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Takeaways: Good Strategy / Bad Strategy (Rumelt), Part 8
Using Design (48% completed)
Today’s read surprised me a bit. At nearly halfway through the book, I keep expecting things to start getting dry. I’m pleased to be wrong again! 🧠📈
New chapter! Using Design, in Part II: Sources of Power. Rumelt explores the early history of strategy as a subject of military affairs. Like organized agriculture, it turns out that organizing and coordinating the actions of fighters led to better military outcomes!
He writes about the history of warring between Hannibal and the Romans. The Roman culture, conquerors for centuries, weren’t always a hardened society of soldiers. It took painful lessons from their “father of strategy”, Hannibal, who bloodied and beat their armies over and over again.
Rumelt distills these stories into three fundamentals from strategic design:
“Premeditation (winging it is not a strategy)”
“Anticipation of others’ actions”
“Purposeful design of coordinated actions”
Scenario: It’s 200 BC, and you’re going to pit tens of thousands of soldiers against one another in a war for land/resources/sovereignty/etc. Let’s consider Rumelt’s 3 elements:
Premeditation: Just going to sharpen your spears and hope for the best?
Anticipation: Do you know anything about your enemy? Their culture? Historical tactics?
Purposeful design: Just going to send in your troops, single file? How will you pass orders to 50,000 soldiers?
I don’t know about you, but I’d be worried about keeping my job (and my life) in those circumstances. The question of spear sharpness doesn’t compare to a cohesive, well-designed strategy.
Takeaway #1: “Many effective strategies are more designs than decisions—are more constructed than chosen”
Takeaway #2: “Leaders are rarely handed a clear set of alternative actions, outcomes, and probabilities of events.”
The more one considers just how many variables influence success, I think, the more one turns to synthesizing results over predicting results. As a leader, do you wait for a nicely formatted list of pros & cons before you make a lasting decision, or do you find ways that this decision fits into the overall design of the business/unit?
⭐ At work, we have an agreement with a large company. I’ll call them TinyWare. These folks are supplying research (which produces hard-to-duplicate code) in exchange for a future (and sizable $$$) commitment to their product. I’m going to try Using Design, as the chapter suggests, and work in the three elements above.
⭐ The challenge, for me, is to get the research without committing $ to their product. Firstly, I’d study our IP agreements on the work that’s been done already (presumably they own the pure research, but we may have independent rights to the code). On top of that, I’d consider how our business strategy depends on this code. After all, we want to continuously improve our position and expand our options.
⭐ Next, I’d research the effects of choosing TinyWare’s product versus popular alternatives in the context of our business strategy. After all, TinyWare may do exactly what we need in the next 5 years. It may be faster, and can do it for half the cost.
⭐ Let’s assume that we’re not going with TinyWare (gotta keep this interesting!). What do we anticipate? I believe they’ll pull their research immediately, and use whatever legal leverage they have to punish us. Not very classy, TinyWare. How can we maneuver around this? Assuming its within our legal right, we quietly bring a resource in house who can carry on the work. This may not mirror the work being done by TinyWare, but TinyWare isn’t a well-integrated resource in our strategic design. The research being done by TinyWare is designed to work for TinyWare.
⭐ Last, how do we coordinate our activities? This isn’t just about executing what I’ve laid out above, I think this is about trade-offs. (continued below…)
Takeaway #3: “Varying forty or fifty parameters, you’ll eventually find a sweet spot…you cannot search the entire space of possibilities…it is too complex.”
Takeaway #4: “Most of the work in systems design is figuring out the interactions (aka trade-offs).”
Takeaway #5: “Performance is the joint outcome of capability and clever design.”
Rumelt writes about the construction of a BMW. You could build it with off-the-shelf parts, but would it be a tightly-integrated driving machine? Could the off-the-shelf version compete with other, more tightly-integrated designs? Could the marketing and sales and distribution machinery survive in a competitive landscape?
Think about your company and the competitive landscape. Are there thousands of competitors like in marketing tech? Are there dozens like in behavioral healthcare IT? Do you have a valuable resource, like Xerox’s patents in 1970, that drive profit regardless of your strategic planning, or do you need watertight coordination to stand out in a crowded market like Drift?
⭐ We’re not just looking at research vs. an infrastructure product. We’ve got to look at the knock-on effects on other resources. The same way you can’t change the power in a BMW engine without affecting the drivetrain, the chassis, the overall weight, etc. Going with TinyWare’s product will require onboarding and education. It’s newer and less popular, with a smaller talent base. TinyWare may be willing to bend over backwards to make sure we’re successful, but those resources will be finite.
⭐ We already have one hand tied behind our backs organizationally, does it make sense to add an additional burden to the team? That said, if we hire someone to specialize in this research, who manages them? Who will make sure they are performing the work to maintain the benefit? We’re also talking about a jarring change for marketing and sales. TinyWare is a fun bullet point in their materials. Do we sacrifice salability to help us ship faster? ☠
Takeaway #6: “Resources and tight coordination are partial substitutes for one another.”
Takeaway #7: “A strategic resource is a kind of property that is fairly long lasting that…competitors cannot duplicate without suffering a net economic loss.”
Takeaway #8: “Resources are to coordinated activity as capital is to labor…thus, a strong resource position can obviate the need for sophisticated design-type strategy.”
Takeaway #9: “It is human nature that the easy life builds laxity…and to associate current profit with recent actions (even though it should be evident that the current plenty is the harvest of planting seasons long past).”
Rumelt, you may be able to help us yet! Based on these takeaways, maybe we can make sense of the somewhat-overwhelming questions I paralyzed myself with above.
⭐ So a guiding question: “is this research/code a strategic resource?”. I think the answer is no. Not necessarily based on the quality of the work, but rather, in our implementation of it (which is to say, we haven’t really leveraged this, and it’s in a very simplistic form).
⭐ I think we can achieve a strong resource position by investing in hard-to-duplicate global infrastructure + interoperability resources, and by taking this research in-house to tightly coordinate it with our product (and business strategy).
That was a fun exercise! All thanks to thinking about strategy as something we design instead of a decision to be made. I hope you enjoyed the ride!
🔖 Bookmark! Next chapter: Focus.
Rumelt recommends learning about Bill Gates’s triumph over IBM, and Nucor’s intrepid victory over global steel incumbents in this chapter. I’ve linked to case studies for your pleasure.
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