Good Strategy vs. Bad Strategy (Part VI)

So far we’ve summarized what good strategy looks like and the major characteristics of bad strategy.  Now I want us to focus on why so much bad strategy exists and how you can avoid it in your organization.

Rumelt focuses on two primary causes of bad strategy: the inability to choose and template style planning. Today, we’ll focus on the inability to choose. A problem that is most likely dragging down your organizations’ performance right now.

Power to Choose

Choices are never easy.  Primarily because making a choice pushes us away from the status quo of where we are today, which will cause change to happen. Change paralyzes most of us. Also, making a choice closes a door or multiple doors. For instance, if you choose to focus on a particular customer segment so you can serve that customer better than anyone, then we fear that we’ve closed the door to all those other customers. The fact is that by focusing on a specific customer segment you’ll do far better, but no one wants to make that choice!

Remember our definition of strategy: focusing the organization’s energy on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes.

Strategy requires focus and focus requires choice.  Choice can sometimes mean leaving a profitable business segment that you know has a limited future to focus on a new business that, though risky, has a much bigger upside in the years ahead.  Butchering the cash cow is never easy!

Rumelt provides the example of Digital Equipment Corporation (DEC) who had been a leader in the minicomputer revolution of the 1960s and 1970s.  DEC had been losing ground for several years to the new 32-bit personal computers.  The company needed to make some serious changes to survive.  There were three competing visions for DEC’s future: a computer company integrating hardware and software (Boxes strategy); a solutions company focused on solving customer’s problems (Solutions strategy);   or a focus on semiconductor technology (Chips strategy).

Each strategy had its champions and each had its detractors.  With equally powerful executives arguing for each strategy, DEC’s chief executive, Ken Olsen, made the decision to force the group to reach their own consensus.  Unfortunately, the executives were unable to make a decision on a specific strategy and instead chose to compromise.  The statement agreed to was “DEC is committed to providing high quality products and services and being a leader in data processing.”  This was not a strategy.  It was just a weak way out of an executive stalemate.

Not surprisingly, this “non-strategy” failed in the marketplace.  Ken Olsen was replaced by Robert Palmer.  Palmer made it clear that DEC’s strategy would be chips, but that decision was five years too late.  Palmer could not stem the tide of ever more powerful personal computers that were overtaking the firm.  In 1998, DEC was acquired by Compaq, which was acquired by Hewlett-Packard three years later.

How do you avoid a similar fate for your company?

  1. Force a decision.  If your people cannot make the call, as the chief executive, you must make it.

    2.  

  2. Look beyond the horizon.  Where is your industry headed?  The decision you make may not be the most profitable in the short term, but may be vital for your organization to survive in the turbulent future.

    3.  

  3. Focus.  Once the decision has been made, focus all of your company’s energies on that strategy!

In the next post, we’ll look at how “template-style” planning can lead to bad strategy.

If you liked this blog, please share it with your friends and join the conversation by leaving a comment or question on our website.  While you are there you can sign up for email updates, or take our growth quiz.

Thank you for being a part of our values driven community!

Photo courtesy of http://farm4.staticflickr.com/3562/3339640903_1a76436b41_z.jpg?zz=1

Look for other posts in the Good Vs. Bad Strategy series?

  1. Intro
  2. 4 Steps to Facing the Challenge in Your Strategy
  3. 4 Steps to Avoid Mistaking Goals for Strategy
  4. 3 Steps to Setting Great Objectives
  5. 7 Steps to Avoiding Fluff
  6. Conclusion

Filed Under: ,

2 Comments