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BOOK REVIEW: ‘Good Strategy/Bad Strategy’
GOOD STRATEGY/BAD STRATEGY
By Richard P. Rumelt
Crown Business, $28, 321 pages
Do not, I repeat, do not read this book if you plan to savor the coming 11 months of political blather-skating by our apparent seekers of high office. For if you have read this book, their pious sloganeering and obfuscations during the campaign debate orgies may cause you to kick the cat across the room and do violence to your new flat-screen television.
What is so upsetting about “Good Strategy/Bad Strategy” is that it leaves the reader with the painful realization that none of our would-be leaders has the least notion what really ails this once-great nation, let alone any clear strategy for leading us back. Goals? Oh, sure, they all have goals - “more jobs” being the most popular nostrum. But as author Richard P. Rumelt emphasizes, goals are not strategy. Goals are wishes. Strategies are how one goes about achieving goals.
I hasten to add that this book is not a political diatribe. Mr. Rumelt holds a chair at UCLA’s Anderson School of Management when he is not consulting on strategy for the likes of Shell International, the U.S. Department of Defense and a substantial list of top-tier multinational corporations and nonprofits. The focus of the book is how poorly many major business decisions are made as well as how transformational it can be when strategists think more clearly about where they are, what it is they can do, what they can’t and how to go about doing better what they can.
For all that, Mr. Rumelt has not written yet another of those “Ten Tips to Get to the Top” business books that glut airport book carousels. Lee Iacocca and Jack Welch don’t get treated with much reverence by Mr. Rumelt, for after all, they stand out on the business horizon mainly because so many other chief executives of big companies over the past four decades have not known how to think about what it is they are doing. That is what this book is about: how to think.
Simply put, having a goal is not the same as having a strategy to achieve that goal. It sounds simple, but as Mr. Rumelt argues, very few leaders - corporate or governmental - bother to think goals through. In fairness to most of us, this is because that is harder to do than Mr. Rumelt would have one believe. First you have to assess your strengths and candidly face up to your weaknesses and insufficiencies. Then you have to look at the obstacles in your way, your competition, and make painful calculations about where they are more formidable and where they are weaker. Only then can you plan a strategy that capitalizes on your strengths and your opposition’s weaknesses and get where you want to go.
Two examples Mr. Rumelt cites make the point. In the contest between Wal-Mart and Kmart, the latter concentrated on building more big stores in major markets while Wal-Mart started putting stores in smaller market locations; the difference was that Sam Walton tied all his outlets with distribution centers driven by a network of computers that accelerated the delivery of products from producer to warehouse to retail site - in effect creating one giant store instead of an increasingly unwieldy Kmart system of inventory management.
In the other case, the management of International Harvester, once the fourth-largest company in the United States, sought to ramp up profitability with a complicated strategy to boost market share in each of its divisions. Not a bad plan but one that ignored the corporation’s major weakness - crippling workforce rules and rotten labor relations - which made all the other improvements in cost control and market-boosting moot. To be sure, the company’s labor problems were extremely tough to resolve, but with that critical weakness ignored, the rest of the strategy failed.
Where Mr. Rumelt’s book breaks rank with typical advice-genre offerings is that he tells the reader how to go about recognizing a strategy and how to fashion it in a variety of situations. He calls the process the “kernel” of good strategic thinking. It is a three-step process:
First, you need a “diagnosis” that defines the nature of the challenge. “A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as critical.”
Second, you need a “guiding policy” to deal with the challenge. “This is an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis.”
And third, you then fashion a “set of coherent actions” to implement the guiding policy. “These are steps that are coordinated with one another to work together in accomplishing the guiding policy.”
So a doctor’s diagnosis leads him to the therapeutic approach he chooses and then to the prescriptions he writes for the patient. For the corporate leader, market changes and the competition are the problems to be solved, not some ephemeral goal. For the foreign-policy architect, the task is to choose among historical precedents to pick policy responses to current political problems.
The thing about this clearly written, thoughtful book is that Mr. Rumelt helps you plan better strategies not just for business. This is what I mean about the election-campaign gibberish to which we are being subjected. Has one candidate of any political hue articulated a real strategy for, say, what America’s interests in China should be? Are we to be more afraid of China’s success or its collapse? And the turmoil in the Middle East - if the Arab Spring is the awakening of democratic yearning among those people, what strategy should the White House pursue to enhance that yearning without squashing it with heavy-handed interventions?
The raw information for making these strategic decisions is all around us. What Mr. Rumelt’s book does is challenge us to gather that information and make some tough-minded analysis before we make the mistake of setting goals we can never achieve. Or we can keep doing what we’re doing and complain when it all keeps going wrong. This book is painful therapy but a necessary read nonetheless.
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