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- Why You Have A Bad Strategy
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I have a saying at my company that whenever someone calls an investment, “strategic,” you can substitute switch out the adjective with the phrase, “money-losing.” I think because, “strategic,” has some mystical power that is supposed to preempt questions about ROI. Doesn’t work on me anymore but it did a few times.
The abuse of the word strategy in all its forms is rampant. It can mean a dozen things or nothing. It can be a plan, a process, a phrase, a set of goals, an investment, a way of thinking, a set of projects, etc. It’s vague.
The word derives from the Greek term Strategos meaning general. These were elected commanders in ancient Athens who had various levels of political power as well. Pericles was a Strategos. So the concept comes from warfare along with a healthy scoop of politics.
Management consulting has abused the word more than any other actor. Strategy consulting rose as a cope that allowed more educated people to feel like business was an intellectual pursuit.
Once they saw what you could earn in finance and tech, it was important for smart people to find a way to get involved. Strategy consulting was perfect. You could think and debate about the direction a company should take without getting your hands dirty in actual sales, fulfillment, or the like.
At its worst, major American companies employed large strategy departments whose job was to get in the way of all the people actually doing the work in the company. See pre Bob Iger Disney.
A Better Way To Do Strategy
Ok, so I don’t love the way we approach strategy but as John Goodman said to Hi in Raising Arizona, “I’d rather light a candle than curse your darkness.”
I think there is a concept we can salvage here. I tend to agree with the general approach of Professor Richard Rumelt who wrote two books on the subject, Good Strategy, Bad Strategy and The Crux.
Your strategy is simply how you deploy your resources (money, people, time, tech, etc.) to achieve a result(s). When you have a good strategy, you target your resources in an effective and coherent way to tackle the biggest challenge or opportunity facing the company or organization.
When you have a bad strategy, you either don’t target your resources; don’t focus on the most important area; don’t put together a coherent and effective plan; or some combination of the three.
It’s just that simple.
Good Strategy
One of my favorite business stories comes from Andy Grove’s book, Only the Paranoid Survive. He (a soon to be CEO of Intel) and the then CEO of Intel, Gordon Moore (of Moore’s law fame), were facing a tough decision.
Most of Intel’s business at that point was in memory chips. The Japanese were mass producing these and dumping them on the market. Intel was facing major investments to try to keep pace in a commodifying technology.
At the same time, there was a new category of microprocessors for personal computers that was more profitable but the business was still small. Not that many people owned PCs at the time.
Do they invest to try to stay relevant in the industry that was at the core of the company but eroding by the day or did they make a bet on a better more sustainable future?
Gordon Moore turned to Grove and asked, “If the Board fired us tomorrow and brought in new management, what would they do?”
They both knew the answer immediately. The new leadership, unburdened by the history and relationships within the company, would go all in on the new tech and so they did. Intel went on to be one of the most valuable companies in the world.
That’s a good strategy.
Bad Strategy
Bad strategy is most strategy. It’s usually characterized by spreading resources across a lot of different initiatives. Giving every faction or interest it’s due and generally not making trade offs and choices.
Another category of bad strategy, as Rumelt points out, is characterized by a lot of fluff-lofty goals without any substance behind how the organization is going to achieve them.
I’d say that’s about 80% of strategies.
Lots of government and non-profit strategies suffer from this disease. Because there is no profit motive, the temptation is to just appease all the interests and factions.
Another example might be Yahoo in the 2000s. It wanted to be a Hollywood media company, a social company, a e-commerce company, a portal to the Internet, etc. It just seemed like it wanted to be a little bit of everything.
Another might be Sears which lost focus in the 1980s buying Coldwell Banker, Dean Witter, and even got into the proto-internet Prodigy service. Meanwhile Walmart kicked their ass by focusing relentlessly on applying logistic technology to build a massive national retailing business.
Wrong Strategies
Then there are wrong strategies. These are strategies that have a priority and a plan but it’s just the wrong one. This can happen either because the choice they made was the wrong one ie if Intel had stuck with memory chips, or if the company itself had little hope of implementing the plan.
For the latter, I think of Blockbuster. In the face of Netflix DVD by mail program and then streaming, it failed at both. The structure and culture of the company based on retail stores and late fees just couldn’t pull off the switch. Essentially there was no strategy for them beyond making as much money as they could, passing it to shareholders, and then liquidating themselves.
So when you approach strategy just ask yourself one key questions. What’s the most important thing? The rest is noise.
Keep growing,
Alan
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