- Audible Audio Edition
- Listening Length: 11 hours and 48 minutes
- Program Type: Audiobook
- Version: Unabridged
- Publisher: HighBridge, a division of Recorded Books
- Audible.com Release Date: January 31, 2012
- Whispersync for Voice: Ready
- Language: English
- ASIN: B0073OGRN0
- Amazon Best Sellers Rank:
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Good Strategy/Bad Strategy: The Difference and Why It Matters Audiobook – Unabridged
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Good strategy arises from good theory. Rumelt has contributed a plethora of ground-breaking papers to the strategy literature over the past forty years. It began with his Harvard dissertation, 'Strategy, Structure, and Economic Performance', which was later published by the Harvard B-School Press. Even after nearly four decades, it remains the definitive empirical work on diversification, good and bad. An important finding of that book is counterintuitive: that vertical integration (think major oil companies or investor-owned electric utilities) is an uneconomic way to grow. The ignoramuses in economics that masquerade as talking heads on network news programs would have us believe that vertical integration is a true bogeyman. Hogwash. The data don't support that view, not for a minute, and Rumelt blew the whistle on that myth.
His new book is another seminal contribution. He weaves theory and his own considerable consulting experience (both with business and with government) into a coherent and highly readable essay about the formulation of strategy. One of the best--and, I suspect, most underrated--contributions of the book is its enumeration of what makes for 'bad strategy'. Beginning the chapter with that name (p. 32), Rumelt cites four primary contributors, any one of which will do the job:
1. "Fluff. Fluff is a form of gibberish masquerading as strategic concepts or arguments. It uses 'Sunday' words (words that are inflated and unnecessarily abstruse) and apparently esoteric concepts to create the illusion of high-level thinking.
2. "Failure to face the challenge. Bad strategy fails to recognize or define the challenge. When you cannot define the challenge, you cannot evaluate a strategy or improve it." [WDM note: He deals with defining the challenge in Chapter 5, 'The Kernel of Good Strategy.']
3. "Mistaking goals for strategy. Many bad strategies are just statements of desire rather than plans for overcoming obstacles.
4. "Bad strategic objectives. A strategic objective is set by a leader as a means to an end. Strategic objectives are 'bad' when they fail to address critical issues or when they are impracticable."
As other reviewers have noted, the 'new' new thing in this book is the 'strategy kernel'. He defines its three constituent parts as follows:
1. a 'Diagnosis' the defines the nature of the problem;
2. a 'Guiding Policy' for determining whether an idea for dealing with the problem holds water; and
3. 'Coherent Actions' that implement the guiding policy.
My pithy description of the kernel might make it sound trivial. Trust me: it's not. It's deep, mind-bending stuff. We have used it in our practice to reshape my own contribution to the literature, 'Value Maps: Valuation Tools That Unlock Business Wealth' (Wiley, 2010). Rumelt's 'kernel' is now the underlying foundation of each value map we prepare for a client.
But there's more, much more, to Rumelt's book than the kernel. Along the way, he offers up the four components of 'bad strategy': fluff; failing to face the problem; mistaking goals for strategy (take that, Strategic Planners!); and lousy strategic objectives. These may sound like common sense, but they're not. And Rumelt's explication of them is riveting.
He devotes a lengthy chapter to one of the most interesting new aspects in strategy: design thinking. He calls today's master strategist a 'master designer'. He notes that contemporary strategy is not about decision-making. It's about design. He contrasts how Xerox blew its dominance of plain-paper copiers with Paccar's high performance in a low-growth domain. Xerox had plain-paper copiers to itself and then rested on its laurels; I'll bet Coach Jim Harbaugh of the San Francisco 49ers can relate to that. So can Nokia. So can Blackberry (nee Research In Motion). Any coach of a top-rated college football team will attest that it's a lot easier to become #1 than it is to remain #1. The same thing is true in business, only its 'players' aren't on a four-year cycle. (Somehow Rumelt did not mention the serial inability of Xerox to commercialize trailblazing innovations created at its PARC [Palo Alto Research Center] facility: the mouse, the graphical-user interface (the forerunner of Windows), the WYSIWIG text editor, Ethernet networks, and the laser printer. Paccar was lower-profile and just kept on keepin' on, as they say down South. My description doesn't do this chapter justice, so be sure to give it the time and attention it deserves.
The highlight of the last chapter in the book is the 'five intertwined errors in human judgment' that gave us the following disasters: the 2008 financial collapse, the Hindenburg, the Johnstown flood, Katrina, and the BP Gulf oil spill. That commingled quintet comprises:
1. 'engineering overreach' - systems whose defects designers didn't understand until it was too late;
2. the 'smooth-sailing fallacy' - 'the assumption that a lack of recent tremors and storms means there is no risk';
3. 'risk-seeking incentives' - Rumelt notes that the bail-outs of New York City (1975), Continental Illinois Bank (1984), and Long-Term Capital Management (1998) served to encourage people to take huge risks because, if the risks paid off, they got fabulously wealthy, and if they didn't, society stomached the loss. 'Privatize the gain, socialize the loss'. Others would call such policy 'moral hazard';
4. 'social herding' - wherein everyone is doing more or less the same thing, so it seems normal, mutually self-reinforcing, and risk-free. . .until the bottom falls out; and
5. what Rumelt labels 'the inside view' - he cites the fact that talking on one's cell phone while driving multiplies the likelihood of an accident by 5 times, yet drivers do it anyway, secure in the misbegotten belief that those sobering statistics 'don't apply to me because I'm a good driver'.
This is a well-written and powerful book. Each time I've read it, I've learned and spotted insights that I hadn't picked up on before. I think that makes it accurate to say that Richard Rumelt is a man of great wisdom. It just takes some of us a while to pick up on such wisdom because we encounter it so seldom.
I was visiting my brother's house and started reading his copy of Good Strategy/Bad Strategy one evening. I stayed up until 3 a.m. to finish it. There is a wealth of practical wisdom here that is presented without jargon and with a nice garnish of wit.
At first I assumed the "bad strategy" concept would apply to big companies and that I could breeze through it. But, as I got ahold of the argument, I began to see bad strategy all around me. It's there in state government, in the school system, in town planning, at a park where I am a trustee, and, of course, in Washington D.C. This idea has been a real eye-opener to me and I hope that it reaches a wide audience. The benefit is not just to strategy experts, but to ordinary people who need a way of understanding what is right and wrong with the institutions around them.
Even more than the "bad strategy" idea, I found the author's approach invigorating and empowering. Dr. Rumelt doesn't tell you what to do to make a good strategy. Instead, he says that it is the product of insight. In addition, he tells us that a strategy can't be "proven" to be correct. It is simply a good guess ("hypothesis") about what will work. (I sort-of always knew this, but couldn't articulate it in the face of so much expert blather about the best way to plan.) But, he then explains ways of thinking that help generate insight. A strategy is the solution to a problem, he says, so work very hard on defining and understanding the problem. Your insights about strategy will grow with your understanding of the challenge being faced. A strategy is not just about the future, he tells us, which means that we need to set a proximate objective, one that we can focus on getting done now. The proximate objective should be a task, not some performance goal. A good strategy, he explains, concentrates energy where it will have the most effect.
Good Strategy/Bad Strategy has had an immediate effect on our parish study group. I saw that we were building what the book terms a "dog's dinner" strategy and that we needed to focus on a critical "proximate objective." Dr. Rumelt, gives examples, but wisely doesn't tell you much about what your objective should be. Instead, he suggests that the group seek to discover the one thing, the one task, that is doable and which, when accomplished, would make the most difference. No fancy charts or diagrams, just a big WOW!
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