The word ”strategy” is one of the most used and abused concepts in the industry. What exactly is the difference between a good strategy and a bad ...

Good strategy / Bad strategy

The word ”strategy” is one of the most used and abused concepts in the industry. What exactly is the difference between a good strategy and a bad one? In this article, we sort out the differences and give tips on how to succeed.

It was about a year ago since I graduated from my master’s program in strategic communication at Lund university. Learning strategic thinking was one of the pillars of the education. When I was in doubt (which happened a lot), I referred to a classic book covering the subject.

The book is called Good Strategy/Bad Strategy. Author and professor Richard Rumelt presents the kernel of a good strategy and what constitutes a bad one. In this article, we summarise a few of the book’s most important takeaways. I also share one of my favourite examples of a good strategy.

What is a bad strategy?

Rumelt claims that bad strategies fail to face the problem. It’s easy to confuse a strategy with pure goal setting. In a worst case scenario, a ”strategy” is translated into a document with incoherent goals and fluff. They contradict – and therefore work against – each other. Hence a bad strategy fails to recognise the problem. And there can’t be a good strategy unless you know the problem you’re trying to solve.

What is a good strategy?

A good strategy is a company’s cohesive response on how to solve a business challenge. It describes the way forward by guiding its employees on what to do and, just as important, what not to do. A good strategy involves focus and choice.

The kernel of a good strategy is based on these three steps:

  1. A clear understanding of the challenge.
    The analysis of the situation ought to generate insights about weaknesses and obstacles that the organisation needs to overcome. A diagnosis creates a ”map of the territory” and seeks to figure out: ”What’s going on here?”
  2. A guiding policy.
    A guiding policy is not primarily interested in the goals. Rather, it describes how the company will concentrate its resources and channel its actions in a specific direction.
  3. A set of coherent actions.
    At the third stage, the company sets out concrete action steps that will help them solve the challenge. It’s about overcoming the obstacles that appeared in the diagnosis by leveraging the company’s strengths and resources.

Let’s apply this three-step method to a real example.

Example of a good strategy

One of my favourite examples of a good strategy is the football team FC Barcelona.

  1. A clear understanding of the challenge.
    Barcelona’s football players are physically smaller than their opponents from other European countries [weakness]. Buying top players from other clubs costs a lot of money [challenge]. How should the club tackle these obstacles?
  2. A guiding policy.
    ”Total fotboll” became the guiding policy during the 1970s. The idea was that players could switch positions with each other (everybody except the goalkeeper) to form a faster and more unpredictable play. In recent years, this policy has developed into Tiki-taka football. The policy can be summed up as ”patience and ball possession”.
  3. A set of coherent actions.
    FC Barcelona has invested in fast and technical football since the 1970s. Through short passes and ball possession their physical size has become less significant. In addition, they established their own youth academy, La Masia, which today is one of the world’s most renowned football institutions. Messi, Iniesta, Xavi and many other famous footballers have had their schooling there.

With this strategy, FC Barcelona doesn’t need to acquire expensive players; they train players in a unique style of play that is difficult for their competitors to emulate. FC Barcelona’s way of play is entertaining to watch and is appreciated by fans from all over the world.

Summary

Strategy can be a difficult concept to understand and apply in practice. Remember Rumelt’s three-step model: analyse the situation and describe the challenge, create a guiding policy and write down a set of coherent actions, where you leverage company resources and assets to your advantage. Over the long haul, you will increase the chances of succeeding. Just like FC Barcelona did.

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