Strategy Principles
Growing up as an athlete, I always found developing strategy to be fairly simple. To me it was the mechanism for accomplishing a goal, or the path to get from point A to point B. This approach came to mind recently when I was listening to ‘The Drive’ a podcast from Dr. Peter Attia. In the episode, Attia described a ‘first principles’ based framework for improving the health of his patients, it includes three components: objective, strategy, and tactics. This is pretty much exactly how I accomplished goals as an athlete.
The objective is simply the thing you are trying to accomplish, the strategy is the overarching mechanism for getting you there, and the tactics are the specific things you do to achieve the objective. This is the exact way I approached goals as a football player. For example, from the time I was about 15 until into my early 20s, I had an annual goal of getting stronger. At the position I played (defensive line), strength was a critical attribute for on-field success.
To frame how strength training works in college in Attia’s terms: my objective was to get stronger, my strategy was to define a strength training program (eg. get a good coach), and the tactics involve showing up everyday and working hard. Using this approach, I got stronger each year. Straightforward. Effective.
As I moved into my business career I naturally gravitated towards this approach for advising companies on strategy. Define the objective, build the strategy and tactics, then execute. But over time, I found business strategy did not work the same way as football strategy. You see, as an athlete goals are simple and external factors do not matter that much. Goal setting is linear. But in business, I quickly found goals are not linear, the ‘game’ of business is infinite or unbounded and requires a different approach.
This kicked off a period of research where I read dozens of books and journals covering business, military, and sports strategy.
In my research two books stood out: “Good Strategy/ Bad Strategy’ by Richard Rumelt, and ‘Playing to Win’ by A.J Lafley. As a stand alone, both offer great ways to think about building strategy, but together, they make up the framework I was searching for.
GOOD STRATEGY/ BAD STRATEGY
In Good Strategy/ Bad Strategy Rumelt starts by describing what ‘bad strategy’ looks like. He believes that if you can identify bad strategy quickly, it will improve your ability to develop good strategy. Most of us in the business world do not get to start from scratch. It is likely that you have/will inherent a legacy strategy. If this is the case, Rumelt’s checklist for ‘bad strategy’ will help you quickly cut through the noise and make an assessment. Here is the checklist directly from the book:
Bad strategy is not simply the absence of good strategy. It grows out of specific misconceptions and leadership dysfunctions. Once you develop the ability to detect bad strategy, you will dramatically improve your effectiveness at judging, influencing, and creating strategy. To detect a bad strategy, look for one or more of it’s four major hallmarks:
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.
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.
Mistaking goals for strategy: Many bad strategies are just statements of desire rather than plans for overcoming obstacles.
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.
Do any of these factors look familiar? They did for me. In fact, most “strategy discussions” I have had primarily revolve around one or more of these criteria. Understanding if your strategy is bad is the first step to improving it.
Rumelt believes ‘good strategy’ is broken down into three simple components. He calls it ‘the kernel.’
The kernel includes: a diagnosis of the situation, the choice of an overall guiding policy, and the design of coherent action. Rumelt explains:
The kernel defines the logic of a strategy — the bare-bones minimum. For a strategy to have any bite, it must chart a direction based on a diagnosis of the situation. Absent a diagnosis, one cannot judge one’s own choice of an overall guiding policy, much less someone else’s choice. A strategy must also translate the overall directive into coordinated action focused on key points of leverage in the situation.
You might notice the similarities between Rumelt’s kernel and the process that I used as an athlete, but there is one key difference, the diagnosis. You see, for athletes the need for a diagnosis is less important. The rules of engagement and best practices are crystalized. Knowing what you need to do is straightforward. But with more complex initiatives (like business), without a diagnosis, you cannot design a strong guiding policy. Rumelt highlights the components of a good diagnosis looks:
“A 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.”
The second two steps, guiding policy and action plan are simple, as Rumelt explains:
“A guiding policy for dealing with the challenge. This is an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis.”
“A set of coherent actions that are designed to carry out the guiding policy. These are steps that are coordinated with one another to work together in accomplishing the guiding policy.”
While Rumelt’s framework is helpful, I find that layering on the process as defined by A.J Lafley in ‘Playing to Win’ improves it.
PLAYING TO WIN
In ‘Playing to Win’ Lafley lays out five core questions to answer when developing strategy:
1) WHAT IS OUR WINNING ASPIRATION?
This is essentially the purpose and mission of the organization, what are you ultimately trying to accomplish? What can you anchor to when chaos/change emerges?
2) WHERE WILL WE PLAY?
What geography, customer segment, channel, vertical, etc. are you going after? This question raises an important point from famed strategist Michael Porter. Good strategy required tradeoffs. In strategic thinking choosing what not to do is just as important as choosing what to do. Being selective about where you play is critical.
3) HOW WILL WE WIN?
What is your distinct value proposition? What leverage makes you better or different from your competition? Having clear and correct answers to these questions is essential for developing a competitive advantage or determining how you will win. If you are competing for customers, Porter believes sustainable competitive advantage can be developed in a couple of key ways: cost leadership, differentiation, and focus. In simple terms, cost leadership means developing a comparable product at a lower price. Differentiation means capturing more value from a market than your competition through factors outside of price, and focus means narrowing in on a small niche market (cost leadership and differentiation can also be layered into a focus strategy).
Answering the question ‘How will we win?’ requires a lot of work. Guessing at this will lead to failure more times than not. To answer the question well, you must first understand your organizational competencies, weaknesses, opportunities, and points of leverage. Then you must understand your competition and customers customers at a deep level. To do this you must get out in the field. Survey your customers give them demos. Feedback is critical for answering this question. Aligning your strengths with a unfilled need is the best way to sustainably win.
4) WHAT CAPABILITIES MUST BE IN PLACE?
What do you need to execute your strategy? Capabilities are softer things. What skills, what types people, what relationships? These can take a long time to develop.
5) WHAT MANAGEMENT SYSTEMS ARE REQUIRED?
The management systems are the crux of the action plan. What are your goals? How will you achieve them? How do you define success? How do you build an operating cadence to make sure you are reaching your desired outcomes? Building efficient management systems is critical for sound operational and project management.
Now that you understand the core message of both books, lets bring them together.
BRINGING IT ALL TOGETHER
Rumelt’s kernel is a great way to frame strategy development. The key questions from ‘Playing to Win’ help build the necessary objectives, policy, and action plans required to successfully execute a strategy. Starting with a diagnosis and moving all the way into action plans will help you cover the key factors for strategy development.
But as you execute it is critical to note the iterative nature of strategy development. This was the biggest failure of my initial process when I crossed over from football to business. In business, strategy is not static. It is a continuous feedback loop. Good strategy is iterative. You must build management systems to assess if your strategy is working.
Business strategy is inherently complex. There are many moving pieces. To make things worse, our brains are not wired to think rationally over the long-term. We have evolved to make short-term decisions that ensure survival. This is one of the reasons why frameworks are so helpful, they pull you away from the day-to-day. The tools I provide in this post are not all encompassing. There are no one size fits all solutions. With this being said, this framework has consistently improved my ability to think strategically. If you use it as a guide, I think it will help you as well.
To conclude, here is a checklist that I use to make sure that I stick to the framework. When ever I perceive a problem in strategy, I pull this out and assess.
- Is the framework required? Remember strategies in bounded games (eg. getting stronger) can usually be more simple.
- Is there any evidence of ‘bad strategy?’
- Have you diagnosed the situation? Where are you at on the field?
- Is your diagnosis/policy/plan stale? How long has it been since you assessed your strategy?
- Given this diagnosis, what is required? What should you accomplish? What is the aspiration?
- Where will you focus? Where will you play?
- What is your competitive advantage? How will you win?
- Points of leverage?
- Strengths, Weakness, Opportunities, Threats?
- Cost/Differentiation/Focus
- Is the ‘opposite’ of your strategy ‘a strategy’? If it is not, that probably means you are doing the same thing as your competition. This is a losing strategy.
- What capabilities do you need to execute?
- What management systems do you need to execute?
Good luck!
