Saturday, 25 May 2013

Understanding the meaning of strategy

The word strategy  has always  appeared  to me  intriguing.I have been hearing and using this word for many years , with some hazy  understanding.Of course , I have   used  with some clarity words and concepts like  mission , vision , goals , projects and plans.But  strategy  has always appeared illusory.How is marketing different from marketing strategy,data processing from IT strategy, acquisitions from Growth strategy, cutting prices from Low-price strategy?
               We must not mistake strategic  goals for strategy.Strategy is not goal-setting.Strategy is not a belief in the power of positive thinking.Shared visions of successful stages  cannot be the basis of strategy.Vision and mission statements  also are no where near a good strategy.But then , what is strategy , and what distinguishes a good strategy from a bad one? 
               Richard Rumelt in his outstanding book"Good Strategy Bad Strategy . . .The Difference and Why it Matters" has thrown light on the meaning of strategy with remarkable success.At first, I thought  I will be able to read this book quickly .But as I progressed , I realized that it has been written with a richness and compactness that I had to pause , read, think and proceed often enough .But  finally after I completed reading this book , I was somewhat clearer on strategy than before.Published in Great Britain in 2011 by Profile Books Limited, it has 323 pages.

                    Richard Rumelt  was described by McKinsey Quarterly as a giant in the field of strategy.He is one of the world's most influential thinkers on strategy and management .
                    A strategy has three elements:a diagnosis, a guiding policy and coherent action .It responds to a high -stakes challenge.Diagnosis spells out the obstacles.Guiding policy is like a sign post, marking the direction forward but not defining the details of the trip.Coherent actions are  feasible co-ordinated policies, resource commitments, and actions  designed to carry  out the guiding policy.    If we fail to identify and analyze the obstacles and problems , we do not have a strategy.Instead , we have either a stretch goal , or a list of things we would wish to happen.

                 In many situations , the main impediment to action  is the forlorn hope  that certain powerful choices or actions  can be avoided-that the whole long list of priorities  can all be achieved .It is the hard craft of  strategy to decide which priority will take precedence.
            It is the strategy which transforms vague overall goals into a coherent set of actionable objectives.  A strategy coordinates action to address a specific challenge.Decentralized coordination is difficult.It requires centralization .But centralized coordination  fights against the gains to  specialization..In any coordination committee, coordination interrupts and de-specializes people..There will be costs of demanding coordination , because it will ride roughshod over  economies of specialization  and more nuanced local responses.Good strategy lies in specializing on the right activities and imposing only the essential amount of coordination.
                         The need for true strategy work is episodic, not necessarily annual .In this sense , strategy is different from planning.Planning for financial  resources, human resources, opening of regional offices are not strategy , though some people call these annual exercises "strategic planning".
               Motivation is an essential part of life and success, and a leader may justly ask for "one last push", but the leader's job is more than that.The job of the leader is also to create the conditions that will make that push effective, to have a strategy worthy of the effort called upon.The most important demand from our leaders must be the demand for good strategy.Good strategy  requires leaders who are willing and able  to say no to a variety of actions and interests.Strategy is at least as much about  what an organization does  not do as it is about what it does.     
                Strategies focus  resources,energy and attention on some objectives rather than others.There will be powerful forces opposed to  almost any change in  strategy.In such a situation , it is the task of leadership to  make or enforce hard choices.It requires will or political power. Creating a vision and motivation   is not the same thing as  making  strategy .Strategy is the craft of figuring out  which purposes are  worth pursuing and capable of being accomplished.Leadership in the sense of vision and motivation may be joined  with strategy in the same person , but they are not the same thing .                                         
                 Richard Rumelt is critical of  giving too much importance to shared vision , as has been done by Peter Senge  in his book The Fifth Discipline.(I have elsewhere written a blog post on The Fifth Discipline.).
Ascribing the success of  Ford and Apple to a vision , shared at all levels, rather than pockets of outstanding competence mixed with luck, is a radical distortion of history.
                    A good strategy  uses leverage so that we invest resources where it would make a large and more visible difference..This means choosing an objective that can be decisively affected by the resources at hand.   Another tool for a good strategy is  is the creation of a good proximate objective-one that is close enough at hand to be feasible..A proximate objective names a target that the organization can reasonably be expected  to hit, even overwhelm.
                      The third tool is  to prepare the design for coordinated actions.Effective strategies are more designs than decisions.A master strategist is a designer first and then a decision maker.Strategy is a design rather than a plan or choice or decision  because we need to emphasize the issue of mutual adjustment or integration /coordination .Strategy is a joint outcome/tradeoff between technolgy and design(integration).Good strategy is design , and design is about fitting  various pieces together  so they work as coherent whole.
         At the core, strategy is about focus..Most organizations pursue multiple goals at once , not concentrating  enough resources to achieve  a breakthrough in any one of them.
            Any good strategy  prefers high ground, which is harder to attack and easier to defend.                   This requires us to exploit a wave of change.We need to have a strategy that is in tune with the  dynamics of change.      
 Rumelt  asks  us to  cultivate  three essential skills or habit  to guide our thinking in strategy work:
1. Have a variety of tools for fighting our own myopia and for guiding our own attention .
2.Develop the ability to question our own judgment.
3.Cultivate the habit of making and recording judgments so that  we can improve.
In this regard, Rumelt mentions five intertwined  errors in human judgment and behaviour .These are  engineering overreach, smooth-sailing fallacy, risk-seeking incentives, social herding and finally inside view.
A good strategy  should come out  minds free from these errors .
                  Richard Rumelt knows  the meaning of strategy, what distinguishes a good strategy  from a bad one, and what one needs to do to develop a good strategy in work and life .The book  is extremely useful , insightful . I recommend you to read it , and if you agree after reading  , put it into practice .