How to Be Strategic — Part II

What Sylvester Stallone can teach you about diagnosing problems

This is a multi-part series on how to learn to think strategically. If you haven’t read Part I yet, I suggest reading that first.

The Three Techniques of Strategic Thinking

The Richard Rumelt “kernel” framework we introduced in Part I of this series — Diagnosis, Guiding Policy, and Plan — makes “strategy,” the most over-used word in business, way simpler and more accessible. It gives you the tools that can help you think strategically about any decision, big or small.

But the framework also reveals how you can improve your strategic thinking: By improving the technique and answering the question that sits at the heart of each piece of the strategy kernel.

Let’s lay this out in a table:

See? Being strategic is nothing more than three simple techniques — diagnosing, choosing, and planning — used in harmony with one another. There’s nothing special about the techniques in isolation, but when combined, they create a special kind of clarity. Clarity about what’s in your way, what you should do about it, and where to begin.

In the next few installments of this series, I’m going to share my thinking on each technique, one-by-one.

We’ll start with diagnosing.

Diagnosing — Identify and Prioritize the Gaps

A good diagnosis simplifies things. And simplifying things is hard.

Most of us can relate to the feeling captured in a COVID-era New York Times headline: “There is too much happening.” With all of the information and work we sort through everyday, it can be difficult to prioritize. So when you’re greeted with a complex situation, how do you break it down and identify the problem that most needs solving?

For the answer to that question, we turn to one of the world’s great management theorists: Sylvester Stallone. Early on in Rocky, Sly’s friend Pauly asks him to explain the chemistry with his new girlfriend, Adrian.

“I don’t see it,” Pauly says. “What’s the attraction?”

“She fills gaps I guess,” Rocky says. “She’s got gaps, I got gaps… together we fill gaps.”

I don’t know, Rock. You might be onto something there.

Here’s what I believe. Progress — in business and in life — comes from finding and filling our gaps. If you can identify the obstacle, problem, or area of unfulfilled potential at the heart of a situation (especially in a business setting), you’ll be well on your way to figuring out how to solve it. Finding the gap leads to a clearer sense of the problems and their relative priority. As the saying goes, “The wolves are always less once they are counted.” Finding the gaps — the discrete list of problems that you could solve — also tends to make it obvious which you should solve first.

Here’s a couple tactics to help you become a better gap-finder:

Emotion and Instinct

Sometimes, the easiest move is to just trust your gut. Sometimes, it’s also the best move. Creating a list of what-obviously-needs-fixing is a perfectly acceptable starting point when building a diagnosis. What’s missing? What’s broken? There is gold in the obvious gaps — and they’re all around you. I often talk to executives in our portfolio about their feelings of “operational guilt” — the stuff they know isn’t working, but they just haven’t gotten around to fixing yet. That guilt is a powerful divining rod. As Ben Horowitz wrote in The Hard Thing About Hard Things: “It’s a good idea to ask yourself what you’re not doing.” That question — and the basic, instinctual answer it summons —is often all you need to diagnose the which problem needs solving first.

Checklists

I love checklists. They’re especially helpful in the early days of a PE investment, when we’re trying to help a business become more proactive, predictable, and consistent. When investors talk about “professionalizing” a business, they’re usually just mean they’re filling in boxes on a checklist. Operational checklists help you impose simplicity on your piece of the business and leave you with an honest inventory of what you have and what you don’t. Then, as the old Mafia saying goes, it’s often just about “taking the pebble out of your shoe” — addressing the most obvious gap first.

Data + Metrics

Whatever your role, you likely have access to information that tells you “how things are going.” Well… when was the last time you checked how things are going? How are you performing vs. a reasonable benchmark, target, or goal? Where are you falling short? What could be causing that? Examining your data with actual questions in mind is the first step to becoming data-driven instead of “data-aware.” In his fantastic book Founding Sales, author Pete Kazanjy lays out a step-by-step approach to becoming a Modern Metrical Sales Manager.

The backbone of this approach is a three-step process: “(1) Consume the metrics, (2) Detect the anomalies, and (3) Root cause the issues.” If you frame these steps as questions, they look like this:

1. What’s happening?
2. What’s off?
3. Why?

Pete’s method isn’t just for salespeople. “Peeling the onion” with these three questions works for any role and is a great way to identify gaps, start to build perspective on what’s causing them, and drive towards a recommendation for how to fix them. Summarizing a few key trends in your operational data and then taking a stance on which one matters most is a great way to build a diagnosis that’s easy to defend. Sure, your opinion informs your recommendation. But you let the the numbers back it up — so you don’t have to.

What a Good Diagnosis Looks Like

Good diagnoses are structured like an inverted pyramid, starting out broad and then ending at a point. They begin by enveloping the entire context of a situation, and then quickly whittle things down to a single, most important issue, problem, or question that needs answering.

Doing this is pretty simple, but that doesn’t mean it’s easy. One of our catchphrases at ParkerGale Capital is “strategy is about making hard choices.” It’s not easy to neck down all of the metrics, observations, and potential improvements in your purview to a single issue. But that’s what good strategy is about: Making the difficult choice to focus on this instead of that. This is also where the glory in great strategy comes from. From rallying a team to put “more wood behind fewer arrows” and bring focus and clarity to a complex situation. And, in doing so, to bravely assert that everything else matters just a little less than this right now.

If you’ve read any of my previous writing, you know I steal a lot from my time at Bain & Co. Bain has a great framework for creating this sense of prioritization, which works great as a diagnostic framework. It’s called “Situation, Complication, Critical Question.”

Here’s how it works, using an example I see all the time in my work in the B2B software world: “We don’t have enough pipeline!”

This example is compressed, but notice how it works. We start by laying out “just the facts.” Here’s what we’ve got: We’re growing nicely. Our customers are happy. Here’s where the growth is coming from. This part of the diagnosis is pretty vanilla. It’s all about setting the scene. “Here’s non-judgmentally what’s going on.”

But then, boom. The complication hits. Something’s wrong, or not working, or reaches an impasse, or just needs deciding. The recipe for a good Complication is this: Change + Stakes. Something’s different, there are consequences, and we probably need to do something about it.

The Complication begs for the answer to a single Critical Question: A “what should we do” query that invites debate and sets up the set of strategic choices that follow. A good Critical Question both simplifies and illuminates. It’s leadership in the form of inquiry. It says: “There’s a lot going on, but the most important thing we need to answer is this.” It’s also a sneaky-powerful alignment tool, which is why consultants love it so much. Once everyone agrees that this is the most critical question, it’s way easier to keep people focused on the options you have, the factors you need to explore, and the data and people you need to make a part of the decision.

We’ll often use the acronym “ROMA” with our portfolio company management teams, which stands for “Return on Management Attention.” We’re optimists. We believe that our management teams will accomplish the goals they focus on — IF they can focus on a short-enough list of goals. A great diagnosis can give you that shorter list. It’s a slow build. It walks you around everything going on, zooms in on the change that’s happening, and focuses the team on the most important next decision, in the form that we human beings can’t help but fix our attention on: The question.

Once you have a good diagnosis, and once you have buy-in on the question you’re answering, and once you all agree on the decision that you need to make, all you have to do is take a stance and choose what to do next.

We’ll cover how making good choices fits into the art of thinking strategically in Part III.