Good Strategy / Bad Strategy Summary

A graphics company contacted the author and strategic management consultant Richard Rumelt for his help in defining its strategy.

During their first meeting, the CEO of the company said he had a “20/20 plan” in mind, that he planned to use as the company’s fundamental strategy. In other words, he planned for his firm’s revenues to increase 20% each year, and for its profit margin reach to achieve 20% or higher.

The plan he had come up with included projections of expenses, profits, and revenues. It also included strategy statements that went like: “We will be the graphics arts services firm of choice,” and “We will delight our customers with unique and creative solutions to their problems.”

After hearing him out and reading his plan, Rumelt asked the CEO what the actual steps the company was planning to make to achieve these objectives were.

Can you guess what the CEO replied?

He said that setting goals that are as ambitious as his, would automatically inspire his staff to achieve them.

Rumelt listened to what the CEO had to say on the power of motivation, but once he was done talking, he explained that he had big plans, but no strategy.

He advised him that instead of focusing on broad and general goals, the CEO and his team of employees should concentrate on discovering opportunities and finding out the best way to use them.

Why did we tell you this story?

For you to understand that success does not depend merely on grand visions and motivation, but also on skills and strategic insights.

However, what is a strategy? Even more importantly, what is a GOOD strategy?

A good strategy is straightforward, simple and easy to understand. It constitutes of “strength applied to the most promising opportunity.”

To strategize means to identify essential issues that trouble your industry, and to consequently make a plan and take result-oriented action towards fixing those critical points.

The strategy does not have much to do with leadership, innovation, vision, objectives or determination. That is the biggest misconception out there: for many people, the strategy is just an exercise that gives birth to impressive goals, nice-sounding slogans, that are in fact meaningless and unachievable.

A good business strategy presents a specific set of steps which the company needs to take to overcome a defined issue. It constitutes of numerous analyses and thoughtful, implementable policies, which are designed to overcome obstacles and push the company ahead, in the desired direction.

A good strategy is an entirely intentional and focused problem-solving activity, which focuses on fundamental and vital issues. It utilizes the intelligent application of advantage to reach better placement in the market.

Key Lessons from “Good Strategy / Bad Strategy”:

1.      Bad Strategy Characteristics
2.      The Core of Good Strategy
3.      Design Your Strategy

Bad Strategy Characteristics

• “Fluff”

Empty slogans which are just a combination of trendy buzzwords, which take the place of significant information.

• “Failure to face the challenge.”

You cannot develop a good strategy if you do not identify your company’s core problem.

• “Mistaking goals for strategy.”

Make a difference between goals and strategy. Objectives are only items on your wish list until you take concrete steps to achieve them.

• “Bad strategic objectives.”

Goals should be overreaching, but always realistic and achievable.

The Core of Good Strategy

• “Diagnosis”

Identify facts and patterns which might lead your thoughts into new and different directions.

• “A Guiding Policy”

At the point when you are finished diagnosing your company’s strategic intent, you need to create a methodology which will serve as a guide and direction for your team’s actions.

• “A Set of Coherent Actions”

The difference between good and bad strategy is that good strategy acts to achieve its objectives. A plan of coherent actions will drive you where you need to go and helps in the process of wisely allocating resources.

Design Your Strategy

• “Premeditation”

The strategy is planning, which you do before you start with action.

• “Anticipation”

Figure out what others (consider your competitors, for example) will so in the future, as a significant part of your strategic planning process.

• “Design of coordinated action.”

Keep in mind that strategy is more than just a simple choice among different options. A strategy is something you create.

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“Good Strategy / Bad Strategy” Quotes

A good strategy recognizes the nature of the challenge and offers a way of surmounting it. Simply being ambitious is not a strategy.A good strategy is built on functional knowledge about what works, what doesn’t and why..To see an effective design-type strategy, you must usually look away from the long successful incumbent toward the company that effectively invades its market space.It is hard to show your skill as a sailor when there is no wind. Similarly, it is in moments of industry transition that skills at strategy are most valuable.Good strategy grows out of an independent and careful assessment of the situation, harnessing individual insight to carefully crafted purpose. The bad strategy follows the crowd, substituting popular slogan for insights.