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Good Strategy/Bad Strategy

By Richard Rumelt

(Crown Business, 322 pages, $33)

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Richard Rumelt, a management professor at the University of California, Los Angeles, coined the term "bad strategy" in 2007 when he was taking part in a seminar about U.S. security. He was frustrated that the strategy articulated a set of national goals and objectives – but no road map for how to reach those goals.

For example, there was no evidence that policy makers had thought through the problem (which became apparent in both the Bosnian and Iraqi interventions) of the United States being fed false or exaggerated intelligence information to induce military action. And Prof. Rumelt found a key section of the strategy to be nothing more than a superficial political slogan saying that the United States would "work with others to defuse regional conflicts."

The context was military strategy, but bad strategy happens in all sectors. It's a way of thinking about strategy that has been gaining ground, if not mushrooming.

"Bad strategy is long on goals and short on policy or action. It assumes that goals are all you need. It puts forward strategic objectives that are incoherent and, sometimes, totally impractical. It uses high-sounding words and phrases to hide these failings," Prof. Rumelt writes in his book, Good Strategy/Bad Strategy.

Because bad strategy may be more familiar to you than good strategy, it's worth some attention. Prof. Rumelt offers these four hallmarks of bad strategy:

Fluff

A form of gibberish that masquerades as strategic concepts or arguments. The professed strategy uses what he calls "Sunday words" – words that are inflated and unnecessarily abstruse – and apparently esoteric concepts to create the illusion of high-level thinking.

Take this example from a major retail bank: "Our fundamental strategy is one of customer-centric disintermediation." Since the word "intermediation" means that a company accepts deposits and then lends them to others, that fancy word in the strategy simply states the obvious: It's a bank. And the buzzword "customer-centric" is not backed by any policies or products.

Failure to face the challenge

The professed strategy fails to recognize or define the challenge facing the enterprise. "When you cannot define the challenge, you cannot evaluate a strategy or improve it," Prof. Rumelt notes.

An example is the 1979 corporate strategic plan of International Harvester, which set out hockey-stick shaped growth – immediate recovery from decline and then a steady rise. But the plan never mentioned what was holding back the company: a grossly inefficient work organization. So it didn't work.

Mistaking goals for strategy

Many bad strategies are simply statements of desire rather than plans for overcoming obstacles.

Take the CEO who told Prof. Rumelt of his company's "20/20 strategic plan." Revenue was to grow at 20 per cent per year and the profit margin would be 20 per cent or higher. When Prof. Rumelt asked what needed to be done to accomplish such an aggressive goal, the CEO referred to his days on the gridiron, where he learned that to win you need the drive to succeed. "Although he was well-intentioned, his plan, to me, was all results and no action," the author says.

Bad objectives

A strategic objective is a means to an end. Strategic objectives are "bad" when they fail to address critical issues or when they are impractical. The classic is a scrambled mess of objectives – everyone's wishes and dreams gathered together into an unworkable plan. The word long-term, he notes, is usually added so that none of it has to be done today.

Good strategy, in contrast, is more elusive. It is not an exhortation, Prof. Rumelt warns. It is not a synonym for future success. It is not to be confused with ambition, determination, inspirational leadership or innovation.

A good strategy has three crucial elements: a diagnosis, a guiding policy and coherent action. The guiding policy outlines the approach to dealing with the obstacles highlighted in the diagnosis. "It is like a signpost, marking the direction forward but not defining the details of the trip," he says.

Coherent actions are feasible, co-ordinated policies, resource commitments and actions designed to carry out the guiding policy. "A good strategy doesn't just draw on existing strength; it creates strength through the coherence of its design. Most organizations of any size can't do this. Rather, they pursue multiple objectives that are unconnected to one another or, worse, that conflict with one another," he observes.

If you find that unsettling, it may be because you have been viewing strategy inappropriately, succumbing to bad strategy rather than good strategy. His book is unusual not just for the insights he provides but for the clarity of the writing. It's an easy-to-read, indeed compelling, book on a topic that can often be turgid.

POSTSCRIPT

The title of It's Not About You (Portfolio, 118 pages, $29), by consultant Bob Burg and journalist-entrepreneur John David Mann, sums up the message in this short fable. It's a tale about an executive who is under pressure to make an acquisition work and has to learn to set aside his own urgent needs and understand the needs and feelings of the people in the company he is trying to take over. It's feel-good stuff and obvious, except that we often fail to heed this advice. And it comes enmeshed in a reasonably dramatic story.

Harvey Schachter is a Battersea, Ont.-based writer specializing in management issues. He writes Monday Morning Manager for The Globe and Mail's T.G.I.M. page, management book reviews on Wednesdays and an online work-life balance column on Fridays.