Opinion: Rekindling the relevance of strategic planning

Effective exercises premised on choice and focus

Richard P. Rumelt, Good Strategy/Bad Strategy: The Difference and Why It Matters. Crown Business, 2011.

I have been teaching MBA courses in business strategy, as well as working with companies and public-sector organizations on their strategy exercises, for a couple of decades now, so I always look forward to new books on strategy.

Unfortunately, in the last few years many of them have been quite forgettable. The current recipe for strategy books seems to involve a collection of case studies tied together with clichés and simplistic generalizations about the strategies that have made these companies successful.

Perhaps more damaging to real strategy work has been the recent proliferation of books offering templates to guide strategy exercises and to, in their words, "take the hard work out of strategy development."

I have been a fan of Richard Rumelt's work for some time and thus had high expectations that his new book on strategy would have some important and useful information to offer. I was not disappointed.

Mr. Rumelt is a professor at the UCLA Anderson School of Management. He is the author of several business strategy classics and has been a consultant for both small and Fortune 500 companies. McKinsey & Co. has called him "strategy's strategist."

In Good Strategy/Bad Strategy, he draws on his research and consulting experience to provide an important reminder of what differentiates good strategy from bad. The book does not so much break new ground as take us back to the key fundamentals that make for good strategy.

This book is borne out of the author's frustration at seeing bad strategy all around him. In his view, too many organizations have replaced the fundamentals of good strategy with fluff, buzzwords, and slogans. Moreover, he feels that template-style planning, which has been enthusiastically embraced by companies and particularly public-sector organizations, has caused a dumbing-down of strategic thinking.

The result is that for many organizations, strategy today consists of nothing more than broad goals combined with some financial projections and lots of empty rhetoric.

In Mr. Rumelt's view, bad strategy results largely from weak leadership. Too often, managers sacrifice choice and focus to achieve consensus by trying to accommodate a multitude of conflicting demands and interests.

If you have ever been exposed to a public-sector (e.g. university) strategic planning exercise, you will recognize this problem. The result of these exercises is typically the avoidance of choice, resulting in a dog's breakfast of what the various constituencies would like to see done, all swept into the strategic plan.

His four hallmarks of bad strategy are noteworthy. They include: failure to face the real problem; mistaking goals for strategy; having bad strategic objectives; and the use of fluff and esoteric concepts to create the illusion of high-level thinking.

By contrast, good strategy, in his view, is premised on choice and focus.

It works by concentrating energy and resources on a very few pivotal objectives that, once accomplished, will lead to a cascade of favourable outcomes.

The author argues that all good strategies have a basic underlying structure that consists of three elements. The first, which he calls the "kernel," involves a clear-eyed analysis of the challenges that the organization is facing, including the identification of the aspects of the situation that are the most critical.

This is followed by a guiding policy or overall approach to overcoming or coping with the obstacles identified in the diagnosis. The final step involves a set of coherent actions that are co-ordinated with one another to support the accomplishment of the guiding policy.

While these fundamentals are well-established in strategy literature, they would appear today to be honoured more in the breach than in the observance.

In addition to reminding us of the basics of good strategy, the book also provides a very good discussion of the nature and limitations of competitive advantage, as well as dozens of examples of successful and unsuccessful strategies from both military and corporate history. It also supplies some useful techniques, tools and insights that will help you in the hard work of real strategy development.

Already selected by the Financial Times as one of six finalists for Business Book of the Year, Good Strategy/Bad Strategy is an enjoyable read and is destined to become a management classic.

Micheal Kelly is a professor and former dean at the University of Ottawa's Telfer School of Management.