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Business book review: Good Strategy / Bad Strategy

18 Jan 2012 by BusinessTraveller
Lots of business books contain useful advice, but this is in a different league. Rumelt is a respected strategist, and one who writes wonderfully and cuts through the normal corporate speak. The opening paragraphs start with Nelson's victory at the Battle of Trafalgar, and during the course of the book you even get a stirring description of Hannibal’s famous victory over Rome at the battle of Cannae (and lessons to learn from it), but this isn’t some macho book of posturing – the opposite in fact. Rumelt's purpose is to strip away a lot of what surrounds a subject - and a word - that has come to me much misused, and reclaim it, and he does so in no-nonsense paragphs such as this: “A word that can mean anything has lost its bite. To give content to a concept one has to draw lines, marking off what it denotes and what it does not. To begin the journey toward clarity, it is helpful to recognise that the words “strategy” and "strategic” are often sloppily used to mark decisions made by the highest-level officials.” He’s right, and he gives examples of this.... (Please excuse the long quotation, he’s not easy to summarise.... “Fluff is superficial restatement of the obvious combined with a generous sprinkling of buzzwords. Fluff masquerades as expertise, thought, and analysis. As a simple example of fluff in strategy work, here is a quote from a major retail bank’s internal strategy memoranda: “Our fundamental strategy is one of customer-centric intermediation.” The Sunday word “intermediation” means that the company accepts deposits and then lends them to others. In other words, it is a bank.....” After examining the lack of any strategy behind being “customer-centric”, Rumelt finishes.... “The phrase customer-centric intermediation” is pure fluff. Pull off the fluffy covering and you have the superficial statement “Our bank’s fundamental strategy is being a bank.” It’s perhaps easy to have fun at other’s expense, but what’s scary is that as example after example of both good and bad strategy is exposed, you recognise a lot of what you have to listen to day after day. Helpfully, Rumelt talks clearly about the ways of devising a good strategy. “A good strategy doesn’t just draw on existing strength; it creates strength through the coherence of its design. Most organisations of any size don’t do this. Rather, they pursue multiple objectives that are unconnected with one another, or, worse, that conflict with one another.” And secondly he recommends “The creation of new strengths through subtle shifts in viewpoint.” Most of this is in just the first few pages. Check out the opening line of Chapter One, with its subtitle, "Good strategy is unexpected": “The first natural advantage of good strategy arises because other organisations often don’t have one. And because they don’t expect you to have one either “ Isn’t that great? And then we get a discussion of Microsoft, Apple, and Desert Storm in just a few pages. I tore through these chapters, then re-read them much more slowly. I could go on, but to summarise, there’s not a bad chapter in this book, and as your read, you get observations (backed up by case studies) such as “The proposition that growth itself creates value is so deeply entrenched in the rhetoric of business that it has become an article of almost unquestioned faith...” And as for charismatic leadership, Rumelt doesn’t deny its effect, but cites Peter Drucker “One of the foremost thinkers about management” who pointed out that “...effective leadership doesn’t depend on charisma. Dwight Eisenhower, George Marshall and Harry Truman were singularly effective leaders, yet none possessed any more charisma that a dead mackerel.” And as Rumelt says, the belief that charisma is enough is very dangerous, particularly when it is not allied to an effective strategy.... “...believing... that by thinking only of success you can become a success {is a form of] psychosis and cannot be recommended as [an] approach to management or strategy.” So what’s the solution? Well Rumelt gives plenty of food for thought, focusing on a diagnosis of the challenge, a guiding policy for dealing with the challenge and a set of coherent actions designed to carry out the guiding policy.” Obvious, isn’t it? But it’s amazing how few organisations have got that down correctly. This is a simply superb book, and one which will be on my shelf for years to come. When it’s not in my hands. Tom Otley
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