The Perils of Bad Strategy by Richard Rumelt

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Table of Contents

Summary
Critique
Conclusion
References

Richard Rumelt’s The Perils of Bad Strategy talks about the value of a good strategy to an organisation (Apolloni, 2007). The article focuses on mistakes made by leaders when creating strategies for their respective companies (Barrick & Ryan, 2003). The author said that appropriate strategies could radically affect the future of the company (Bradford & Burke, 2005). The author provided the details on how to develop strategic plan to ensure the success of the organisation (Cartwright & Cooper, 2009). The author pointed out the hallmarks of bad strategy (Cummings & Worley, 2009). Rumelt pointed out the common mistakes in the creation of strategies (Griffin & Stacey, 2005).

He contrasted it with the components of a good strategy (Gallos, 2006). Rumelt provide great insights with regards to identifying the reasons why leaders are prone to creating bad strategies (Thompson, Strickland, Peteraf, & Gamble, 2008). Nevertheless, there was not enough information given so that ordinary leaders can believe that they have what it takes to create good strategies (Huczynski & Buchanan, 2004).

Summary

Richard Rumelt made the assertion that the majority of companies and organisations around the world have leaders that cannot discern between good and bad strategy. Rumelt talks about the hallmark of bad strategy from a business and corporate strategy perspective. He went on to provide an outline on how to detect a bad strategy. He believes that if leaders learn to embrace this framework, they will know how to develop a good one.

Rumelt said that the first hallmark of a poorly crafted strategy could be seen in the absence of certain critical information. Rumelt said that a bad strategy lacks the ability to pinpoint the root cause of poor performance. As a result, the strategy that was created was nothing more than a glorified statement on what the company hopes to accomplish. A bad strategy is something that does not enable the company to solve a particular difficulty.

Rumelt also pointed out that leaders mistake goals for strategy. When leaders are unable to see the weakness and strength of their respective companies, there is nothing else to do except to motivate workers to accomplish a set of goals. Rumelt warned his audience about the negative influence created by different stakeholders trying to accomplish goals that were based on their selfish interests. He said that it is better to focus on a few important items rather than create a long list of things that workers have to accomplish in a given time period. Rumelt spoke against adding fluff, when leaders begin writing down their strategies.

At the end, Rumelt provided the reason why a plethora of terrible business strategies abound in the world today. He went on to share the components of a good strategy. Rumelt said leaders must remember three things: 1) make a diagnosis of the problem; 2) develop a guiding policy; and 3) develop coherent actions.

Critique

It is important to acknowledge the limitation inherent in any type of media. Thus, the following is not a criticism but more of a lament against the inability of the author to write down all the things that he wanted to stay. The article leaves much to be desired with regards to the crafting of a good strategy. First of all, Rumelt identified the features and characteristics of a bad strategy. He even went as far as providing the framework in creating good strategy. However, the reader has to figure out the rest when it comes to the steps needed to create a good strategy.

Rumelt’s opening remarks exacerbated the issue of the actual creation of a good strategy. For his opening remarks, Rumelt cited the example of Admiral Nelson’s brilliant strategy against the French and Spanish invaders. An overview of the battle strategy that Nelson used left readers with only one conclusion. They concluded that Nelson was a genius, and he was able to develop a strategy based on his experience. Thus, it is hard to believe if ordinary leaders can create good strategy, just like Nelson did. Rumelt pointed out the numerous mistakes that leader make but he forgot to provide a practical approach to inspire his audience or readers that ordinary mortals can create good strategy.

Another problematic issue concerning Rumelt’s strategy-creation-framework was the dearth of information when it comes to the practical steps needed to create a diagnosis; develop a guiding policy; and develop coherent actions. How will leaders identify the company’s most critical problem? Take for example the case of Sony Corporation. In the 1980s Sony’s CEO was at the top of the world because of the company’s best selling product – the phenomenon called Sony Walkman (Nathan, 1999). The 1990s came and went, and Sony’s CEO, and other corporate leaders did nothing to prepare the company for the incoming onslaught (Nathan, 1999). But who could have foreseen the coming of the MP3 player? Who could have foreseen the emergence of Apple’s iPod?

There is neither crystal ball nor fortuneteller powerful enough to anticipate the emergence of cutting-edge technology that eliminated the use of certain electronic products and bulky cassette tapes. It would have been better if Rumelt was able to provide more information with regards to his assertions (Rumelt, 2011).

Readers may wonder if there is a practical approach that can generate the same awe-inspiring insights. If this is possible, then, leaders can have the skills necessary to make an accurate diagnosis of the problem. Nonetheless, the steep-learning curve required to master the first step in strategy creation can lead to frustration. Perhaps this is the reason why leaders are willing to embrace mediocre strategies (Jackson & Carter, 2000). After all, an imperfect strategy is better than a blank piece of paper (Spar, 2003). When it is time for the annual strategic meeting, leaders are forced to come up with a strategy or lose the respect of his or her subordinates (Tidd & Bessant, 2009).

It was easy for Rumelt to castigate CEOs, team leaders, and politicians for their inability to craft winning strategies. But it is unclear if Rumelt can succeed as a CEO. If Rumelt was chosen to lead Apple, the company that Steve Jobs left behind after his untimely death, will Rumelt succeed in a head-to-head collision with Samsung’s mobile phone department? Rumelt benefited from hindsight. It is therefore important to find out the inner-workings of effective strategy creation. As pointed out earlier, there is not enough space available even if Rumelt had more to say on the said subject matter.

Although there were serious gaps in the presentation of a viable mechanism that can help leaders develop effective strategy, Rumelt must be commended for his work. One of his astounding contributions in the field of corporate governance can be seen in his ability to see the faulty features of a bad strategy. It is important to highlight this accomplishment because for hundreds of years, modern businessmen tried to develop effective strategies and most of the time they fail.

Rumelt’s insight was particularly helpful to corporate America, a nation that seems preoccupied with personality-based leadership. It is also a country that loves to listen to motivational speakers. American businessmen, corporate leaders, and politicians experienced a rude awakening when Rumelt pointed out the obvious mistakes they made in terms of creating bad strategies over the years. One of the most profound insights he made was on his commentary on World War I. He said that European leaders were unimpressed with motivational speakers because of the bitter lessons learned in the First World War.

With a quick broad stroke, Rumelt painted a clear mental image that explains the perils of bad strategy. In other words, Rumelt provided convincing proof that if leaders of the 21^st century shirk back from learning how to develop good strategy, they will lead their people to slaughter. They will lead them into harms way, just like when British soldiers were forced to embrace a hail of bullets coming from German machine guns (Leibold, Probst, & Gibbert, 2005).

Rumelt must be commended for the way he pointed out the hallmarks of bad strategy. There was a well of information contained in a simple statement: failure to face the problem. Rumelt had the gift of communication, because he was able to present a complex truth and make it simple. If only leaders are able to face the problem that hounded their respective companies, a lot of bad strategies could be avoided.

Finally, Rumelt must be commended for his idea on how to create good strategy. The three statements that he wrote was a wealth of knowledge. At the same time the phrases were short enough that most leaders will never have a difficulty mastering the basic concepts. It is therefore interesting to note that these short phrases are so powerful in terms of breaking down old beliefs on how to develop effective strategies.

Conclusion

The article leaves much to be desired. Limitations were acknowledged but it would have been very helpful if Rumelt was given enough space and provide details about the framework he espoused. Thus, he could provide the practical approach in developing a diagnosis of the problem. There were serious questions raised with regards to the ability of the average leader to come up with brilliant strategies like the ones created by Nelson and the CEO of NVIDIA. Nevertheless, the genius of Rumelt was manifested in the creation of a strategy development framework. If leaders will study the hallmarks of a bad strategy, they can easily create a good strategy to replace the bad one (Jackson & Carter, 2000).

But it is only when leaders make a serious attempt to grasp the wisdom of developing a correct diagnosis, establishing a guiding policy, and the creation of coherent actions when they begin to truly appreciate what Rumelt’s framework. Without a doubt Rumelt contributed a wealth of information to the world of corporate governance. His insights will help pave the way for reducing the proliferation of bad strategies that could endanger the future of business organisations.

References

Apolloni, B 2007, Knowledge-based intelligent information and engineering Systems, Springer, London, UK. Web.

Barrick, M & Ryan, M 2003, Personality and work: reconsidering the role of personality in organisations, Jossey-Bass Jossey-Bass, San Francisco, California. Web.

Bradford, D & Burke, W 2005, Reinventing organisation development: new approaches to change in organisations, John Wiley & Sons, San Francisco, California. Web.

Cartwright, S & Cooper, C 2009, The Oxford handbook of organisational well-Being, Oxford University Press, London, UK. Web.

Cummings, T & Worley, G 2009, Organisation development and change, Cengage learning, Boston, Massachusetts. Web.

Gallos, J 2006, Organisation development: a Jossey-Bass reader. John Wiley & Sons, San Francisco, California. Web.

Griffin, D & Stacey, R 2005, Complexity and the experience of leading organisations. Routledge, New York. Web.

Huczynski, A & Buchanan, D 2004, Organisational behaviour: an introductory text. Prentice Hall, New York. Web.

Jackson, N & Carter, P 2000, Rethingking organisational behaviour. Cornell University Press, New York. Web.

Leibold, M, Probst, G & Gibbert, M 2005, Strategic management in the knowledge economy: new approaches and business applications. Publicis Corporate Publishing, New York. Web.

Nathan, J 1999, Sony: the private life. Houghton Mifflin Company, New York. Web.

Rumelt, R 2011. ‘The perils of bad strategy’, McKinsey Quarterly, vol.1, no. 1, pp. 30-39. Web.

Spar, D 2003, Managing international trade and investment. Imperial College Press, London, UK. Web.

Thompson, A, Strickland, A, Peteraf, M & Gamble, J 2008, Crafting and executing strategy: the quest for competitive advantage, concepts and cases. McGrawhill, New York. Web.

Tidd, J & Bessant, J 2009, Managing innovation, integrating technological, market & organisation change. John Wiley & Sons, San Francisco, California. Web.

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The Perils of Bad Strategy by Richard Rumelt

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