Know Your Strategy – The Differences Between Good and Bad Strategy

The speeches of a football player who exhorts his teammates to win can be motivational, but it is not strategic. Are you the same type of person?

Many organizations have failed to fulfill the true meaning of strategy. Most of them have a mindset of calling impressive yet unrealistic goals and meaningless slogan, broad adjectives and grand vision, as strategy. This proves that the word strategy has become a verbal tic for many people in organizations.

“The truth is that many companies, especially large complex companies, don’t really have strategies.”

Often we find company or organization leaders exclaiming ambitious statements, and we might find them inspiring and motivating, but in reality, those are only well-delivered figures of speech. At the end of the day, strategy is about action, about doing something. Goals, visions and suchlike, will never be realized without proper strategies.

“A good strategy recognizes the nature of the challenge and offers a way of surmounting it. Simply being ambitious is not a strategy.”

Strategizing means identifying critical issues in the market and industry, determining the next move to uncover possibilities and opportunities, and planning result-oriented action on those crucial points. Strategy has little to do with ambitious goals, vision, leadership, innovation or determination. A good strategy presents a specific action plan to overcome a defined challenge. It is highly focused, problem-solving activity that tackles fundamental issues. And lastly, it is built on functional knowledge about what works, what does not, and why.

The core of good strategy is a foundation with three components: diagnosis, a guiding policy, and a set of coherent actions.

  • Diagnosis allows and requires us to ask, “What is going on?” While strategizing is about thinking and imagination, it also involves judgment and evaluation. A company or organization that knows nothing about what is wrong is a moving “titanic”. The more knowledge you gain about your company’s challenges and its consequences of its strategic options, the chance of tackling a diagnosis is higher.

  • After knowing what is wrong and how to avoid it, your company or organization need to have a concept that can guide your teams’ action. A guiding policy provides the reasons for the actions you need to take to attain your objectives. It is a signpost that shows you the way to proceed. For example, if your rival has the advantage of being more preferred by the working people, then you can gain the advantage by changing your market target to be available even for cost-conscious student shoppers. Make it affordable in a wider-range of people

  • A plan of action gets you where you need to go and calls for the thoughtful allocation of resources. For example, applying your sales and marketing knowledge to expand your capacity or alter your product is a coherent action, one that synthesizes your strengths. Think of strategy as something you impose on a challenging situation through your actions.

Bad strategy isn’t just the opposite of good strategy; it is strongly based on delusional leader and misleading passion. Four characteristics typify most bad strategies:

  • “Fluff” – Empty slogans filled with trendy buzzwords take the place of important insights. Consider this example from a bank’s internal report: “Our fundamental strategy is one of customer-centric intermediation,” or, translated into plain English, “Our bank’s fundamental strategy is being a bank.” Many so-called strategies are equally banal.

  • “Failure to face the challenge” – You can’t have a strategy if you don’t isolate and identify your firm’s main problem.

  • “Mistaking goals for strategy” – Objectives are just a wish list if you don’t pair them with concrete action steps.

  • “Bad strategic objectives” – Leaders must set overarching, but always realistic, aims.

We have gone so far of learning to differentiate between good and bad strategy. The last thing to remember is that good strategy represents a hypothesis, an idea or explanation for something that is based on known facts but has not yet been proved. In this case, your hypothesis should aim to be productive. You will know whether your idea is right if your strategy has succeeded. If and when it succeed, this strategic information will be a valuable proprietary information that will help you finesse your operations to achieve even more in the future.

Source : Rumelt, Richard. Good Strategy/Bad Strategy, The Difference and Why it Matters. London, United Kingdom, Profile Books Ltd., 2017.

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