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By Roger Parry Wednesday, 01 June 2011

Book review: Good Strategy/Bad Strategy, by Richard Rumelt

Too many people in business mistake what it is and what it should be. They ought to read this book...

Most business leaders would agree that the right strategy, executed well is the basis of success. But in many organisations there is no clear consensus as to what strategy really means, or how to go about its formulation. Professor Rumelt, who has spent nearly 40 years studying the issue, has come up with a convincing and crisply written proposition.

John Maynard Keynes famously observed: 'Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.' Such a fate, of quietly informing future generations of pragmatic business leaders, may well fall, in time, to Richard Rumelt. Although for now he and his ideas are far from defunct. His book represents the latest thinking in strategy and is peppered with many current real world examples. Good Strategy/Bad Strategy has much to offer and has every chance of becoming a business classic.

The overblown language of many management books makes them hard going. Good Strategy/Bad Strategy is an enjoyable exception. The book is easy to read and one of the best ways to convey its flavour is to let it speak for itself with a few quotes. The book argues that the notion of strategy has become much misunderstood: Simply being ambitious is not a strategy ... 'for many people in business, education and government the word "strategy" has become a verbal tic. A word that can mean anything has lost its bite.'

In terms of what strategy actually is, Professor Rumelt offers a simple definition. A good strategy does more than just urge us forward ... it honestly acknowledges the challenges being faced and provides an approach to overcoming them.

The topic of strategy has launched more books that Helen did ships and few of them stand the test of time - however, some big ideas have become woven into the fabric of business philosophy. Michael Porter's five forces, Tom Peters' seven Ss of organisation and BCG's Growth/Share matrix are all now familiar strategy tools.

Professor Rumelt may well now be adding a couple of his own. His notions that may become the management shibboleths of the future include the kernel and the proximate objective. He says: 'The kernel of a strategy contains three elements: a diagnosis, a guiding-policy and a coherent action. The guiding-policy specifies an ap proach to dealing with the obstacles called out in the diagnosis.'

Building on his theme of practical and realistic actions, he talks about the 'proximate objective as being a target that is close enough at hand ... that the organisation can reasonably be expected to hit, or even overwhelm it'.

He cites as an example President Kennedy's call to place a man on the moon. While it sounded visionary, JFK, in fact, knew the technology was already in place to achieve it.

The book opens with the challenge facing Lord Nelson at Trafalgar. His strategy was to use his only advantages - manoeuvrable ships and well-trained sailors. He famously won against the odds and Rumelt comments: 'A good strategy almost always looks this simple and obvious and does not take a thick deck of PowerPoint slides to explain ... The core ... is always the same; discovering the critical factors and designing a way of co-ordinating and focusing actions.'

A possible criticism of the book is that it is very repetitive of this basic theme of critical factors and co-ordinated actions. But this could also be seen as strength - the message is convincing and illustrated with a huge range of examples, from Hannibal and General Schwarzkopf to Starbucks and Steve Jobs, which really bring the text alive.

If you go to a lot of annual strategy sessions (I chair five of them a year) some of this book might make you cringe with recognition at the weaknesses of the usual 'Vision, Mission, Goals and Strategy' approach. It feels a bit like being told you have a penchant for wearing 1970s fashions. It is hard to fault Rumelt's assertion that genuine strategy requires a clear-eyed analysis of an organisation's weaknesses and challenges. He makes the point that simply getting board consensus does not mean you've found the right answer. So if you are preparing a strategy awayday you should read this book, if only to avoid the intellectual equivalent of turning up wearing flared trousers and sporting a mullet.

Good Strategy/Bad Strategy: The difference and why it matters

Richard Rumelt

Profile Books £12.99

- Roger Parry is chairman of a number of companies including Future and YouGov.

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