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Book Summary: Good Strategy Bad Strategy
'Strategy' is a widely used term, everybody knows its importance and why we need it. But very few understand what it is and how to properly construct one.
Richard saw that organizations and leaders today are plague with making bad strategy, and this needed to be addressed. Hence, this book was written, with purpose and meaning.
The book introduces the essence of strategy and a few of its many aspects. And though it is written with good intentions, it is far from perfect.
However, the intended message is clear: 'What is good strategy? What is bad strategy? What are the differences? Why it matters?' All this are covered within the first 5 chapters of the book.
Chapter 1: Good strategy is unexpected
The idea and concept of strategy is so terribly stretched that people don't recognize strategy when they see one, or mistakenly identify non-strategy as strategy. Hence to have a 'real' strategy is really unexpected, especially when nobody knows what it looks like.
Chapter 2: Discovering power
By moving away from conventional wisdom, by looking at things from a difference angle and perspective, when you view the matter differently, you gain knowledge and better understanding. This is power, and the start to strategy.
Chapter 3: Bad strategy
Any strategy that have any 1 of the following, is bad strategy.
Strategy with lots of fancy words and hard-to-understand sentences.
In any given situation, you'll want to make a complex matter simple and understandable. If your strategy is doing the opposite, then that's obviously bad.
2) Failure to face the challenge
Strategy that does not identify or address the problem.
Basically, you can't fight what you can't see. Can you see the problem here?
3) Mistaking goals for strategy
Strategy that doesn't tell you 'what to do' and 'how to get there'.
Yes, we all want 10% growth increase, yes we know its important, but how?
4)Bad strategic objectives
Strategy that has some direction, but doesn't get you anywhere.
Throwing money at a problem isn't a strategy and it won't make the problem go away.
Chapter 4: Why so much bad strategy?
- Strategy creates change in any establishment, and change isn't always well-received. There will be compromise, some people will be unhappy, and if leaders aren't willing to make tough decisions, change can't happen, and so can't strategy.
- Templates are very popular today and there are templates for everything, including strategy. But unfortunately in strategy, there is no 'one size fits all'.
- There is much 'New Age' hype on positive thinking. Although motivation is important in any kind of activity, it is not a means-to-an-end. Richard gives the example of the Children's Crusade. They had all the right motivation to carry out their cause, but they lack the right means and capabilities, and things ended disastrously for them.
Chapter 5: The Kernel of Good Strategy
- When cooking up a strategy, you first have to ask "What is going on here?".
If strategy is about getting from point A to point B, then its crucial to first identify what and where is point A. If you don't know where you are on the map, how will you ever get to where you wanna be?
- Once you know where you're at, then its time to decide how you gonna get there. What path are you taking? What mode of travel? How much budget? etc.
- And once all that is decided, you plan your first steps. Buy the tickets, book the hotels, call the travel agencies, and so forth.
*All these are basic stuff, and yet, how often do you see it being applied?
Honestly, I've never seen it in my office. Have you?
Chapter 6: Using leverage
Good strategy uses leverage, but leverage is hard to describe in this context because it could just about be anything. What I can gather is that you're gonna have to keep your eyes peeled.
Chapter 7: Proximate Objectives
When a chess game begins, do you think a chess master can see all the moves and steps he is going to make to win the game? Well, he can't, so there is no point trying to look too far ahead into the future when constructing a strategy.
Instead, what the chess master does is take positions that create more options and builds advantage. This is what you should do too when deciding on your strategic objectives.
Chapter 8: Chain-link systems
When working with strategy, you'll wanna take note of whether your situation is a chain-link system. In order words, whether it fits into this context: a chain is only as strong as its weakest link. If it does, then identify the weakest link and work on it!
Chapter 9: Using design
People tend to think of strategy as having a set of options and choosing the best solution. But most of the time, it doesn't work that way. Everything is so inter-connected, and changing one thing will inevitably change another. For example, if I have a budget to work with, whenever I increase budget on one end, it automatically decreases on the other!
Chapter 10: Focus
Strategy is focused and specialized, and being focused brings advantage (this is explained in basic economics). Richard uses this chapter to illustrate this concept.
Chapter 11: Growth
Growth is the result of good business management, good policies, and basically good strategy. But when growth becomes your objective, things aren't going to work out so well. When a tree grows, it grows higher while its roots grow deeper. If it decides to just shoot upwards without building its foundation, its gonna fall eventually.
Chapter 12: Using advantage
Competitive advantage is relative or specific to the given circumstances. Once circumstances change, those advantages could become irreverent and obsolete.
Chapter 13: Using Dynamics
The world is constantly fluctuating, its hard to know what will happen tomorrow or the day after. Companies and industries rise and fall. When in darkness, it is important to have a lighthouse as a point of reference. Richard introduces 5 of them. When any of these 5 situations occur, it means the current strategy needs to be re-evaluated.
- Rising fixed cost
Fixed cost in the industry is rising.
Major changes to government policies, especially deregulation.
- Predictable Biases
When everything becomes too 'predictable' or too similar, when companies are all doing the same thing, etc.
- Incumbent Response
The way people in the organization are reacting to the change.
- Attractor States
Chapter 14: Inertia and entropy
- "Even with its engines on hard reverse, a supertanker can take one mile to come to a stop." When faced with change, there will always be some form of resistance. The bigger the organization the bigger its resistance. Many new smaller companies are emerging to take advantage of this and capture the markets.
- Chaos and disorder plagues us everyday and everywhere. When you leave your garden unattended for too long, weeds will grow and your garden will deteriorate. The same applies to your organization and strategy. If you don't take the time to constantly maintain and review, your strategy will eventually crumble.
Chapter 15: Putting it together
Richard goes through the case study of nVidia.
Chapter 16: The science of strategy
In Richard's own words:
"A strategy is, like a scientific hypothesis, an educated prediction of how the world works. The ultimate worth of a strategy is determined by its success, not its acceptability to a council of philosophers or a board of editors.
Science is a method, not an outcome, and the basic method of good business people is intense attention to data and to what works."
Chapter 17: Using your head
Making a list of things to do is common advice, and yet it is seldom practiced. The power of the list is not the list itself, but rather the process of making the list. Making the list help put things into perspective, whats important and what isn't, and its useful to do it frequently.
Thinking about thinking is an interesting topic, but not many contemplate on this matter. It is important to know if there is flaws in your thinking, in your judgement, are you being bias? why are you bias? and so forth. If you are not aware of these flaws, you are unlikely able to spot the errors in your strategy.
Chapter 18: Keeping your head
One would expect the public to be rational, but time and time again, history has proven the opposite. So just because everybody is into it, doesn't make it right.
London School of Economics and Political Science
Richard Rumelt presenting in LSE
Above is a video of Richard giving a lecture in LSE. He delivers his message on the problems with strategies today, and what makes a good strategy. Everything discussed here compose the first 5 chapters of his book.
All-in-all, 'Good strategy Bad strategy' is a relatively good book, considering the amount of superficial material written on the subject. Although it does provide good pointers for distinguishing good and bad strategy, it falls short in terms of 'how to develop a good strategy'. Also the later chapters can be hard to follow when too many different aspects are discussed.
I would recommend this book only to those who are interested in strategy. As for everyone else, do listen to his lecture, it'll help you identify what strategy your organization is practicing and if it needs to be changed.