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February 12 - March 28, 2025
Bad strategy tends to skip over pesky details such as problems. It ignores the power of choice and focus, trying instead to accommodate a multitude of conflicting demands and interests. Like a quarterback whose only advice to teammates is “Let’s win,” bad strategy covers up its failure to guide by embracing the language of broad goals, ambition, vision, and values.
A good strategy includes a set of coherent actions. They are not “implementation” details; they are the punch in the strategy. A strategy that fails to define a variety of plausible and feasible immediate actions is missing a critical component.
good strategy has an essential logical structure that I call the kernel. The kernel of a strategy contains three elements: a diagnosis, a guiding policy, and coherent action.
What is remarkable about Jobs’s turnaround strategy for Apple is how much it was “Business 101” and yet how much of it was unanticipated. Of course you have to cut back and simplify to your core to climb out of a financial nosedive. Of course he needed up-to-date versions of Microsoft’s Office software to work on Apple’s computers. Of course Dell’s model of Asian supply-chain manufacturing, short cycle times, and negative working capital was the state of the art in the industry and deserved emulation. Of course he stopped the development of new operating systems—he had just brought the
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most organizations will not create focused strategies.
Good strategy requires leaders who are willing and able to say no to a wide variety of actions and interests. Strategy is at least as much about what an organization does not do as it is about what it does.
Looking just at the actions of a winning firm, you see only part of the picture. Whenever an organization succeeds greatly, there is also, at the same time, either blocked or failed competition.
“By itself,” she says, “it doesn’t help that much. Kmart would have to move the data to distribution centers and suppliers. It would have to operate an integrated inbound logistics system.” “Good,” I say, and point out to everyone that Wal-Mart’s policies fit together—the bar codes, the integrated logistics, the frequent just-in-time deliveries, the large stores with low inventory—they are complements to one another, forming an integrated design.
But Wal-Mart’s advantages were not inherent in its history or size. They grew out of a subtle shift in how to think about discount retailing.
It argued that “in dealing effectively with the other side, a nation seeks opportunities to use one or more distinctive competences in such a way as to develop competitive advantage—both in specific areas and overall.”
most important, it argued that having a true competitive strategy meant engaging in actions that imposed exorbitant costs on the other side.
It's Not about fighting were the other is strong, trying to up eachother, but instead fighting were the other iz weak.
It was simple. The United States should actually compete with the Soviet Union, using its strengths to good effect and exploiting the Soviets’ weaknesses.
overextended.
use your relative advantages to impose out-of-proportion costs on the opposition and complicate his problem of competing with you.
a shift from thinking about pure military capability to one of looking for ways to impose asymmetric costs on an opponent.
If you fail to identify and analyze the obstacles, you don’t have a strategy. Instead, you have either a stretch goal, a budget, or a list of things you wish would happen.
A basic challenge for any military research organization is matching military problems with technological opportunities, including the new operational concepts those technologies make possible. Parts of this challenge are extremely difficult because: (1) some military problems have no easy or obvious technical solutions; and (2) some emerging technologies may have far-reaching military consequences that are still unclear. DARPA focuses its investments on this “DARPA-hard” niche—a set of technical challenges that, if solved, will be of enormous benefit to U.S. national security, even if the
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When I asked Logan “What has to happen?” I was looking for some point of leverage, some reason to believe this fairly quiet company could explode with growth and profit. A strategy is like a lever that magnifies force.
business competition is not just a battle of strength and wills; it is also a competition over insights and competencies.
Importantly, opportunities, challenges, and changes don’t come along in nice annual packages. The need for true strategy work is episodic, not necessarily annual.
Good strategy works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes.
A good strategy defines a critical challenge. What is more, it builds a bridge between that challenge and action, between desire and immediate objectives that lie within grasp.
When a leader characterizes the challenge as underperformance, it sets the stage for bad strategy. Underperformance is a result. The true challenges are the reasons for the underperformance. Unless leadership offers a theory of why things haven’t worked in the past, or why the challenge is difficult, it is hard to generate good strategy.
Not miscalculation, bad strategy is the active avoidance of the hard work of crafting a good strategy.
But the essential difficulty in creating strategy is not logical; it is choice itself. Strategy does not eliminate scarcity and its consequence—the necessity of choice. Strategy is scarcity’s child and to have a strategy, rather than vague aspirations, is to choose one path and eschew others.
Any coherent strategy pushes resources toward some ends and away from others.
In organizations and politics, the longer a pattern of activity is maintained, the more it becomes entrenched and the more its supporting resource allocations are taken to be entitlements.
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.
The diagnosis for the situation should replace the overwhelming complexity of reality with a simpler story, a story that calls attention to its crucial aspects. This simplified model of reality allows one to make sense of the situation and engage in further problem solving.
The guiding policy outlines an overall approach for overcoming the obstacles highlighted by the diagnosis. It is “guiding” because it channels action in certain directions without defining exactly what shall be done.
Like the guardrails on a highway, the guiding policy directs and constrains action without fully defining its content.
Good strategy is not just “what” you are trying to do. It is also “why” and “how” you are doing it.
good guiding policy tackles the obstacles identified in the diagnosis by creating or drawing upon sources of advantage. Indeed, the heart of the matter in strategy is usually advantage. Just as a lever uses mechanical advantage to multiply force, strategic advantage multiplies the effectiveness of resources and/or actions.
A guiding policy creates advantage by anticipating the actions and reactions of others, by reducing the complexity and ambiguity in the situation, by exploiting the leverage inherent in concentrating effort on a pivotal or decisive aspect of the situation, and by creating policies and actions that are coherent, each building on the other rather than canceling one another out. (These sources of advantage are discussed in detail in chapter 6, “Using Leverage.”)
“Without action, the world would still be an idea.”
The coordination of action provides the most basic source of leverage or advantage available in strategy.
It is coherence imposed on a system by policy and design. More specifically, design is the engineering of fit among parts, specifying how actions and resources will be combined.
By “proximate,” I mean a state of affairs close enough at hand to be feasible. If an objective is clear and feasible, it can help coordinate both problem solving and direct action.
Good strategy and good organization lie in specializing on the right activities and imposing only the essential amount of coordination.
In either case, a “good strategy” is an approach that magnifies the effectiveness of actions by finding and using sources of power.
A good strategy draws power from focusing minds, energy, and action. That focus, channeled at the right moment onto a pivotal objective, can produce a cascade of favorable outcomes. I call this source of power leverage.
In general, strategic leverage arises from a mixture of anticipation, insight into what is most pivotal or critical in a situation, and making a concentrated application of effort.
In competitive strategy, the key anticipations are often of buyer demand and competitive reactions.
Most strategic anticipation draws on the predictable “downstream” results of events that have already happened, from trends already at work, from predictable economic or social dynamics, or from the routines other agents follow that make aspects of their behavior predictable.
The risk is not that the price of oil may be high or may be low. The risk is that it will go high, suckering you into a major investment, and then turn and dive to low, leaving you with useless assets.
A pivot point magnifies the effect of effort. It is a natural or created imbalance in a situation, a place where a relatively small adjustment can unleash much larger pent-up forces.
A “threshold effect” exists when there is a critical level of effort necessary to affect the system. Levels of effort below this threshold have little payoff. When there are threshold effects, it is prudent to limit objectives to those that can be affected by the resources at the strategist’s disposal.
A proximate objective names a target that the organization can reasonably be expected to hit, even overwhelm.
every organization faces a situation where the full complexity and ambiguity of the situation is daunting. An important duty of any leader is to absorb a large part of that complexity and ambiguity, passing on to the organization a simpler problem—one that is solvable.
The more dynamic the situation, the poorer your foresight will be. Therefore, the more uncertain and dynamic the situation, the more proximate a strategic objective must be.
