Strategic business thinking and decision-making require taking multiple independent and interdependent variables into account every time a new problem arises. In the modern globalized environment where the impact of disruptive technologies becomes evermore dominant and the level of uncertainty in management increases continuously, developing proper strategies is essential for any organization. In his book Good strategy/Bad strategy: The difference and why it matters, Richard Rumelt (2011) employs his vast knowledge and experience to discuss the antecedents, implications, and the distinction between good and bad strategy. The author provides examples of both and explores various antecedents of developing an effective business strategy.
Chapters 1 and 2 are dedicated to what Rumelt considers “good strategies,” including the role of Steve Jobs in Apple and the American military’s success during Operation Desert Storm. The author compares similar tactics and strategic decisions in different contexts, arguing for the universality of good strategies across domains. The conclusion is that effective management requires evaluating a broad situation and making thought-out decisions.
Another aspect of good strategies, exemplified by the approach employed by Wal-Mart, is the idea of a shift in perspective. According to Rumelt (2011), the timely introduction of what is now known as supply-chain management allowed the shop’s owner to significantly scale up the production.
Next, Rumelt (2011) discusses the indicators of bad strategies, such as unrealistic objectives, too many goals, and overly complex approaches, citing the U.S. national strategy in the 1990-2000’s as an example. The author also mentions inability or unwillingness to approach a problem one of the primary antecedents for failure, particularly due to the inevitable piling up of issues over time.
The book’s Part II covers various sources of power which an organization can leverage to achieve its goals with an effective strategy in place. One of such sources, according to Rumelt (2011), is the ability to predict potential rising demand and prepare the supply beforehand. Discussing the cases of Toyota, Getty, 7-Eleven and others, the author demonstrates how broad long-term thinking provided these organizations with a competitive advantage.
In the following chapters, the author discusses the difficulties that an organization an face in highly specific circumstances, such as those including chain-link systems and proximate objectives, and ways to profit from these conditions. One of the proposed solutions is relying on product and process design to mitigate the influence of external and internal factors that cannot be completely eliminated.
In chapters 10-15, the author promotes the idea that owning a competitive advantage is not enough to achieve strategic success. Instead, according to Rumelt (2011), dynamic development and application of an advantage is necessary to ensure that it brings maximum profit before becoming obsolete or disappearing. The author provides an example of Cisco going through several stages of change to cope with the changing strategic objectives and market demand, becoming a global telecommunication leader.
The final part of the book contains various recommendations for developing a strategic mind-set that would be applicable in different organizational contexts based on the knowledge and evidence provided in the previous chapters. In particular, Rumelt (2011) advises against making assumptions and deductions based on limited data due to the ever-present possibility of unaccounted factors and anomalies that can disrupt a potentially good strategy. Furthermore, the author encourages the use of intellectual resources and various tools for evaluating strategies and their potential.
Reference
Rumelt, R. P. (2011). Good strategy/bad strategy: The difference and why it matters. Profile Books.