Many organization leaders say they have a strategy and yet in actuality they don’t. instead, they espouse what I call bad strategy that can propel a company forward for not too long.
What’s a Bad Strategy?
A bad strategy tends to skip over pesky details such as problems. It ignores the power of choice and focus, trying instead to accommodate a multitude of conflicting demands and interests. Like a quarterback whose only advice to teammates is ” Let’s win,’ bad strategy covers up its failure to guide by embracing the language of broad goals, ambition, vision, and values. Each of these elements is, of course, an important part of business, but by themselves, they are no substitutes for the hard work of strategy.
What’s a Good Strategy?
A good strategy includes a set of coherent actions. It does more than urge us forward toward a goal/vision. It acknowledges the challenges being faced and provides an approach to overcoming them by coordinating efforts to achieve a powerful competitive punch or problem-solving effect. The kernel of a good 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 sign post, marking the direction forward but not defining the details of the trip. Coherent actions are feasible coordinated policies, resources commitments, and actions designed to carry out the guiding policies.
APPLE CASE STUDY
After the 1995 release of Microsoft’s Windows 95 multimedia operating system, Apple Inc. fell into a death spiral. On February 5, 1996, Business Week put Apple’s famous trademark on its cover to illustrate its lead story: “The Fall of an American Icon.”
CEO Gil Amelio struggled to keep Apple alive in a world being rapidly dominated by Windows-Intel-based PCs. He cut staff. He reorganized the company’s many products into four groups: Macintosh, information appliances, printers and peripherals, and “alternative platforms.” A new Internet Services Group was added to the Operating Systems Group and the Advanced Technology Group.
Wired magazine carried an article titled “101 Ways to Save Apple.” It included suggestions such as “Sell yourself to IBM or Motorola,” Invest heavily in Newton technology,” and “Exploit your advantage in the K-12 education market.” Wall Street analysts hoped for and urged a deal with Sony or Hewlett-Packard. By September 1997, Apple was two months shy from bankruptcy. Steve Jobs, who had cofounded the company in 1976, agreed to return to serve on a reconstructed board of directors and to be interim CEO Die-hard fans of the original Macintosh were overjoyed, but the general business world was not expecting much. Within a year, things changed radically at Apple. Although many observers had expected Jobs to rev up the development of advanced products, or engineer a deal with Sun, he did neither. What he did was both obvious and, at the same time, unexpected. He shrunk Apple to a scale and scope suitable to the reality of its being a niche producer in the highly competitive personal computer business. He cut Apple back to a core that could survive.
The Powerhouse Strategy
Steve Jobs talked Microsoft into investing $150 million in Apple, exploiting Bill Gates’s concerns about what a failed Apple would mean to Microsoft’s struggle with the Department of Justice. Jobs cut all of the desktop models- there were fifteen-_back to one. He cut all portable and handheld models back to one laptop. He completely cut out all the printers and other peripherals. He cut development engineers & software development, distributors and cut out five of the company’s six national retailers. and finally, he cut out virtually all manufacturing, moving it offshore to Taiwan. With a simpler product line manufactured in Asia, he cut inventory by more than 80 percent. A new Web store sold Apple’s products directly to consumers, cutting out distributors and dealers.
What is remarkable about Jobs’s turnaround strategy for Apple is how much it was “Business 101” and yet how much of it was unanticipated. Of course you have to cut back and simplify to your core to climb out of a financial nosedive. Of course he needed up-to-date versions of Microsoft’s Office software to work on Apple’s computers. Of course Dell’s model of Asian supply-chain: manufacturing, short cycle times, and negative working capital was the state of the art in the industry and deserved emulation. Of course he stopped the development of new operating systems–he had just brought the industry’s best operating system with him from NeXT.
The power of Jobs’s strategy came from directly tackling the fundamental problem with a focused and coordinated set of actions. He did not announce ambitious revenue or profit goals; he did not indulge in messianic visions of the future. And he did not just cut in a blind ax-wielding frenzy- he redesigned the whole business logic around a simplified product line sold through a limited set of outlets.
In May 1998, when Jobs was asked by Richard Rumelt about his approach to turning Apple around. He explained both the substance and coherence of his insight with a few sentences:
The product lineup was too complicated and the company was bleeding cash. A friend of the family asked me which Apple computer she should buy. She couldn’t figure out the differences among them and I couldn’t give her clear guidance, either. I was appalled that there was no Apple consumer computer priced under $2,000. We are replacing all of those desktop computers with one, the Power Mac G3. We are dropping five of six national retailers- meeting their demand has meant too many models at too many price points and too much markup.
This kind of focused action is far from the norm in industry. And after the impressive turnaround at Apple, Jobs did not enunciate some simple-minded growth or market share goal. He did not pretend that pushing on various levers would somehow magically restore Apple to market leadership in personal computers. Instead, he was actually focused on the sources of barriers to success in his industry. This is through recognizing the next window of opportunity, the next set of forces he could harness to his advantage, and then having the quickness and cleverness to pounce on it quickly like a perfect predator. This was a wise approach to apple situation at that moment, in that industry, with so many technologies seemingly just around the corner. – Richard Rumelt
The first natural advantage of good strategy arises because other organizations often don’t have one. And because they don’t expect you to have one, either many organizations, most of the time, don’t have this. Instead, they have multiple goals and initiatives that symbolize progress, but no coherent approach to accomplishing that progress other than “spend more and try harder.” Which is simply another 1001 way to die faster.
- Focus – Every great strategy has focus, and a company’s strategic profile, or value curve, should clearly show it.
- Divergence – We do not develop reactive strategies that try to keep up with the competition – it loses its uniqueness. Instead, we apply the eliminating-reducing-raising-creating model that differentiate our clients’ profiles from the industry’s average profile.
- A Clear-cut compelling tagline
- Coordinating actions
- Policies, and
So as to accomplish an important end.
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