the clear, elegant framework in what he calls the "kernel"--a diagnosis explaining the nature of the challenge, a guiding policy for dealing with it, coherent actions for carrying out the policy.

In "Sources of Power," though, he goes deeper than the merely crafty to identify potential levers of for strategic advantage--proximate objectives, design, and focus, among others--that transcend the purely economic. Repeatedly he demonstrates how to think down through the apparent challenge, with questions and then questions of those questions, to get at what can be the bedrock of a good strategy.

In a final section on thinking like a strategist, we get a sense of what a delight it must be to sit in Rumelt's classroom, or with him on a consulting assignment, as he leads us through the best kind of Socratic dialogue to appreciate the kinds of blinders or mass psychology that can pose the final barriers to our forging clear-eyed strategy.

If you want to make strategy, or be an informed part of the ever-evolving conversation around the subject, you will need to read this book. My bet is that you'll enjoy the experience. --Walter Kiechel

Review
"Drawing on a wealth of examples, Rumelt identifies the critical features that distinguish powerful strategies from wimpy ones—and offers a cache of advice on how to build a strategy that is actually worthy of the name.  If you're certain your company is already poised to out-perform its rivals and out-run the future, don't buy this book.  If, on the other hand, you have a sliver of doubt, pick it up pronto!"
--Gary Hamel, co-author of Competing for the Future

"..Brilliant … a milestone in both the theory and practice of strategy. … Vivid examples from the contemporary business world and global history that clearly show how to recognize the good, reject the bad, and make good strategy a living force in your organization." --John Stopford, Chairman TLP International, Professor Emeritus, London Business School

" Penetrating insights provide new and powerful ways for leaders to tackle the obstacles they face. The concepts of "the kernel" and "the proximate objective" are blockbusters. This is the new must-have book for everyone who leads an organization in business, government, or in-between."--Robert A. Eckert, chairman and CEO of Mattel

". Richly illustrated and persuasively argued … the playbook for anybody in a leadership position who must think and act strategically. "  --Michael Useem, Professor of Management at  the Wharton School, University of Pennsylvania, and author of The Leadership Moment

"… Rumelt writes with great verve and pulls no punches as he pinpoints such strategy "sins" as fluff, blue sky objectives, and not facing the problem."--James Roche, former Secretary of the Air Force and president of Electronic Sensors & Systems, Northrop Grumman.

"This is the first book on strategy I have r...

About the Author
RICHARD P. RUMELT is one of the world's most influential thinkers on strategy and management. The Economist profiled him as one of twenty-five living persons who have had the most influence on management concepts and corporate practice. McKinsey
Quarterly described him as being "strategy's strategist" and as "a giant in the field of strategy." Throughout his career he has defined the cutting edge of strategy, initiating the systematic economic study of strategy, developing the idea that companies that focus on core skills perform best, and that superior performance is not a matter of being in the right industry but comes from a firm's individual excellence. He is one of the founders of the resource-based view of strategy, a perspective that breaks with the market-power tradition, explaining performance in terms of unique specialized resources. Richard Rumelt received his doctoral degree from Harvard Business School, holds the Harry and Elsa Kunin Chair at the UCLA Anderson School of Management, and is a consultant to small firms such as the Samuel Goldwyn Company and giants such as Shell International, as well as to organizations in the educational and not-for-profit worlds.

Customer Reviews

Most helpful customer reviews

21 of 24 people found the following review helpful.
5Excellent Perspectives -
By Loyd E. Eskildson
Rumelt's 'Good Strategy Bad Strategy' provides an excellent framework for understanding the difference between good and bad strategies. The material benefits greatly by his inclusion of good and bad strategy examples. Rumelt begins by pointing out that developing and implementing a strategy is the central task of a leader. Strategy, however, does not equate to buzzwords, values, slogans, or financial goals. Good strategy applies power where it will do the greatest good. Most organizations don't have a strategy, let alone a good one.

Good strategy almost always looks simple and obvious, and is built around one or two critical issues. Bad strategy tends to skip over problems. Strategy is about how an organization will move forward. The purpose of Rumelt's book is to clarify the differences between good and bad strategy, and help readers create good strategy. A good strategy is coherent; most organizations pursue multiple objectives that are unconnected with each other, or even conflict with each other. One way to begin is by identifying the leading competitor and asking how that company became that leader, then segueing into how one's own company could also become a leader. (My preference is more direct - ask significant/target customers for advice on how one could substantially increase business volume with them.)

Steve Jobs' turnaround of Apple in 1996 began by shrinking the firm to a scale and scope appropriate for the niche producer it was at the time (4% of the total market). Jobs got Microsoft to invest $150 million in Apple and develop new Microsoft Office software for Apple to deflect Gates' worries over antitrust prosecution. Jobs also cut the number of desktop models from 15 to 1 (too confusing), the number of portable and handhelds to one, cut out all printers and other peripherals, cut development engineers and software development, cut distributors and 5 of its 6 national retailers (part of the rationale for too many models), moved manufacturing to Taiwan, began selling direct via a Web site, and waited for 'the next big thing.' Two years later came the iPod, then online music, and later the iPhone. (Actually, except for the waiting for 'the next big thing,' the previous list consists of 'actions,' not strategy.)

WalMart provides another good strategy example. It contravened the conventional wisdom that a full-line discount store needs a population base of at least 100,000 and replaced it with a network of 150 stores/distribution center that used bar codes, JIT delivery, cross-docking, bringing vendors' shipments into the centers on back-hauls, paying low wages, satellite-based IT and shared data with vendors, and management providing fast follow-up, shared learning, and a more centralized structure (eg. purchasing). Meanwhile, KMart sat and let WalMart run largely unopposed in its rural areas - Rumelt states that when a firm runs away with a market it usually is partly due to competitors sleeping. Blockbuster's sleeping while Netflix developed is another example.

International Harvester was once the 4th largest U.S. corporation. It's '79 'Corporate Strategic Plan' provides an example of poor strategy. The 'plan' was to increase market share, cut costs, and build revenue and profits. The plan, however, ignored its inefficient production caused by union rules and adverse labor relations - something not curable by simply buying new equipment. Administrative overheads were improved, but a 6-month strike got no concessions for IH and the company collapsed. Rumelt makes the point that under-performance is a result - the true challenges (areas to focus on) are the reasons for the under-performance. (Otherwise one is left with Deming's criticized 'management by exhortation.')

Continuing, Rumelt states that the most common pathways to bad strategy are: 1)the belief that all you need to succeed is a positive attitude, 2)a filling in the blanks approach vision, mission, values, strategies, 3)leaders unwilling to make choices among competing parties - often due to internal political conflict involving status gains and losses. Charismatic leadership has nothing in common with good strategy. Jack Welch - "If you don't have a competitive advantage, don't compete." (Get out of the business.)

Peter Senge's 'shared vision' explanation for Ford and Apple's success is nonsense - reality is their successes were due to the special genius of a very few. Three steps to strategy. 1)Diagnosis defines/explains the challenge. 2)Guiding policy is the overall approach to over come the identified obstacles - such policy is especially good if it draws upon sources of competitive advantage. 3)Coherent actions are steps that work together to accomplish the guiding policy. Rumelt then uses education to illustrate, though has difficulty doing so. He begins by stating (correctly) that cultural and socio-economic differences are the primary determinants of pupil achievement. He then incorrectly states that these are not useful policy determinants - reality is that American students would do much better emulating their Asian peers. Given that incorrect premise Rumelt then postulates that since evidence shows school performance is positively associated with decentralization, it should be the focus of policy because it can be changed - regardless of whether organization structure explains most variation in school performance. That's nonsense - standing the Pareto Principle on its head.

Continuing, Gerstner came to a flounder IBM when microprocessors were replacing big-iron, IBM was providing end-to-end computing solutions, and new vendors were fragmented (chips, memory, hard disks, software, operating systems). The thinking when Gerstner entered was that IBM should be split up. Instead, Gerstner returned to providing integrated solutions - this time around customer solutions rather than IBM mainframe hardware platforms. Another example - Wells Fargo has pursued a strategy of large breadth/scope, allowing cross-selling. (Also Citicorp.) Selecting the appropriate customer segment to focus on (eg. busy professionals, or students) is an important strategy component (Drucker's emphasis on 'What businesses are you NOT in?') guiding subsequent decisions with coherence (eg. 'yes' to a 2nd checkout line at the busy 5 P.M. hour, 'yes' to more parking, 'yes' to quality almost ready-to-eat foods instead of snacks, 'no' to late hours.)

Ford in 2000 found itself torn between a policy of 'scale economies' and brand premiums (acquisition of Volvo, Jaguar). It attempted consistency through designing Volvo and Jaguar to use a shared frame - satisfying nobody. No firm has strength in all areas. Likely conflict - evolving from a fast new-product development firm to one with low mass-production costs. Growth through acquisition usually involves paying too much (25% premium, plus fees). Vertical integration creates mismatches of scale economies and is more easily accomplished via contract.

Bottom-Line: Rumelt's 'Good Strategy Bad Strategy' provides a good overview of the topic, aided by examples. However, it would be stronger yet with less verbiage and more focused discussion on the strengths/weaknesses of popular generic strategies - eg. economies of scale and scope (eg. G.M. suffered from too many similar car lines and models), M&A, vertical integration, price wars - especially with assymetric warfare, and the importance of a sustainable competitive advantage.

26 of 32 people found the following review helpful.
2Disappointing
By William H. Franklin Jr.
Based on the glowing reviews, I bought and read this book with great anticipation. As I read the first several chapters, I kept thinking, "Boy, this is going to be really good." The frequency of my highlighting corroborated that. Then, after Chapter 5, The Kernel of a Good Strategy, I expectantly plunged forward thinking the author was finally going to parse his strategy model and give examples -- good and bad -- in which strategy makers had departed from his model. Instead, chapters meandered through "fluffy" (to use one of the author's pejoratives) notions like "proximate objectives" and "chain link systems" and "using dynamics" and "inertia and entropy". Where is this going, I asked? Alas, nowhere. The author had lost his way, my highlighting tailed off to nothing, and I struggled to finish -- which I've just done.

Beyond the promise of those first few chapters, the rest of the book is a brain dump of disjointed concepts, jargon, and not a few self-serving examples of consulting engagements in which Dr. Rumelt's strategic insight was put on conspicuous display. To employ a technique he recommended in his expository on the Tivo case: I wondered what motivated all of these surplus chapters. The only conclusion I could come to was that Rumelt had sufficient material to write about five chapters, but not much more.

7 of 7 people found the following review helpful.
5Refreshingly Blunt
By Maarten van Hasselt
In "about the author" in the end of the book it says that prof. Rumelt is one of the most influential thinkers in the area of strategy. What a shame he has not made more noise earlier. His first book seems quite theoretical but then this one is a gem. There are parts that I would probably have edited out as they are not to the point. That distracts a bit from the main story about strategy. That main story should be obligatory reading: it is important to know where you are (diagnosis), it is somewhat important where you want to end up but it is crucial to define how to get going in the direction of your goals and what you will do about the problems that are there to be resolved. Ignoring the problems, as Rumelt points out, is not a lack of positive thinking but plain lack of prudent and realistic planning. Reading the part on "give it one last push" will show the danger of confusing optimism with being blind sided.

The attack on "fluff", politically correct statements that if de-constructed, as Rumelt does with a very sharp pen, are nothing more than vapid feel good statements is worth the book's price and the time spend reading it. Reading how a cumbersome statement of a bank's strategy is reduced to "this bank wants to be a bank" is amusing if it weren't sad. Clients that I worked with during my consulting years almost always had the issues pointed out in the book: lofty goals but no clear thinking on the barriers that have to be bridged to get there and even less a plan that acknowledges the barriers. And not just employees are needing clearer strategies, people in general expect from their leaders clarity of direction exemplified by what I once read on the wall of a government building in latin-america: "For a captain without a clear course there are no favorable winds". Current political grandstanding discussions in the capital of a major country show the danger of locking in to goals without thinking through the problems that need addressing to have any chance of success.

Highly recommended reading to create clarity about strategy.

http://astore.amazon.com/amazon-book-books-20/detail/B004J4WKEC

 

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