WHAT IS A BAD STRATEGY?
This is the second article on our five-part series on Richard Rumelt’s book “Good Strategy/Bad Strategy”
According to Rumelt, a bad strategy is not simply the absence of a good strategy, but rather a result of misconceptions and management deficits. The four characteristics of bad strategies are
(1) Fluff – a form of gobbledygook that poses as a strategic concept.
(2) lack of reference to the challenges
(3) confusion of objectives with the strategy and
(4) wrong strategic objectives
Bad strategy is not the same as no strategy or an unsuccessful strategy. Rather, it is a clearly recognizable way of thinking and writing about strategy, which unfortunately is all too common. Bad strategy is typically rich in objectives and poor in policies or measures. Those who formulate such pseudo-strategies assume that goals are all that is needed. In some bad strategies, you find objectives that are not connected and often not feasible, often full of lofty words and phrases to hide these shortcomings.
Fluff is a superficial reformulation of the obvious, combined with a lavish scattering of keywords. Fluff disguises itself as expertise, thought and analysis. Take, for example, the strategy Credit Suisse presents on their website: “Our strategy is to be a leading asset manager with strong investment banking capabilities.” which means if you remove the jargon: “Our basic strategy is to be a bank”.
A mark of real expertise and insight is to make a complex subject understandable. One sign of mediocrity and bad strategy is unnecessary complexity, a vortex of words and jargon masking the absence of substance.
Lack of reference to the challenges
This typically sounds like this: “The overall strategy is to increase the company’s market share in each market, reduce costs in each business and thereby increase sales and profits”. A strategy is a response to challenges or an approach to overcoming obstacles. If the challenges are not defined, it is impossible to assess the quality of the strategy. And if you cannot judge the quality of a strategy, you cannot turn a bad strategy into a good one.
If the obstacles or challenges are not clearly defined you have something that masquerades as strategy, but not a good strategy.
Confusing goals with strategy
This looks something like this: “Our strategy is simple and clear: we call it the 20/20 plan: increase sales by 20% per year while achieving at 20% profit margin.”
If you ask what the basis for this so-called strategy is, you get a projection of sales, costs, margin and profit. But no supporting substance in the form of challenges, opportunities, threats, key strengths on which this projection is built. What is missing are the levers with which sales and profits can suddenly be increased by so much. You may have extrapolated goals, a budget or simply a wish list that somehow you hope will be fulfilled. The result is usually frustration because the projects are whipped through until teams are no longer willing or able to participate.
Wrong strategic goals
Rumelt brings two examples here:
- The “dog’s dinner objectives”: a long, scrambled and messy list of unrelated targets and things to do. Rumelt cites an example of a strategic plan with 47 strategies and 148 objectives.
- The Blue Sky targets: These goals are long-term visions to which you lack a bridge or the way to achieve them.
To summarise, a “bad strategy” lacks the foundation, failing to provide a realistic direction that answers to the diagnosis with clear principles and a coherent implementation plan.
How we develop a good strategy will be shown in the next articles – step by step.
Authors: Andreas Wettstein / Ignaz Furger
Rumelt, R., Good Strategy, Bad Strategy, New York 2017