Wednesday, December 28, 2011

How to Recognize a Good Strategy?

In our hearts we know it when we see it. We are told that the organization is going to launch a bold new strategy. But in reality we see that what is being presented is just a new goal with a bow tied around it.

That’s why I enjoyed an article I just read by Richard Rumelt titled, “The Perils of Bad Strategy”. He lays out the characteristics that point to a bad strategy and also what the ingredients are of a good strategy.

In sports, we see the impact of strategy played out in game situatons right before our eyes.  “Like a quarterback whose only advice to his teammates is ‘let’s win,’” Rumelt writes “bad strategy covers up its failure to guide by embracing the language of broad goals, ambition, vision, and values.” All of these items have their place, but they should not be mistaken for a strategy.

On the other hand, a good strategy is when “a talented leader has identified the one or two critical issues in a situation—the pivot points that can multiply the effectiveness of effort—and then focused and concentrated action and resources on them. A good strategy does more than urge us forward toward a goal or vision; it honestly acknowledges the challenges we face and provides an approach to overcoming them.”

Rumelt gives three steps that are important to developing a real strategy that can make a difference.

“1. A diagnosis: an explanation of the nature of the challenge. A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as being the critical ones.

2. A guiding policy: an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis.

3. Coherent actions: steps that are coordinated with one another to support the accomplishment of the guiding policy.”1.

As we start the New Year, take a look at the strategies that you have in place. Do they address the real problem or challenge your organization is facing? Is the strategy actionable? Does it provide a road map so each member of the team knows how they can achieve the strategy? If not, now may be a good time to step back and re-evaluate what your strategy should be.

1. Richard Rumelt, The Perils of Bad Strategy, McKinsey Quarterly, the business journal of McKinsey & Company, June 2011.

2 comments:

Annie Gallagher said...

This is a great post. I think the number one reason people have a bad strategy is because they can't prioritize. We often see trade associations, non-profits, and for-profits starting a strategic planning process and they can't simply focus on one or two things. I tell people strategic planning is really hard because you have to prioritize. Imagine you only have resources to send one of your children to college. You have to pick you child that you think can best succeed, which is something most people could never do. But if you pick your favorite child, the other kids are going to benefit too, because you have only so many resources. It doesn't mean the other kids aren't loved, but you have to prioritize and make tough decisions.

Tony Rossell said...

Hi Annie -- Good point on prioritization. I do see strategic plans that have seven goals that all appear to be of equal importance. But beyond having too many goals, I also see goals that are set in a vacuum. A goal is just a nice intention without a strategy in place to accomplish it. Tony