Takeaways: Good Strategy / Bad Strategy (Rumelt), Part 5
This book is the most densely concentrated with insights that I’ve read in recent memory. I feel like every sidebar, quote, and inspection contributes meaningfully to the point Rumelt is making. The overall message is broken into useful, but challenging pieces. The tone is focused, but not dry.
All in all, still a very good book. It’ll be hard to beat in 2021. Here are today’s takeaways.
Picking up from last week on “coherent actions” in the section “Kernal of a Good Strategy”.
Takeaway #1: “…actions should coordinate and build on one another, focusing organizational energy.”
Takeaway #2: “The main impediment to action is…that certain painful choices or actions may be avoided…, that the whole long list of hopeful ‘priorities’ may be achieved".”
Takeaway #3: “Strategy is primarily about deciding what is truly important and focusing resources and action on that objective”
Courage is a requirement to be a strategist in a meaningful context. Look at your company’s strategy right now. Are the actions being taken by your organizational groups build on one another? Is the action aligned around a common goal? This feels like the exception, not the rule, given how difficult it is to muster.
Takeaway #4: “Strategic actions that are not coherent are either in conflict with one another or taken in pursuit of unrelated challenges.”
Takeaway #5: “Strategic coordination (or coherence) is not ad hoc mutual adjustment. It is coherence imposed on a system by policy and design.”
If the first thing that pops into your head is “well, I’m sure leadership has their reasons for [insert incoherent goals here]”, their reason is probably takeaway #2 above. It may not be a universal truth, but Rumelt’s authority and conviction on the topic here are energizing. I love removing ambiguity, and this whole book is making me into an ambiguity terminator 🤖.
Takeaway #6: “Centrally controlled economies are grossly inefficient.”
Takeaway #7: “…decentralized coordination is difficult when benefits accrue only if decisions are properly coordinated”
Takeaway #8: “Centralized coordination is costly because it fights against the gains of specialization (which are the most basic economies of an organized activity)”
Takeaway #9: “We should seek coordinated policies only when the gains are very large…Good Strategy and good organization lie in specializing on the right activities and imposing only the essential amount of coordination”
⭐️ Our product team owned everything when I first joined my company. It was product dev, customer implementations, EHR interop, support tickets, bugs, you name it. All these tasks went into a big scrum board and, god willing, a few things got done for each requestor. They were a smaller team once, and product management was more like project management. Centralized decision-making sent highly-scoped tickets to devs who completed the work et voila! Features shipped, bugs were fixed, et al.
⭐️ Fast forward to a larger team, a wider array of requests, larger demands, and a requirement to look more than a few sprints down the road. The product blob was not so agile, and was bogged down trying to funnel all types of work into the same funnel.
⭐️ We decided to split the well-defined, deadline-driven customer implementation and support work from the open-ended, discovery-driven strategic product development. We formed a “technical services” team and policies to dictate what work belongs to which team. Lo and behold, the product team is gaining momentum, and the services team is GSD. It was a successful revision of a centrally-coordinated organization.
If I were starting a company today, takeaway #9 would be taken to heart, and I would experiment with gusto. Decentralization + accountability seem to be the keys to scaling organizations. Centralized coordination is a limited, maybe “entry-level” policy to create accountability. Centralized coordination by default seems to be a losing equation.
🔖 At this point, we’re entering the second major section of the book: “Sources of Power”. The title made me cringe a little because when I think of power, I think of comic book villains abusing world-changing technology or money-hungry hedge fund managers. Turns out it’s not like that at all. 😎
Takeaway #10: “Good strategy works by harnessing power and applying it where it will have the greatest effect.”
Takeaway #11: “a ‘good strategy’ is an approach that magnifies the effectiveness of actions by finding and using sources of power”
Takeaway #12: “Leverage: focus, channeled at the right moment, into a pivotal objective; aka a type of advantage that is context-free, not being rooted in the particular mechanics of a business, industry, or situation”
Takeaway #13: “the secret of strategic leverage is finding crucial pivot points and concentrating force on them.”
These are all toothsome tidbits, but alone, they’re really hard to apply. Over the next few chapters, Rumelt cracks each one of these open with great examples and stories that dip into international politics, global businesses, and other hairy situations. The above takeaways stuck out to me because I’ve never had to define leverage in a strategic context for anyone, but I’m now prepared! Bring it on!
Takeaway #14: “Types of leverage: Anticipation (buyer demand or competitive reactions), mostly drawing on predictable ‘downstream’ results of past events”
Takeaway #15: “Types of leverage: Pivot Points (insight into an action that will magnify the effects of focused resources and energy)”
Takeaway #16: “Types of leverage: Concentration (focusing on fewer, or more limited, objectives generates a bigger payoff), like getting a check for $500 today instead of being given $1.00 a day for the next 10 years.”
Investing resources where they make a large and more visible difference can be a form of leverage. Use the resources you have on hand (a team, or your time, or budget, etc.) to decisively affect a strategically-valuable objective.
🔖 Bookmark! Next up is “proximate objectives” and you can draw power simply by choosing objectives that are close enough at hand to be feasible!
The book again is Good Strategy / Bad Strategy: The Difference and Why it Matters by Richard Rumelt, and Thank you for reading Takeaways!
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