strategy

introduction

The Kernel of Good Strategy

Good Strategy Bad Strategy: The Difference and Why it Matters; Chapter 5
Rumelt, Richard P.

Good strategy is coherent action backed up by an argument, an effective mixture of thought and action with a basic underlying structure I call the kernel. A good strategy may consist of more than the kernel, but if the kernel is absent or misshapen, then there is a serious problem. Once you apprehend this kernel, it is much easier to create, describe, and evaluate a strategy. The kernel is not based on any one concept of advantage. It does not require one to sort through legalistic gibberish about the differences between visions, missions, goals, strategies, objectives, and tactics. It does not split strategies into corporate, business, and product levels. It is very straightforward.

The kernel of a strategy contains three elements:

1. 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.
2. 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.
3. 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.

Here are some examples:

• For a doctor, the challenge appears as a set of signs and symptoms together with a history. The doctor makes a clinical diagnosis, naming a disease or pathology. The therapeutic approach chosen is the doctor’s guiding policy. The doctor’s specific prescription, or diet, therapy, and medication are the set of coherent actions to be taken.

• In foreign policy, challenging situations are usually diagnosed in terms of analogies with past situations. The guiding policy adopted is usually an approach deemed successful in some past situation. Thus, if the diagnosis is that Iran’s president, Mahmoud Ahmadinejad, is “another Hitler,” war might be the logical implication. However, if he is “another Moammar Gadhafi,” then strong pressure coupled with behind-the-scenes negotiation might be the chosen guiding policy. In foreign policy, the set of coherent actions are normally a mix of economic, diplomatic, and military maneuvers.

• In business, the challenge is usually dealing with change and competition. The first step toward effective strategy is diagnosing the specific structure of the challenge rather than simply naming performance goals. The second step is choosing an overall guiding policy for dealing with the situation that builds on or creates some type of leverage or advantage. The third step is the design of a configuration of actions and resource allocations that implement the chosen guiding policy.

• In many large organizations, the challenge is often diagnosed as internal. That is, the organization’s competitive problems may be much lighter than the obstacles imposed by its own outdated routines, bureaucracy, pools of entrenched interests, lack of cooperation across units, and plain-old bad management. Thus, the guiding policy lies in the realm of reorganization and renewal. And the set of coherent actions are changes in people, power, and procedures. In other cases the challenge may be building or deepening competitive advantage by pushing the frontiers of organizational capability.

I call this combination of three elements the kernel to emphasize that it is the bare-bones center of a strategy — the hard nut at the core of the concept. It leaves out visions, hierarchies of goals and objectives, references to time span or scope, and ideas about adaptation and change. All of these are supporting players. They represent ways of thinking about strategy, stimulating the creation of strategies, energizing groups of people, denoting specific sources of advantage, communicating, summarizing, and analyzing strategies, and so on. The core content of a strategy is a diagnosis of the situation at hand, the creation or identification of a guiding policy for dealing with the critical difficulties, and a set of coherent actions.