How to Be Strategic — Part I
The science of good decision-making is simpler than you think
The Stigma Around Strategy
When I say the word “strategy”… what comes to mind?
For many, the word conjures up imagery of a tense boardroom full of important people and high-powered leadership debates about “one-way door” choices: Entering a new market, buying another company, or making some big, irreversible investment. The kind of choices accompanied by lots of PowerPoint slides with perfectly-formatted bar graphs and squint-worthy footnotes of legalese in small font.
You know, executive stuff.
An example: Ever seen Margin Call? (If not, and if you are even the least bit interested in the world of finance and investing, please add it to your list.) The movie’s pivotal scene features a midnight meeting of an investment bank’s leadership team. They are facing a crisis, and the stakes are high. They have just discovered a time bomb hidden within their balance sheet: Billions of dollars of toxic mortgage-backed securities threatening not only their company’s solvency, but the stability of the entire global financial system. Times are tough.
The well-dressed team of finance execs (featuring a brilliantly-cast Jeremy Irons and also that guy from The Mentalist) weigh their options (none of which are particularly encouraging) and nervously discuss which action they should take before the sun comes up. This is strategy at its theatrical best: Hard choices with grave consequences made by senior people in expensive leather chairs. There’s heaps of ego, analysis, debate, and conflict to go around. There’s an “oh shit” moment and a race to formulate a plan. The clock is ticking.
It’s tense. It’s fun. It’s all very dramatic.
But it ain’t real life.
Good strategy — real strategy — almost never involves bringing a company back from the brink. It isn’t a corporate dark art reserved for the CEO or the Fortune 100. It isn’t a secret form of wisdom bestowed upon you when you finally ascend to the pinnacle of the org chart. You don’t need to be a genius to be strategic. You don’t need ice water in your veins.
Thinking strategically is learnable. It’s teachable. It doesn’t matter who you are, what industry you work in or the level you work at.
Anyone can be strategic.
And actually, it’s kind of simple.
What Strategy Isn’t
Let’s start with a question: “What is strategy?”
Well, that depends on who you ask. And that’s part of the problem.
Myth #1: Strategy Is Big and Complicated
Ask a consultant for a definition of strategy. You’ll get something like the following:
- During my time at Bain & Co., our marketing materials defined strategy as, “focusing scarce resources on where a company can and should win.”
- McKinsey defines strategy as, “an integrated set of actions designed to create a sustainable advantage over competitors.”
- Boston Consulting Group’s definition has a more financial bent: “If corporate strategy is about determining the optimal allocation of capital across a portfolio of strategic business units, the role of business strategy is to deploy that capital to drive growth, generate value, and create sustainable competitive advantage.”
I mean, those all sound pretty smart. (Are you ready to buy a consulting case yet?)
But the quality that gives these definitions their weight also makes them problematic: All three are pretty grandiose. Strategy consultants tend to define strategy as a whole-company issue. They use abstraction to simplify and organize what’s true about the organization in aggregate: Its capabilities, strengths, and how it stacks up to its competitors.
Looking at things from that vantage point can be helpful — if you’re a CEO. But… are you a CEO? I’m not. Most of us aren’t. We can’t yet make decisions for an entire company. In fact, many emerging leaders (even the high-performers) are excluded from the classic “big picture” strategic topics like M&A, organizational planning, and maintaining relationships with investors and the board. A lot of us aren’t even in the room when those calls are made.
But no matter your role or span of control, your choices still matter. Whether an individual contributor, manager, or member of the executive leadership team, if you improve the quality of your decision-making and the consistency of your follow-through, good things happen — to the business, to your team, and to your career. That’s what being strategic is about: Making better decisions, no matter their scope.
Myth #2: Strategy Is Sort of, Like, Whatever You Want It To Be
Get cozy with the name Richard Rumelt. Richard is a management professor at UCLA, and you’re going to hear about him quite a bit for the rest of this article.
As Richard writes in his fantastic book Good Strategy / Bad Strategy, “The gap between good strategy and the jumble of things people label strategy has grown over the years.” In other words, the word “strategy” has grown more meaningless and confusing the more it’s been misused. Here’s the stuff, according to Richard, that people most often conflate with actual strategy.
“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.”
Vision statements aren’t strategy. Neither is your list of stretch goals, or your OKRs, or the 16 leadership principles you somehow managed to cram onto that kickoff slide, or the company slogan the CEO won’t stop repeating.
It’s more basic than that.
And a lot more useful.
Strategy = Action Backed Up By Coherent Argument
Luckily, Mr. Rumelt does more than debunk bad strategy in his book. He also offers a definition that can help anyone be more strategic.
Here it is:
“Good strategy is coherent action backed up by an argument, an effective mixture of thought and action with a basic underlying structure called the kernel.”
And if you’re wondering what the heck a “kernel” is, he defines that too:
“The kernel of a strategy contains three elements:
· 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.
· A guiding policy for dealing with the challenge. A guiding policy ‘is like a signpost, marking the direction forward but not defining the details of the trip.”
· 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.”
There we have it — the ingredient list for strategic thinking. The diagnosis summarizes and simplifies “what’s going on” by identifying the problem that most needs solving. The guiding policy provides the headline for “what we’re going to do about it” — giving direction without revealing the turn-by-turn details of the trip. And the set of coherent actions? That’s your plan — a clear punch-list of who needs to do what by when.
I could try to come up with an example of what the kernel looks like in real life, but unsurprisingly, Richard’s example is better (and simpler) than mine:
“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 prescriptions for diet, therapy, and medication are the set of coherent actions to be taken.”
Three ingredients. Applicable to any decision.
1. Diagnosis
2. Guiding Policy
3. A Plan of Action
That’s strategy.
Click here to read Part II of this series, where I unpack the art of applying the three ingredients of good strategy — and how they can help you approach any decision a little more strategically.
