Knowing Good Strategy

What is strategy? (State the obivous)

Strategy is sometime used interchangeable as Plan, but it is actually greater than that, the book summarize it using 3 components

• Diagnosis
• Guiding Policy
• A set of coherent actions

It is the 3rd point that is the plan, but the 1st and 2nd point are equally important, in my own words, Strategy is a plan made by deliberately consider the challenge and anticipate how environment will react to your action. It is most effective when you exploit some sort of leverage/insights that are unique to you.

What is bad strategy? (or Non-strategy trying to disguise as one)

There are many bad strategy or really non-strategy that business leaders like to use:

Confusing Goals with Strategy

Many business leaders confuse goals setting and strategy creation, goal setting states what you want, but strategy needs to provide the how, if leaders fail to articulate how to achieve their goal, they are not doing much better than praying.

Fail to define the challenge

All strategy should starts with a clearly defined challenge, if you cannot clearly define the challenge, you risk shifting the goal post all the time, losing focus and really not knowing what to optimize for, it becomes a disaster for execution.

Bad strategic objectives

The book tries to differentiate Goals with Objectives, where goals are high-level and often obvious, for example all for-profit company has a goal to be profitable, where objectives are a breakdown of goals that a level lower and typically reveal a company’s strategy (or the lack thereof).

Bad strategic objectives are either setting at the wrong level, or just outright bad and does not form coherency with the rest of the objectives or even the original goal. Sometimes its too ambitious, or sometimes it tries to cover everything and makes it impossible to follow and/or execute.

There’s a key idea here that if the objective set by Leader is not making things easier (ie. increasing the chance of solving the challenge), then the leader is not doing his/her job well.

Personal note: determining the right level when setting objective is really context-sensitive, and I think being a good leader is to be able to determine the level of granularity needed when strategizing, knowing what is key and what isnt, what needs to be in tight control and what can be delegated or pass to subordinate is key skill of a leader.

Why bad strategy happens?

Personal note: I think the most obvious reason is that the knowledge Strategy isnt widespread, and most people dont get a chance to practice.

The book gives the following reason:

1. Inability to choose, this is a big one, willingness to sarcrifice is something I find important when comes to focus, not able to focus is terrible, and real world sometimes give you a false sense that you can do everything all at once.
2. Template style strategy, you can almost call this laziness, basically assumes strategy is just a blank to be filled following some sort of template without thinking critically, one example is that some strategies simply state the obvious without providing additional information.

Leverage

Leverage are points that gives an organization outcome that are disproportionate with the input, leverage is fundamental to strategy, in the simplest term, you want to leverage your strength to maximize the outcome.

One thing that’s important through out the book is the idea of concentrated coordination, it is important for all the actions you do to work towards a common goal and help each other, it sounds easier than done, because its mostly hard work, but when executed correctly it will produce outcome quicker and cheaper.

Proximate objectives

Proximate objectives are objective that are reachable by the group while simultaneously move us closer to the strategy. This concept further reinforce the idea that leaders need to assess feasibility. This implies the leaders need to be down to earth and they need to know how. Without knowing how, they wont be able to add much value because without knowing how it is hard to consistently set objectives that are both useful and achievable.

Personal note: Another thing that comes to my mind is to build up your strategic position that opens up possibilities, some strategy takes a long time and a long play to play out, and in the process you are not always working on the end goal directly, but instead you might just be building your position so that you can perform the perfect strike when the time comes, and it is important to figure out the whole plan, understand what activities is to build up strategic advantages versus activities that perform the strike. Good position provides options, but we shouldnt treat generating options a goal though

Chain-linked System

The book introduces me the idea of Chain-linked system which is really interesting, it is a fragile system where all parts of the chains need to perform for the function to work well. I said its fragile because in software system we tend to call this system with a single failure point, but in business world it can bring in something interesting.

If your business forms a chain-linked system, it becomes harder to replicate, it is a form of moat. Note that most business form chain-linked system almost naturally, chain-linked system basically means the parts (ie. every link) are closely related to some other parts of the system, and this is usually the case because any complex business requires coordination of different groups of people with different skills and expertise.

Being able to identify such system and understand bottleneck is useful, and arguably a fundamental benefit you get by learning to think systematically.