business strategy book by Richard Rumelt; followed by The Crux

Excerpts (partial)

INTRODUCTION OVERWHELMING OBSTACLES

a talented leader identifies the one or two critical issues in the situation—the pivot points that can multiply the effectiveness of effort—and then focuses and concentrates action and resources on them.

The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors

A leader’s most important responsibility is identifying the biggest challenges to forward progress and devising a coherent approach to overcoming them.

the greater the challenge, the more a good strategy focuses and coordinates efforts to achieve a powerful competitive punch or problem-solving effect.

More and more organizational leaders say they have a strategy, but they do not. Instead, they espouse what I call bad strategy. 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.

The gap between good strategy and the jumble of things people label “strategy” has grown over the years

This sort of mishmash of pop culture, motivational slogans, and business buzz speak is, unfortunately, increasingly common.

strategy, responsive to innovation and ambition, selects the path, identifying how, why, and where leadership and determination are to be applied

Many people assume that a strategy is a big-picture overall direction, divorced from any specific action. But defining strategy as broad concepts, thereby leaving out action, creates a wide chasm between “strategy” and “implementation.” If you accept this chasm, most strategy work becomes wheel spinning

A good strategy includes a set of coherent actions. They are not “implementation” details; they are the punch in the strategy

Executives who complain about “execution” problems have usually confused strategy with goal setting

A 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

Bad strategy is more than just the absence of good strategy. Bad strategy has a life and logic of its own, a false edifice built on mistaken foundations. Bad strategy may actively avoid analyzing obstacles because a leader believes that negative thoughts get in the way

The creeping spread of bad strategy affects us all. Heavy with goals and slogans, the national government has become less and less able to solve problems

PART I GOOD AND BAD STRATEGY

The most basic idea of strategy is the application of strength against weakness. Or, if you prefer, strength applied to the most promising opportunity

The standard modern treatment of strategy has expanded this idea into a rich discussion of potential strengths, today called “advantages.”

this whole midlevel framework misses two huge, incredibly important natural sources of strength:

Having a coherent strategy—one that coordinates policies and actions. A good strategy doesn’t just draw on existing strength; it creates strength through the coherence of its design

The creation of new strengths through subtle shifts in viewpoint. An insightful reframing of a competitive situation can create whole new patterns

Like weeds crowding out the grass, bad strategy crowds out good strategy

CHAPTER 1 GOOD STRATEGY IS UNEXPECTED

The first natural advantage of good strategy arises because other organizations often don’t have one

And because they don’t expect you to have one, either

A good strategy has coherence, coordinating actions, policies, and resources so as to accomplish an important end

How Steve Jobs saved Apple

APPLE

After the 1995 release of Microsoft’s Windows 95 multimedia operating system, Apple Inc. fell into a death spiral

By September 1997, Apple was two months from bankruptcy. Steve Jobs, who had cofounded the company in 1976, agreed to return to serve on a reconstructed board of directors and to be interim CEO

Within a year, things changed radically at Apple

What he did was both obvious and, at the same time, unexpected. He shrunk Apple to a scale and scope suitable to the reality of its being a niche producer in the highly competitive personal computer business. He cut Apple back to a core that could survive.

What is remarkable about Jobs’s turnaround strategy for Apple is how much it was “BusinBusiness 101 is surprisingess 101” and yet how much of it was unanticipated

The power of Jobs’s strategy came from directly tackling the fundamental problem with a focused and coordinated set of actions.

he did not just cut in a blind ax-wielding frenzy—he redesigned the whole business logic around a simplified product line sold through a limited set of outlets.

Eighteen months earlier, I had been involved in a large-scale study, sponsored by Andersen Consulting, of strategies in the worldwide electronics industry

interviews with twenty-six executives

I asked each executive to identify the leading competitor in their business. I asked how that company had become the leader

These executives, by and large, had no trouble describing the strategy of the leader in their sectors

But when I asked about their own companies’ strategies, there was a very different kind of response

They had each told me the formula for success in the 1990s electronics industry—take a good position quickly when a new window of opportunity opens—but none said that was their focus or even mentioned it as part of their strategy

Given that background, I was interested in what Steve Jobs might say about the future of Apple

What is the strategy?” He did not attack my argument. He didn’t agree with it, either. He just smiled and said, “I am going to wait for the next big thing.*

There was no pretense that such windows opened every year or that one could force them open with incentives or management tricks

It would be two years before he would make that leap again with the iPod and then online music. And, after that, with the iPhone

General Schwarzkopf’s strategy in Desert Storm

DESERT STORM

Gulf War in 1991

People were surprised to discover that U.S. commanders actually had a focused strategy for defeating the entrenched Iraqi invaders

In an area about the size of West Virginia the Iraqis have poured 540,000 of their million-man army and 4,000 of their 6,000 tanks

Schwarzkopf’s combined-arms left-hook strategy was so successful that the intense ground war lasted only one hundred hours

Finally, and perhaps most important, Saddam Hussein had ordered his commanders not to use their chemical weapons

Saddam was deterred—postwar intelligence gleaned from the Russians revealed that he feared a U.S. nuclear retaliation to such use

News commentators described the plan as “brilliant” and “secret.” Few had anticipated this envelopment maneuver. But why hadn’t they? The Department of the Army publishes field manuals fully describing its basic doctrines and methods

a surprise not only to Iraq but also to talking-head military commentators on television and to most of the U.S. Congress.

The best answer to this puzzle is that the real surprise was that such a pure and focused strategy was actually implemented

Having conflicting goals, dedicating resources to unconnected targets, and accommodating incompatible interests are the luxuries of the rich and powerful, but they make for bad strategy

Strategy is at least as much about what an organization does not do as it is about what it does.

CHAPTER 2 DISCOVERING POWER

The second natural advantage of many good strategies comes from insight into new sources of strength and weakness.

A SLUNG STONE

David the shepherd boy defeated the warrior Goliath

The story teaches us that our preconceived ideas of strength and weakness may be unsound.

More than the deft wielding of power, the listener experiences the actual discovery of power

Discovering Wal-Mart’s secret

WAL-MART

Much of my work with MBA students and companies involves helping them uncover the hidden power in situations

Hard as it is to believe today, Wal-Mart was once David, not Goliath.

Before beginning the discussion, I copy a phrase from the case onto the whiteboard and draw a box around it: CONVENTIONAL WISDOM:* A full-line discount store needs a population base of at least 100,000*

“If the policies you have listed are the reasons for Wal-Mart’s success, and if this case was published—let’s see—in 1986, then why was the company able to run rampant over Kmart for the next decade? Wasn’t the formula obvious? Where was the competition?”

Half of what alert participants learn in a strategy exercise is to consider the competition even when no one tells you to do it in advance.

Both Wal-Mart and Kmart began to install bar-code scanners at cash registers in the early 1980s. Why did Wal-Mart seem to benefit from this more than Kmart?

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

It takes a lot of customers to spread the overhead and keep costs and prices low. Exactly how did Walton break the iron logic of cost?”

The Wal-Mart store needs to be part of the network.

The network replaced the store. A regional network of 150 stores serves a population of millions! Walton didn’t break the conventional wisdom; he broke the old definition of a store

In making an integrated network into the operating unit of the company, instead of the individual store, Walton broke with an even deeper conventional wisdom of his era: the doctrine of decentralization

Kmart had long adhered to this doctrine

the oft-forgotten cost of decentralization is lost coordination across units

once Walton’s insights made the decentralized structure a disadvantage, Kmart had a severe problem. A large organization may balk at adopting a new technique, but such change is manageable. But breaking with doctrine—with one’s basic philosophy—is rare absent a near-death experience.

ANDY MARSHALL

I first met Andy Marshall in mid-1990. He is the director of net assessment for the Defense Department

Since the Office of Net Assessment was created in 1973, there has been only one director: Andrew Marshall. His challenging job is to think broadly about the security situation of the United States.

He explained to me how during the Cold War the traditional budget cycle of the military and the Congress had created a reactive mindset.

This process of justifying expenditures as counters to Soviet expenditures conditioned U.S. actions on Soviet strengths, expressed as threats, not on Soviet weaknesses and constraints. We had a war strategy—a catastrophic spasm—but no plan about how to compete with the Soviet Union over the long term

He took out a document, a thin sheaf of paper, and began to explain its meaning: “This document reflects thoughts about how to actually use U.S. strengths to exploit Soviet weaknesses, a very different approach.” Titled “Strategy for Competing with the Soviets in the Military Sector of the Continuing Political-Military Competition,”2 it had been written in 1976

This fascinating analysis of the situation worked to redefine “defense” in new terms—a subtle shift in point of view.

use one or more distinctive competences in such a way as to develop competitive advantage—both in specific areas and overall

the crucial area of competition was technology

having a true competitive strategy meant engaging in actions that imposed exorbitant costs on the other side

In particular, it recommended investing in technologies that were expensive to counter and where the counters did not add to Soviet offensive capabilities. For instance, increasing the accuracy of missiles or the quietness of submarines forced the Soviet Union to spend scarce resources on counters without increasing the threat to the United States.