2 Things That Cause Bad Strategy

Its business planning or budgeting time for many business owners and so in last week’s post I talked about the 4 hallmarks of bad strategy.

They’re featured in an article which was adapted by Richard Rumelt from his new book “Good Strategy/Bad Strategy: The Difference and Why It Matters”. The article appeared in the McKinsey Quarterly

I promised that, for those pressed for time I’d continue summarizing the article in this post and talk about why there is so much bad strategy.

1. Unwillingness or inability to choose

Rumelt argues that a good strategy requires focus. And focus means that business owners have to choose amongst business goals.

Do you remember Digital Equipment Corporation (DEC)? They led the mini-computer industry in the 60’s and 70’s but by the end of the 80’s they were losing ground quickly. There were doubts if the company could survive without making far-reaching changes to their strategy.

Three alternatives were considered – business as usual, become a solutions provider or focus on designing better technology. The CEO wanted consensus on the new strategy but the executive team was divided and unable to reach one.

The result was a compromise, “DEC is committed to providing high-quality products and services and being a leader in data processing.” Like most compromises, it contained a little bit of everything and focused on nothing.

DEC continued losing ground and the CEO was replaced in the early 90’s. His successor focused on technology, but by then it was too late. The losses could only be stopped for a while and the company was acquired by Compaq in the late 90’s.

Failure to choose results in weak strategy and weak strategy results in failure.

2. Confusing “positive thinking” and strategy

Motivational speakers – and their books and web sites – have given rise to the notion that charismatic leaders and positive thinking can achieve the impossible. In concept it’s done by developing a vision and inspiring people to follow it, while empowering them to accomplish it.

The concept was reduced to something of a formula and distilled into a template for strategic planning. But not everyone can be a charismatic leader. Nor can success be achieved simply by applying a formula and completing templates.

A vision has to be more than a statement that the company will be the best, or the leading, or the best known.

The mission has to be filled with more than high-sounding, politically correct statements about the purpose of the business.

And a company’s values can’t be noncontroversial platitudes about integrity, respect and excellence.

Rumelt’s point is that, if the vision, mission and values turn out that way then the strategy is going to be nothing more than aspirations, goals or statements of the obvious presented as decisive insights.

Lack of substance makes a very weak foundation on which to build a future.

3. So what does work?

I’ll save Rumelt’s views on the underlying structure of good strategy for my next post.

Share

Tags: budgeting, business owners, business planning, company, focus, goals, Jim Stewart, mission, Planning, ProfitPATH, strategic planning, strategy, values, vision

Comments

  1. Jay Lebo says:

    I agree completely. Leadership means leading, so DO something!

  2. Jim Stewart says:

    Thanks for the comments Jay. It sounds so simple doesn’t it – but we know that’s not necessarily the case.

    Jim

  3. Jon - Boy says:

    You make success sound so possible – is this why so many local authorities flounder in never-ending financial chaos? J-B

  4. Jim Stewart says:

    Good question Jon-Boy. I think their political agendas make it hard for politicians at every level to make practical decisions. That and the fact that they may not see beyond their current term in office. Jim

Add a Comment

*

Post History