Good Strategy/Bad Strategy

Good Strategy/Bad Strategy - Notes

Page 1: Book Introduction

• "Good Strategy/Bad Strategy" by Richard Rumelt is introduced.
• Rumelt is described as "A giant in the field of strategy" by McKinsey Quarterly.
• The book explores the difference between good and bad strategy and why it matters.

Page 2: Praise for the book (1/3)

• The book is praised for elevating the discussion of strategy with compelling examples and insights.
• Key concepts mentioned are "the kernel" and "the proximate objective."
• It's recommended as essential reading for leaders in business, government, and other organizations.
• It is described as a pleasure to read, explaining good strategic thinking through examples, stories, and anecdotes.

Page 3: Praise for the book (2/3)

• The book is lauded for identifying that most companies have strategies that are quixotic, muddled, and undifferentiated.
• The book cuts through the clutter of naive advice and simplistic frameworks.
• It reminds managers that strategy requires a clear and differentiated point of view supporting forceful and coherent action.
• The critical features distinguishing powerful strategies from wimpy ones are identified.
• It provides advice on building a strategy worthy of the name.
• It should be read by any executive motivated to examine and improve their firm's strategy.
• It reinforces that a strategy is the battle plan for action designed upon unique attributes resulting in exceptional and sustainable profits.

Page 4: Praise for the book (3/3)

• The book enables readers to rethink their thinking and improve performance.
• It's a milestone in both the theory and practice of strategy.
• It cuts to the core of success versus mediocrity using examples from business and global history.
• The book pinpoints the polar difference between good and bad strategy, diagnosing actions versus fluff and failures.
• It serves as a playbook for strategic thinking and acting for leadership positions.

Page 5: Title page

• "GOOD STRATEGY/BAD STRATEGY: The difference and why it matters" by Richard P. Rumelt

Page 9: Contents (Part 1)

• INTRODUCTION OVERWHELMING OBSTACLES
• PART I GOOD AND BAD STRATEGY
• CHAPTER 1 GOOD STRATEGY IS UNEXPECTED
  • How Steve Jobs saved Apple
  • Business 101 is surprising
  • General Schwarzkopf’s strategy in Desert Storm
  • Why “Plan A” remains a surprise
• CHAPTER 2 DISCOVERING POWER
  • David and Goliath is a basic strategy story
  • Discovering Wal-Mart’s secret
  • Marshall and Roche’s strategy for competing with the Soviet Union
• CHAPTER 3 BAD STRATEGY
  • Is U.S. national security strategy just slogans?
  • How to recognize fluff

Page 10: Contents (Part 2)

• CHAPTER 3 BAD STRATEGY (cont.)
  • Why not facing the problem creates bad strategy
  • Chad Logan’s 20/20 plan mistakes goals for strategy
  • What’s wrong with a dog’s dinner of objectives?
  • How blue-sky objectives miss the mark
• CHAPTER 4 WHY SO MUCH BAD STRATEGY?
  • Strategy involves choice, and DEC’s managers can’t choose
  • The path from charisma to transformational leadership to fill-in-the-blanks template-style strategy
  • New Thought from Emerson to today and how it makes strategy seem superfluous
• CHAPTER 5 THE KERNEL OF GOOD STRATEGY
  • The mixture of argument and action lying behind any good strategy
  • Diagnosing Starbucks, K–12 schools, the Soviet challenge, and IBM
  • Guiding policies at Wells Fargo, IBM, and Stephanie’s market
  • The president of the European Business Group hesitates to act
  • Incoherent action at Ford
  • Centralization, decentralization, and Roosevelt’s strategy in WWII
• PART II SOURCES OF POWER
• CHAPTER 6 USING LEVERAGE
  • Anticipation by Toyota and insurgents in Iraq

Page 11: Contents (Part 3)

• CHAPTER 6 USING LEVERAGE (cont.)
  • How Pierre Wack anticipated the oil crisis and oil prices
  • Pivot points at 7-Eleven and the Brandenburg Gate
  • Harold Williams uses concentration to make the Getty a world presence in art
• CHAPTER 7 PROXIMATE OBJECTIVES
  • Why Kennedy’s goal of landing on the moon was a proximate and strategic objective
  • Phyllis Buwalda resolves the ambiguity about the surface of the moon
  • A regional business school generates proximate objectives
  • A helicopter pilot explains hierarchies of skills
  • Why what is proximate for one organization is distant for another
• CHAPTER 8 CHAIN-LINK SYSTEMS
  • Challenger’s O-ring and chain-link systems
  • Stuck systems at GM and underdeveloped countries
  • Marco Tinelli explains how to get a chain-link system unstuck
  • IKEA shows how excellence is the flip side of being stuck
• CHAPTER 9 USING DESIGN
  • Hannibal defeats the Roman army in 216 B.C. using anticipation and a coordinated design of action in time and space
  • How a design-type strategy is like a BMW
  • Designing the Voyager spacecraft at JPL

Page 12: Contents (Part 4)

• CHAPTER 9 USING DESIGN (cont.)
  • The trade-off between resources and tight configuration
  • How success leads to potent resources that, in turn, induce laxity and decline
  • Design shows itself as order imposed on chaos—the example of Paccar’s heavy-truck business
• CHAPTER 10 FOCUS
  • A class struggles to identify Crown Cork & Seal’s strategy
  • Working back from policies to strategy
  • The particular pattern of policy and segmentation called “focus”
  • Why the strategy worked
• CHAPTER 11 GROWTH
  • The all-out pursuit of size almost sinks Crown
  • A noxious adviser at Telecom Italia
  • Healthy growth
• CHAPTER 12 USING ADVANTAGE
  • Advantage in Afghanistan and in business
  • Stewart and Lynda Resnick’s serial entrepreneurship
  • What makes a business “interesting”
  • The puzzle of the silver machine
  • Why you cannot get richer by simply owning a competitive advantage

Page 13: Contents (Part 5)

• CHAPTER 12 USING ADVANTAGE (cont.)
  • What bricklaying teaches us about deepening advantage
  • Broadening the Disney brand
  • The red tide of pomegranate juice
  • Oil fields, isolating mechanisms, and being a moving target
• CHAPTER 13 USING DYNAMICS
  • Capturing the high ground by riding a wave of change
  • Jean-Bernard Lévy opens my eyes to tectonic shifts
  • The microprocessor changes everything
  • Why software is king and the rise of Cisco Systems
  • How Cisco rode three interlinked waves of change
  • Guideposts to strategy in transitions
  • Attractor states and the future of the New York Times
• CHAPTER 14 INERTIA AND ENTROPY
  • The smothering effect of obsolete routine at Continental Airlines
  • Inertia at AT&T and the process of renewal
  • Inertia by proxy at PSFS and the DSL business
  • Applying hump charts to reveal entropy at Denton’s
  • Entropy at GM
• CHAPTER 15 PUTTING IT TOGETHER
  • Nvidia jumps from nowhere to dominance by riding a wave of change

Page 14: Contents (Part 6)

• CHAPTER 15 PUTTING IT TOGETHER (cont.)
  • using a design-type strategy
  • How a game called Quake derailed the expected march of 3-D graphics
  • Nvidia’s first product fails, and it devises a new strategy
  • How a faster release cycle made a difference
  • Why a powerful buyer like Dell can sometimes be an advantage
  • Intel fails twice in 3-D graphics and SGI goes bankrupt
• PART III THINKING LIKE A STRATEGIST
• CHAPTER 16 THE SCIENCE OF STRATEGY
  • Hughes engineers start to guess at strategies
  • Deduction is enough only if you already know everything worth knowing
  • Galileo heresy trial triggers the Enlightenment
  • Hypotheses, anomalies, and Italian espresso bars
  • Why Americans drank weak coffee
  • Howard Schultz as a scientist
  • Learning and vertical integration
• CHAPTER 17 USING YOUR HEAD
  • A baffling comment is resolved fifteen years later
  • Frederick Taylor tells Andrew Carnegie to make a list
  • Being “strategic” largely means being less myopic than your undeliberative self

Page 15: Contents (Part 7)

• CHAPTER 17 USING YOUR HEAD (cont.)
  • TiVo and quick closure
  • Thinking about thinking
  • Using mind tools: the kernel, problem-solution, create-destroy, and the panel of experts
• CHAPTER 18 KEEPING YOUR HEAD
  • Can one be independent without being eccentric, doubting without being a curmudgeon?
  • Global Crossing builds a transatlantic cable
  • Build it for $1.5 and sell it for $8
  • The worst industry structure imaginable
  • Kurt Gödel and stock prices
  • Why the 2008 financial crisis was almost certain to occur
  • The parallels among 2008, the Johnstown Flood, the Hindenburg, the Hurricane Katrina aftermath, and the gulf oil spill
  • How the inside view and social herding blinded people to the coming financial storm
  • The common cause of the panics and depressions of 1819, 1837, 1873, 1893, and 2008
  • NOTES ACKNOWLEDGMENTS INDEX

Page 16: Introduction - Overwhelming Obstacles (1/2)

• In 1805, England faced an overwhelming obstacle: Napoléon's plan to invade England.
• Napoléon needed to wrest control of the sea away from the English to cross the Channel.
• The French and Spanish combined fleet of thirty-three ships met the smaller British fleet of twenty-seven ships off the southwest coast of Spain.
• Traditional naval tactics involved opposing fleets firing broadsides at each other in lines.
• British Admiral Lord Nelson employed a strategic insight: breaking the British fleet into two columns to hit the Franco-Spanish line perpendicularly.
• This risky maneuver focused on disrupting the enemy's coherence, relying on the experience of English captains to win in the ensuing melee.

Page 17: Introduction - Overwhelming Obstacles (2/2)

• Nelson's strategy led to the French and Spanish losing twenty-two ships while the British lost none, ensuring Britain's naval dominance for a century and a half.
• Good strategy is simple, obvious, and doesn't require complex tools or schemes to explain.
• Talented leaders identify critical issues and concentrate action and resources on them.
• Strategy is not ambition, leadership, vision, or planning, but discovering critical factors and coordinating actions to address them.
• A leader's key responsibility is overcoming the biggest challenges.
• The text criticizes leaders who spout slogans and high-sounding goals instead of developing a coherent strategy.
• Examples of failures in strategy include a CEO's superficial "strategy retreat" and Lehman Brothers' misguided growth strategy, leading to disastrous consequences during the 2008 financial crisis.

Page 18: Introduction - Examples of Bad vs. Good Strategy (1/2)

• The U.S. military initially lacked a coherent strategy in Iraq after the 2003 invasion, resulting in a violent insurgency despite high-sounding goals.
• In 2007, General David Petraeus implemented a strategy focused on protecting the populace to gain support against the insurgency, leading to significant results.
• The essence of the strategy was to recognize that the insurgency depends on civilians support.
• To combat the insurgency, the military’s focus shifted from patrols to protecting the populace.
• The civilian support would provide info necessary to isolate the insurgent minority.
• This change, replacing amorphous goals with a true problem-solving strategy, made an enormous difference in the results achieved.

Page 19: Introduction - Examples of Bad vs. Good Strategy (2/2)

• The author contrasts a CEO's simplistic view of strategy as "never quitting until you win" with the idea that good strategy acknowledges challenges and focuses efforts.
• Bad strategy skips over problems and lacks focus, embracing broad goals and language without providing guidance.
• The author notes a growing gap between good strategy and what people mislabel as strategy.
• There is a growing profusion of what the author terms "bad strategy". Bad strategy is long on goals ad shoort on policy or action.
• The author rejects pop culture phrases as adequate for strategy.
• Short circuits real inventiveness and fails to distinguish among different senior-level management tasks and virtues.

Page 20: Introduction - Defining True Strategy (1/2)

• Strategy cannot be a useful concept if it is a synonym for success, ambition, determination, inspirational leadership, or innovation.
• Strategy selects the path identifying how, why and where leadership and determination are to be applied.
• The words “strategy” and “strategic” are often used to mark decisions made by the highest-level officials, regardless of their nature.
• The term "strategy" not simply marking the pay grade of the decision maker. Rather, the term “strategy” should mean a cohesive response to an important challenge.
• A strategy should be a coherent set of analyses, concepts, policies, arguments, and actions that respond to a high-stakes challenge.
• Many people assume that strategy is a big picture overall direction, divorced from any specific action. But defining strategy as broad concepts, thereby leaving out action, creates a wide chasm between “strategy” and “implementation.”

Page 21: Introduction - Defining True Strategy (2/2)

• A good strategy includes a set of coherent actions, not just implementation details.
• A strategy that fails to define a variety of plausible and feasible immediate actions is missing a critical component.
• Executives who complain about “execution” problems have usually confused strategy with goal setting.
• True strategy is about how an organization will move forward, not just setting goals.
• The author aims to differentiate good strategy from bad and provide tools for crafting good strategies.
• A good strategy has a logical structure called the kernel, including:
  • a diagnosis
  • a guiding policy
  • coherent action
• Facility with the structure and fundamentals of a good strategy, you will develop the parallel ability to detect the presence of bad strategy.

Page 22: Introduction - Bad Strategy & Demand for Good Strategy

• The author asserts that you don't need an advanced degree to distinguish between good and bad strategy.
• The U.S. government’s approach to the 2008 financial crisis lacked a clear diagnosis, hindering effective resource allocation.
• Bad strategy actively avoids analyzing obstacles and confuse strategy work with goal setting.
• Leaders may avoid hard choices to avoid offending people, leading to non-focused actions.
• The spread of bad strategy affects government's ability to solve problems, corporate boards' strategic plans, and the education system's underperformance.
• The remedy is to demand more from leaders than charisma and vision: good strategy.
• Overwhelming obstacles often present the need for strategy.

Page 23: Part 1 - Good and Bad Strategy

• The most basic idea of strategy is the application of strength against weakness or to the most promising opportunity.
• Modern strategy expands this idea into a discussion of strengths or “advantages” such as scale, scope, network effects, etc.
• The midlevel framework of potential strengths and advantages misses two important natural sources:
  1. Having a coherent strategy that coordinates policies and actions to create strength.
  2. Creating new strengths through subtle shifts in viewpoint, which can generate new patterns of advantage and weakness.
     *The leader of an organization lacking a good strategy may simply believe that strategy is unnecessary but the lack is often due to the presence of bad strategy.

Page 24: Part 1 - Hallmarks of Good and Bad Strategy

• Like weeds crowding out the grass, bad strategy crowds out good strategy.
• Leaders using bad strategies have mistaken views about what strategy is and how it works.
• Chapter 3 presents evidence for the existence of bad strategy and explains its hallmarks.
• Chapter 4 answers the question: “Why So Much Bad Strategy?”
• Chapter 5 provides an analysis of the logical structure of a good strategy— a structure that acts as a guide on reasoning and a check against generating bad strategy.

Page 25: Chapter 1 - Good Strategy is Unexpected (1/2)

• The first advantage of good strategy is that other organizations often lack one and don't expect you to have one either.
• A good strategy has coherence, coordinating actions, policies, and resources to accomplish an important end.
• Many organizations don't have this coherence.
• They have multiple goals and initiatives without a coherent approach, relying on simply spending more and trying harder.
• After the release of Windows 95 in 1995, Apple Inc. was in a death spiral and near bankruptcy.
• Steve Jobs returned to Apple in 1997 and implemented a strategy to shrink Apple to better compete with Windows-Intel-based PCs.

Page 26: Chapter 1 - Good Strategy is Unexpected (2/2)

• The power of Jobs's strategy came from directly tackling the fundamental problem with a focused set of actions, simplifying to its core to survive.
• Jobs talked Microsoft into investing $150 million in Apple, using concerns about Microsoft's antitrust struggle.
• Apple's turnaround strategy was