Putting together a business strategy that genuinely propels a company forward is no small feat. A lot of businesses fall into the trap of presenting a list of goals or aspirations without having any clear, actionable steps on how to achieve them.
This is where insights from experts like Richard Rumelt prove invaluable. His principles in pieces like Good Strategy, Bad Strategy give decision-makers a robust framework to separate effective strategy from empty promises. By breaking down these key concepts, I’ll aim to show you how to apply them to real-world business strategy development.
Who is Richard Rumelt?
Richard Rumelt is a business strategist and professor at UCLA Anderson School of Management in Los Angeles. Over the years, his trademark has become a straightforward, practical approach to business strategies. His works tend to cut through the usual corporate jargon to show what makes a strategy actually effective.
Rather than leaning on vague goals and buzzwords, Rumelt centres on clarity and focus, helping businesses get to the heart of what matters. His ideas have been applied across different sectors and industries, guiding companies to build more coherent business strategies that deliver results.
Above: Richard Rumelt. Image Source: Media City Bergen
What is a Good Business Strategy?
A good strategy identifies and addresses a core challenge. It’s concise, focused, and actionable. Richard Rumelt suggests that effective strategies orbit around three primary elements:
Principle 1: Focus on The Crux
In his book, Rumelt emphasises the importance of identifying the core issue. Focusing on the crux creates alignment across the organisation and ensures that all efforts address the most immediate challenge.
Principle 2: Define a Clear Guiding Policy
Once the core challenge is identified, a guiding policy sets the direction for addressing it. This policy isn’t a detailed plan but a set of principles or an approach that shapes the decision-making process. A guiding policy should be both flexible and specific, letting your team adapt while maintaining focus.
Principle 3: Design Coherent Actions
The final step in Rumelt’s framework is to design coherent actions that support the guiding policy. These actions need to be interconnected and mutually supportive, creating a cohesive approach to tackling the core challenge.
This structure ensures that each step of the strategic process is aligned with the ultimate end goal of tackling any critical issues.
How to Diagnose the Core Issue
In any business setting, the first essential step is diagnosing the real challenge. Without an accurate diagnosis, any policy or action taken is likely to be misaligned with the business’s needs. Rumelt refers to this as “the crux.” By identifying the crux, you can focus resources on addressing whichever issue is most pressing rather than dispersing efforts across different fronts.
So, if a manufacturing company faces rising costs, diagnosing the crux could involve examining supply chain inefficiencies, outdated technology, or high labour expenses. The diagnosis pinpoints the source of the problem, making sure that the guiding policy and actions address it directly.
What Are the Problems with Bad Business Strategy?
A “bad business strategy” lacks focus and coherence. It often comes across as a list of ambitions rather than a structured plan. Think about how your team communicates its strategies.
Vague, grandiose language can sound impressive but might lack substance. It’s equally important not to confuse goals and strategies. For example, a goal like ‘increase our market share’ isn’t a strategy that details how to achieve said goal.
Perhaps the most critical failure in a business strategy is a failure to identify the crux. When the true core challenge isn’t identified, efforts are dispersed, making it hard to gain traction.
Common Business Strategies to Avoid
With Rumelt’s framework giving us an idea of what makes a bad strategy, it’s important to get an idea of what mistakes might set you on that path, as well as how to fix them.
Setting Overly Broad Objectives
As you’ve no doubt picked up, clarity and focus are the two key pillars of Rumelt’s approach. Failing to focus on clear goals and setting objectives that aren’t actionable is a pitfall to avoid. You can fix this by narrowing objectives. SMART goals are a good starting point here and dovetail perfectly with Rumelt’s principles.
Ignoring Resource Constraints
Effective strategies need to consider available resources, both financial and human. Trying to implement a strategy that exceeds your resources will only lead to setbacks. Overcoming this is all about honest introspection. What resources can you realistically divert to this? If resources are limited, prioritise actions that will yield the most significant impact first.
Failure to Communicate the Strategy Effectively
Even the best strategy will falter if not effectively communicated. For a strategy to succeed, everyone in the organisation needs to get the guiding policy and their role in achieving it.
Engage your team members in the strategy development process and make sure everyone is on the same wavelength at each step of the framework. Break down the strategy into digestible parts and create regular updates to keep everyone aligned.
Ready to Level Up Your Business Strategy with Rumelt’s Principles?
With over 25 years of experience in B2B marketing and business development, I bring a wealth of experience in crafting strategies that drive tangible, measurable results. Whether you’re facing challenges in scaling or refining your business strategy, I can help you cut through the noise and focus on what truly matters.
From SMEs to large corporations, my approach is tailored to your needs and sector. Get in touch today to start building a business strategy that works for you.
FAQs:
What is the difference between a goal and a strategy?
A goal is an outcome you want to achieve, whereas a strategy outlines the actions and policies you need to reach that goal.
Why is identifying the crux so important?
It lets you focus on the core issue affecting your business so your resources can be allocated to that area for the biggest impact.
How can I tell if my business strategy is too broad?
If your strategy includes vague terms like “grow,” “improve,” or “lead,” it might be too broad. A good business strategy is specific, with clear actions tied to a guiding policy.
What are coherent actions?
Coherent actions are steps taken to align with your guiding policy and work together to address the crux. They’re interdependent and support the overall strategic objective.
