Last year I read Rumelt’s excellent ‘Good Strategy Bad Strategy’. Earlier today I was reading a book draft that was very rude about planning. I began to think again about Rumelt’s notion of what a good strategy contains, because it can help avoid coming up with yet another expert-led plan that fails.
Richard Rumelt was a strategy guru, though not as well-known as Porter. One reason might be he doesn’t turn his insights into alliterative lists. Well, I’ve sort of done that below on his behalf.
In his classic Good Strategy Bad Strategy, Rumelt says “Simply being ambitious is not a strategy.”
A good strategy does more than urge us forward toward a goal or a vision. A good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them. And the greater the challenge, the more a good strategy focuses and coordinates efforts to achieve a powerful competitive punch or problem-solving effort.
Notice he doesn’t say ‘a good strategy has a precise implementation plan’. It provides focus and coordination in a way appropriate to the situation. That might be a tight plan or a loose opportunism or something else – as long as it is coherent, internally and externally.
To the three Ds. Rumelt says the kernel of good strategy has three elements. Below is my take, in an alliterative list:
DIAGNOSIS that “defines or explains the nature of the challenge. A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as critical.”
That last line is a kicker. The diagnosis is more than a description; it starts to determine the Direction (see below). And that means diagnosis is a choice at a fundamental level, a choice of what framework is appropriate to the task at hand. Implied is there is more than single-loop learning at work (taking corrective action in order to meet a goal). There is double-loop learning, questioning the assumptions the underpin how to understand the problem and what action to take.
As Rumelt puts it:
A great deal of strategy work is trying to figure out what is going on. Not just deciding what to do, but the more fundamental problem of comprehending the situation.
Also, “good strategy tends to be based on the diagnosis promising leverage over outcomes”.
DIRECTION “outlines an overall approach for overcoming the obstacles highlighted by the diagnosis.” But it is “not goals or visions or images of desirable end-states. It method of grappling with the situation and ruling out a cast array of possible actions.” Like the guiderails on a highway, the Direction guides and constrains action without fully defining its content.
The Direction must create or draw on sources of advantage that (one or more of):
-exploit leverage points inherent in concentrating effort on a pivotal or decisive aspect of the situation
-create actions that are coherent
-anticipate the actions and reactions of others
DESIGN FOR DELIVERY, that is “a set of coherent actions that are designed to deliver the direction. These steps are coordinated with one another to work together to accomplishing the direction.”
Rumelt as a lovely phrase for what design means in this context:
the engineering of fit among parts, specifying how actions are resources will be combined
But coordination is hard so “we should seek coordinate policies only when the gains are very large.”
The brilliance of good organisation is not in making sure that everything is connected to everything else. Down that road lies frozen maladaptive stasis. Good strategy and good organisational design lie in specialising in the right activities and imposing only the essential amount of coordination.
How does this help us avoid coming up with plans that fail?
First, it helps us identify when a strategy is missing key elements. A Direction without a Diagnosis is not a good strategy. An ambitious tagline (“be a world leader in sustainability”) must be part of a Direction which is clear on advantage, that follows from a Diagnosis, and which has an appropriate Design for Delivery.
Second, it helps us understand the level of agreement needed for a strategy to truly be effective. It is not enough to agree on the Diagnosis and the Direction (as hard as these usually are to agree on). The Design must also be widely agreed, if the organisation is to have coherence (otherwise actions “cancel out”, in Rumelt’s phrase).
Also, there are two levels having an agreed design: the appropriate degree of coordination; and what to coordinate on.
Third, it helps understand some core tasks in the process of coming up with your strategy. There must a Diagnosis phase, and one which pays attention to the alternative diagnoses and the downstream consequences one over another. There should be a phase which comes up with different possible Directions, based on different sources of advantage (or different ways of combining the sources of advantage). There needs to be careful Designing for Delivery for the best candidate Directions. Ideally you would want to carry key people through all parts of that journey, so that the initial Design is enacted.
Now it would be easy to take all this and still come up with a plan that fails – if you act with an implicit assumption that all the information you need is available at the moment you make your perfect decision. Better to act with the assumption that you have imperfect information and imperfect reasoning. The key insight is that the Direction is only a guide-rail and the Design must contain the resources and routines for learning from experience.
Because, finally, there is a great deal of learning, adapting and adjusting. Initially this is as you are choosing your Diagnosis, Direction and Design. Crucially, there must be on-going improvements to the Design, as experiences give data on the three Ds. You’ll need to tweak the Design, or maybe update the Direction and certainly keep checking the Diagnosis.