Good Management Is Not Good Strategy. Here’s What Is:
One of the most annoying things I hear from leaders is that “we had a great strategy, but just couldn’t execute it.” That’s simply not possible. If you can’t execute it, it’s not a great strategy. Most likely, it was a fantasy cooked up by some combination of consultants and investment bankers which was enshrined in PowerPoint.
As Richard Rumelt points out in his new book, The Crux, planning is not strategy. Yet that’s what managers are good at, so when they set out to create a strategy they build a plan, starting with objectives and working back to resources and operational directives, rejiggering assumptions along the way to make everything fit.
Good strategy doesn’t rely on assumptions. It changes them. When you look at visionary leaders, like Ray Kroc and McDonalds, Charles Lazarus at Toys “R” Us or Thomas Watson Jr. and the IBM 360, they all focused on solving an emerging problem. The truth is that the next big thing always starts out looking like nothing at all. Good strategy creates something new.
Defining A Problem And It’s Crux
Managers lead through objectives, or what they call in the military commander’s intent, to achieve a desired end-state. To achieve these objectives, good managers make plans, allocate resources and delegate authority to direct action. They monitor progress, give advice and guidance, and maintain an atmosphere of accountability and good morale.
But how are objectives determined? Is the prescribed end-state really desirable? Is it achievable and meaningful? As Rumelt points out, without a true strategic process in place, objectives tend to be tied to financial goals that are easily measured, such as “We want to achieve 15% revenue growth, while improving profit margins and increasing market share.”
Good strategy starts with defining a problem that addresses a particular market reality. Kroc designed McDonalds to fit with an emerging suburban lifestyle. Lazarus came up with the “everyday low price” at Toys “R” Us to solve for the huge inventory swings that sale events caused. Watson bet the company on the IBM 360 because the lack of compatibility among IBM’s machines was slowly killing the company.
Rumelt calls these “gnarly challenges” because none of them had obvious solutions, or even clear alternatives to choose from. Fast food franchises didn’t exist when Kroc got into the business. Most toys stores continued with sales even after Toys R Us came to dominate the industry. None of IBM’s competitors made a similar investment in compatibility.
What most people miss about strategy is that it’s not simply about making choices among defined alternatives. Innovation is never a single event, but a process of exploration, engineering and transformation.
What Do We Know?
Because good managers are so operationally oriented, their minds tend to focus on what they see every day. So in a typical leadership team, the CFO worries about financial and economic data, the CMO follows consumer trends, the CIO is concerned about shifts in technology, the CHRO takes note of changes in the workforce and so on.
When we first start working with a team we do something called a PDO analysis (Problems, Disruptions & Opportunities) to begin to uncover relevant challenges. What I always find interesting is how often some team members are completely unaware of issues that others consider dire threats or important opportunities.
With some further discussion and analysis, we can begin to pare down the list and prioritize a limited number of challenges. We discuss what makes them important and difficult to solve. We ask questions like, “What’s the potential impact these could have on the business?” and “How much do we actually know about them?” “Where we can find out more?”
During this exploration phase, it is important to stay disciplined and curb action-oriented managers’ tendency to want to jump immediately to a solution. At this stage, we mainly want to better understand what the desired end state might look like. Only then can we start to build a strategy to tackle the problem.
What Can Be Done?
The most salient aspect of any journey is that you don’t end up where you started. As you explore the challenges your organization faces, you will encounter insights that lead definable alternatives. You will need to make choices about, as A.G. Lafley and Roger Martin have put it, where to play and how to win.
Yet as I’ve pointed out, strategy is not a game of chess, in which we patiently move inert pieces around a well defined board of play. We need to learn to leverage ecosystems of talent, technology and information from a variety of sources, including partners, suppliers, customers and open resources as well, as from within our organization itself.
That’s why strategy isn’t made in a conference room and doesn’t live on a PowerPoint deck. It reveals itself over time. What we can do is choose a path forward, which means that we leave some attractive alternatives behind. Great businesses like McDonalds, Toys R Us and the IBM 360 didn’t arise from a flash of insight, but emerged as successful initiatives were built upon and failures discarded.
Yet it takes discipline to be able to continue on a chosen path while at the same time retaining the flexibility to adapt as the marketplace evolves. My friend Ed Morrison, whose Strategic Doing framework helps build strategies for collaborative problem solving, recommends holding monthly 30/30 meetings, which review the last 30 days and plan for the next 30.
Good Strategy Isn’t “Right,” But Becomes Less Wrong Over Time
As Mike Tyson has pointed out, “everybody has a plan until they get hit,” which is why we need to take a more Bayesian approach to strategy, in which we don’t pretend that we have the “right” strategy, but endeavor to make it less wrong over time. Good strategy isn’t a plan, but a set of choices made about how to address meaningful challenges.
Ray Kroc didn’t invent the Egg McMuffin at McDonald’s, but his strategy of allowing franchisees to experiment gave birth to it and many other things as well. Charles Lazarus started with a baby furniture store, but his quest to find repeat customers led him to create Toys “R” Us and pioneer the category killer. Thomas Watson Jr. bet the company on the IBM 360, but it was the decision to move to an 8-bit byte that would revolutionize the computer industry. None of these were planned for.
Today, we need to shift our mindset to compete in an ecosystem-driven world in which our ability to compete is no longer determined by what we can command and control, but what we can access. That’s why we need to abandon the fantasy that making a strategy successful is just a matter of executing a series of predetermined moves.
Good strategy is not a function of good management, but a process of discovery. Managing by metrics will always be limited to what came before and cannot see what lies ahead. We need to learn how to identify grand challenges that shift the competitive environment and change perceptions of what is possible.
The essence of a good strategy, as Richard Rumelt noted in Good Strategy/Bad Strategy, is that it brings relative strength to bear against relative weakness in the service of solving a meaningful problem.
Greg Satell is a transformation & change expert, international keynote speaker, and bestselling author of Cascades: How to Create a Movement that Drives Transformational Change. His previous effort, Mapping Innovation, was selected as one of the best business books of 2017. You can learn more about Greg on his website, GregSatell.com and follow him on Twitter @DigitalTonto
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