A word that can mean anything has lost its bite. To give content to a concept one has to draw lines, marking off what it denotes and what it does not. — 18: 221-222
A good strategy has an essential logical structure that I call the kernel. The kernel of a strategy contains three elements: a diagnosis, a guiding policy, and coherent action. The guiding policy specifies the approach to dealing with the obstacles called out in the diagnosis. It is like a signpost, marking the direction forward but not defining the details of the trip. Coherent actions are feasible coordinated policies, resource commitments, and actions designed to carry out the guiding policy. — 19: 241-244
The best answer to this puzzle is that the real surprise was that such a pure and focused strategy was actually implemented. Most complex organizations spread rather than concentrate resources, acting to placate and pay off internal and external interests. Thus, we are surprised when a complex organization, such as Apple or the U.S. Army, actually focuses its actions. Not because of secrecy, but because good strategy itself is unexpected. — 31: 411-414
Having conflicting goals, dedicating resources to unconnected targets, and accommodating incompatible interests are the luxuries of the rich and powerful, but they make for bad strategy. Despite this, most organizations will not create focused strategies. Instead, they will generate laundry lists of desirable outcomes and, at the same time, ignore the need for genuine competence in coordinating and focusing their resources. Good strategy requires leaders who are willing and able to say no to a wide variety of actions and interests. Strategy is at least as much about what an organization does not do as it is about what it does. — 32: 424-428
Half of what alert participants learn in a strategy exercise is to consider the competition even when no one tells you to do it in advance. — 36: 483-484
But the power of that strategy derived from their discovery of a different way of viewing competitive advantage—a shift from thinking about pure military capability to one of looking for ways to impose asymmetric costs on an opponent. — 43: 588-590
In the several years since that seminar, I have had the opportunity to discuss the bad strategy concept with a number of senior executives. In the process, I have condensed my list of its key hallmarks to the four listed in the beginning of this chapter: fluff, the failure to face the challenge, mistaking goals for strategy, and bad strategic objectives. — 49: 679-681
Business leaders know their organizations should have a strategy. Yet many express frustration with the whole process of strategic planning. The reason for this dissatisfaction is that most corporate strategic plans are simply three-year or five-year rolling budgets combined with market share projections. Calling a rolling budget of this type a “strategic plan” gives people false expectations that the exercise will somehow result in a coherent strategy. — 63: 890-893
To obtain higher performance, leaders must identify the critical obstacles to forward progress and then develop a coherent approach to overcoming them. — 63: 899-900
If you are a midlevel manager, your boss sets your goals. Or, if you work in an enlightened company, you and your boss negotiate over your goals. In either setting, it is natural to think of strategies as actions designed to accomplish specific goals. However, taking this way of thinking into a top-level position is a mistake. Being a general manager, CEO, president, or other top-level leader means having more power and being less constrained. Effective senior leaders don’t chase arbitrary goals. Rather, they decide which general goals should be pursued. And they design the subgoals that various pieces of the organization work toward. Indeed, the cutting edge of any strategy is the set of strategic objectives (subgoals) it lays out. One of the challenges of being a leader is mastering this shift from having others define your goals to being the architect of the organization’s purposes and objectives. To help clarify this distinction it is helpful to use the word “goal” to express overall values and desires and to use the word “objective” to denote specific operational targets. Thus, the United States may have “goals” of freedom, justice, peace, security, and happiness. It is strategy which transforms these vague overall goals into a coherent set of actionable objectives—defeat the Taliban and rebuild a decaying infrastructure. A leader’s most important job is creating and constantly adjusting this strategic bridge between goals and objectives. — 64: 905-915
One form of bad strategic objectives occurs when there is a scrambled mess of things to accomplish—a “dog’s dinner” of strategic objectives. A long list of “things to do,” often mislabeled as “strategies” or “objectives,” is not a strategy. It is just a list of things to do. Such lists usually grow out of planning meetings in which a wide variety of stakeholders make suggestions as to things they would like to see done. Rather than focus on a few important items, the group sweeps the whole day’s collection into the “strategic plan.” Then, in recognition that it is a dog’s dinner, the label “long-term” is added so that none of them need be done today. — 66: 934-938
A good strategy defines a critical challenge. What is more, it builds a bridge between that challenge and action, between desire and immediate objectives that lie within grasp. — 66: 945-946
As in the law, disciplined conflict calls forth stronger evidence and reasoning. — 72: 1032-1033
There has been a lot of ink spilled on the inner logic of competitive strategy and on the mechanics of advantage. But the essential difficulty in creating strategy is not logical; it is choice itself. Strategy does not eliminate scarcity and its consequence—the necessity of choice. Strategy is scarcity’s child and to have a strategy, rather than vague aspirations, is to choose one path and eschew others. There is difficult psychological, political, and organizational work in saying “no” to whole worlds of hopes, dreams, and aspirations. — 75: 1069-1072
Put differently, universal buy-in usually signals the absence of choice. — 77: 1099-1099
As in many other official visions, the standard of excellence set is the People magazine measure of success: “being known.” — 82: 1179-1180
Ascribing the success of Ford and Apple to a vision, shared at all levels, rather than pockets of outstanding competence mixed with luck, is a radical distortion of history. — 88: 1265-1266
The amazing thing about New Thought is that it is always presented as if it were new! And no matter how many times the same ideas are repeated, they are received by many listeners with fresh nods of affirmation. These ritual recitations obviously tap into a deep human capacity to believe that intensely focused desire is magically rewarded. — 90: 1294-1296
The kernel of a strategy contains three elements: A diagnosis that defines or explains the nature of the challenge. A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as critical. A guiding policy for dealing with the challenge. This is an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis. A set of coherent actions that are designed to carry out the guiding policy. These are steps that are coordinated with one another to work together in accomplishing the guiding policy. — 91: 1309-1314
The diagnosis for the situation should replace the overwhelming complexity of reality with a simpler story, a story that calls attention to its crucial aspects. This simplified model of reality allows one to make sense of the situation and engage in further problem solving. Furthermore, a good strategic diagnosis does more than explain a situation—it also defines a domain of action. — 95: 1369-1371
Decentralized schools, he argues, perform better. Now, whether the organization of a school system explains most of the variations in school performance is not actually critical. What is critical, and what makes his diagnosis useful to policy makers, is that organization explains some part of school performance and that, unlike culture or social class, organization is something that can be addressed with policy. — 96: 1376-1379
But decentralized decision making cannot do everything. In particular, it may fail when either the costs or benefits of actions are not borne by the decentralized actors. The split between the costs and benefits may occur across organizational units or between the present and the future. — 109: 1570-1572
As is clear to anyone who has belonged to a coordinating committee, coordination interrupts and de-specializes people. — 110: 1585-1585
Thus, we should seek coordinated policies only when the gains are very large — 110: 1586-1586
One of the main projects at JPL was Surveyor, an unmanned machine that would soft-land on the moon, take measurements and photographs, and, in later missions, deploy a small roving vehicle. The most vexing problem for the Surveyor design team had been that no one knew what the moon’s surface was like.2 Scientists had worked up three or four theories about how the moon was formed. The lunar surface might be soft, the powdery residue of eons of meteoric bombardment. It might be a nest of needle-sharp crystals. It might be a jumble of large boulders, like a glacial moraine. Would a vehicle sink into powder? Would it be speared on needlelike crystals? Would it wedge between giant boulders? Given this ambiguity about the lunar surface, engineers had a difficult time creating designs for Surveyor. It wasn’t that you couldn’t design a vehicle; it was that you couldn’t defend any one design against someone else’s story about the possible horrors of the lunar surface. At that time, I worked for Phyllis Buwalda, who directed Future Mission Studies at JPL. Homeschooled on a ranch in Colorado, Phyllis had a tough, practical intellect that could see to the root of a problem. She was best known for her work on a model of the lunar surface.3 With this specification in place, JPL engineers and subcontractors were able to stop guessing and get to work. The lunar surface Phyllis described was hard and grainy, with slopes of no more than about fifteen degrees, scattered small stones, and boulders no larger than about two feet across spaced here and there. Looking at this specification for the first time, I was amazed. “Phyllis,” I said, “this looks a lot like the Southwestern desert.” “Yes, doesn’t it?” she said with a smile. “But,” I complained, “you really don’t know what the moon is like. Why write a spec saying it is like the local desert?” “This is what the smoother parts of the earth are like, so it is probably a pretty good guess as to what we’ll find on the moon if we stay away from the mountains.” “But, you really have no idea what the surface of the moon is like! It could be powder, or jagged needles.…” “Look,” she said, “the engineers can’t work without a specification. If it turns out to be a lot more difficult than this, we aren’t going to be spending much time on the moon anyway.” — 123: 1779-1798
Phyllis’s insight that “the engineers can’t work without a specification” applies to most organized human effort. Like the Surveyor design teams, every organization faces a situation where the full complexity and ambiguity of the situation is daunting. An important duty of any leader is to absorb a large part of that complexity and ambiguity, passing on to the organization a simpler problem—one that is solvable. Many leaders fail badly at this responsibility, announcing ambitious goals without resolving a good chunk of ambiguity about the specific obstacles to be overcome. To take responsibility is more than a willingness to accept the blame. It is setting proximate objectives and handing the organization a problem it can actually solve. — 125: 1811-1816
Many writers on strategy seem to suggest that the more dynamic the situation, the farther ahead a leader must look. This is illogical. The more dynamic the situation, the poorer your foresight will be. Therefore, the more uncertain and dynamic the situation, the more proximate a strategic objective must be. The proximate objective is guided by forecasts of the future, but the more uncertain the future, the more its essential logic is that of “taking a strong position and creating options,” not of looking far ahead. — 126: 1817-1820
There are little or no payoffs to incremental improvements in chain-link systems, but Marco avoided this problem by shutting down the normal system of local measurement and reward, refocusing on change itself as the objective. — 136: 1961-1963
It is also human nature to associate current profit with recent actions, even though it should be evident that current plenty is the harvest of planting seasons long past. — 153: 2218-2219
is basic industry analysis and could have been easily predicted by the use of the popular Five Forces framework developed by — 170: 2463-2464
The proposition that growth itself creates value is so deeply entrenched in the rhetoric of business that it has become an article of almost unquestioned faith that growth is a good thing. CEO Avery’s description of his problem (“The company’s growth had slowed down in the 1980s”) and his goals (“We want to grow bigger … a worldwide foundation for continued international growth”) are little more than the repetition of the word “growth”—magical invocations of the name of the object of desire. — 172: 2495-2498
Whatever it is called, the underlying principle is that improvements come from reexamining the details of how work is done, not just from cost controls or incentives. — 187: 2726-2728
In the words of my UC Berkeley junior-year physics professor, Nobel laureate Luis Alvarez, “This course is labeled ‘advanced’ because we don’t understand it very well.” He explained, “If there were a clear and consistent theory about what is going on here, we would call this course ‘elementary’ physics.” — 212: 3087-3089
In seeing what is happening during a change it is helpful to understand that you will be surrounded by predictable biases in forecasting. For instance, people rarely predict that a business or economic trend will peak and then decline. If sales of a product are growing rapidly, the forecast will be for continued growth, with the rate of growth gradually declining to “normal” levels. Such a prediction may be valid for a frequently purchased product, but it can be far off for a durable good. For durable products—such as flat-screen televisions, fax machines, and power mowers—there is an initial rapid expansion of sales when the product is first offered, but after a period of time everyone who is interested has acquired one, and sales can suffer a sharp drop. After that, sales track population growth and replacement demand. Predicting the existence of such peaks is not difficult, although the timing cannot be pinned down until the growth rate begins to slow. — 214: 3124-3130
you cannot fully understand the value of the daily work of managers unless one accepts the general tendency of unmanaged human structures to become less ordered, less focused, and more blurred around the edges. — 238: 3480-3481
the 1980s, Sloan’s design had faded away—a vivid illustration of the power of entropy. General Motors not only had blurred its brands and divisions, it engaged in badge engineering, offering essentially the same vehicle under several model and brand names. — 240: 3511-3513
When engineers use a nice clean deductive system to solve a problem, they call it winding the crank. By this they mean that it may be hard work, but that the nature and quality of the output depends on the machine (the chosen system of deduction), not on the skill of the crank winder. — 262: 3830-3832
Overcoming quick closure is simple in principle: you look for additional insights and strategies. But, most of the time, when asked to generate more alternatives, people simply add one or two shallow alternatives to their initial insight. Consciously or unconsciously, they seem to resist developing several robust strategies. Instead, most people take their initial insight and tweak it slightly, adding a straw-man alternative, or including options such as “walk away,” or “more study,” that are generic to any situation rather than being responsive to the special circumstances at hand. A new alternative should flow from a reconsideration of the facts of the situation, and it should also address the weaknesses of any already developed alternatives. The creation of new higher-quality alternatives requires that one try hard to “destroy” any existing alternatives, exposing their fault lines and internal contradictions. I call this discipline create-destroy. Trying to destroy your own ideas is not easy or pleasant. It takes mental toughness to pick apart one’s own insights. In my own case, I rely on outside help—I invoke a virtual panel of experts that I carry around in my mind. This panel of experts is a collection of people whose judgments I value. I use an internal mental dialogue with them to both critique my own ideas and stimulate new ones. I try to do this before putting my ideas before others. The panel of experts trick works because we are adept at recognizing and comprehending well-integrated human personalities. Thinking through how a particular well-remembered expert might respond to a problem can be a richer source of criticism and advice than abstract theories or frameworks. My own personal virtual panel of experts contains respected executives I have known and worked with, people who educated and trained me, colleagues I have worked with over the years, and certain people whose points of view emerge clearly from their own written work or from biography. When I face a problem, or have generated a first hunch, I turn to this panel and ask, “What is wrong with this approach to the situation? What would you do in this case?” Professor Bruce Scott, who chaired my dissertation committee long ago in 1971, sits on my panel of experts. In my imagination, I can see him, leaning back in his chair and asking me to explain why anyone should listen to me and to tell him what the action implication is … and there had better be one. Also present is Professor Alfred D. Chandler Jr., who passed away in 2007 but — 292: 4280-4298
Being independent without being eccentric and doubting without being a curmudgeon are some of the most difficult things a person can do. — 297: 4356-4357
The introductory topic taught in any modern course on business strategy is the connection between industry structure and profit. This topic is usually called the “Five Forces,” following Michael Porter’s pioneering analysis of industry structure, published in 1980. A quick summary is that a terrible industry looks like this: the product is an undifferentiated commodity; everyone has the same costs and access to the same technology; and buyers are price sensitive, knowledgeable, and willing to switch suppliers at a moment’s notice to get a better deal. — 301: 4421-4425