3 things I liked in Richard Rumelt's “Good strategy, Bad strategy”

I have known Prof. Richard Rumelt of UCLA primarily through his interviews and carry a lot respect for his perspectives on strategy. I have found his metaphors like predatory leap and strategy as surfing a wave useful. It is no surprise that I enjoyed reading Rumelt’s “Good strategy, bad strategy (GSBS)”. In this book, Rumelt has condensed his wisdom of five decades and made it accessible to people like us.

In an earlier article I have written about the 3 challenges in implementing strategy that was based on the “bad strategy” part of GSBS. Here I want to focus more on the “good strategy” part and present what I liked about it, a few things I thought are missing and finally a few places where GSBS intersects with our book “8 steps to innovation”.

These are the 3 things I liked about GSBS in my first reading. I hope to visit the book again to discover more nuggets of wisdom.

1.     “Challenge” emphasis: I like the way Rumelt emphasizes the importance of “challenge”. He says – A good strategy honestly acknowledges the challenge being faced and provides an approach in overcoming them. This may look like an obvious statement. But ask yourself the question to state the topmost challenge you or your team is facing today and you will realize the difficulty. It involves a choice – a focus among tens or hundreds of problems you are facing and that is not easy. I liked the emphasis on stating the challenge because it can become a first checklist item to see if there is indeed a strategy. Is there a clearly identified challenge?

2.     Proximate objectives: Strategic goals can easily become blue-sky objectives (“We want to become number one player in our chosen market”) or Dog’s dinner list (“Our strategic plan has 7 strategies, 20 tactics and 234 action items”). None of them is helpful. To avoid this trap Rumelt suggests that the strategic goal should have a proximate objective – a feasible goal you are going after right now. If your objective is to send a spacecraft on the moon which can do soft-landing, your proximate goals could be to design something that will do soft-landing on the earth first. Similarly, for Indian Railways, to turn profitable was a distant goal in 2004. Instead, the slogan “heavier, faster and longer” provided more feasible goals in each of the three categories. Rumelt calls these categories – domains of action. This idea is so important according to Rumelt that he contemplated titling this book "The Proximate Objective"

3.     Strategy as a hypothesis: I was glad to see Rumelt acknowledge the role of experimentation in strategy – even if it meant waiting till “chapter 16”. He says – A new strategy , in the language of science, a hypothesis and its implementation is an experiment. This creates a new set of questions typically not found in the strategy textbooks – how do you design a good experiment? How to sequence experiments? How to build experimentation capacity? I believe that the language of experiment can add a rich set of vocabulary to strategy lingo dominated by “rollout” and “balanced score card”.

There are two things conspicuously missing in the book: (1) role of communication and (2) role of bright spots.

Role of communication: Rumelt rightly emphasizes the role of “coherent action” in a good strategy. However, he doesn’t mention the role metaphors and stories can play in generating coherent action. I feel that there is a lot of good work done in this area by people like Chip & Dan Heath in designing a good communication (e.g. Make to stick) that strategy world can use.

Role of bright spots: What is already working well perhaps in pockets may provide a good starting point. It is not so much about finding your strength as finding the situation that is working to your advantage. For example, when Intel was at crossroads and getting beaten in the memory business, microprocessors was a bright spot waiting to be spotlighted. We don’t know if in tough situations, every organization can find its bright-spot. However, I feel it is one of the most important techniques for designing culture-friendly approaches.

“8 steps to innovation” is not about strategy. However, it complements GSBS in many places like step-2 (challenge book), step-4, 6 and 7 (design of experiment and sandbox) and step-8 (create a margin of safety).

I feel “Good strategy, bad strategy” spanning close to fifty years of work in strategy is a must read for anyone interested in developing strategic thinking and implementing it.

image source: directorship.com

Building a challenge-book (step-2): An example from an IIMB session

Prof. Rishikesha Krishnan and I co-facilitated a session on innovation at IIMB week before last based on our “8 steps to innovation” book. Participants in this session were entrepreneurs or second-third generation business owners. Businesses varied from Agarbatti (supplying to 80 countries) to clutch gears to Agro-products to Medical equipment to jewellers to payment gateway – in short quite diverse. One of the exercises we did was to generate a challenge book.

One thing that struck me is that each of these participants had a lot of clarity about the key business challenges. For example, the power problem in Tamilnadu and union problem in West Bengal is reflected in the challenge book. When we do a similar exercise with mid-level managers in large companies group, they don’t necessarily exhibit similar clarity. This may be so because they are far removed from the business decisions. We had explained to the participants about the 3 characteristics of a good challenge statement (1) emotional appeal (2) concrete goal and (3) hooks for imagination. The first draft of the challenge book we generated is shown in the picture above.

My analysis of how some of the challenges (selected randomly) fulfil the three characteristics is given below.

A few observations about the challenge book:

A challenge meeting all three characteristics: “Prototyping in a non-IT startup takes a few weeks. Can the time be brought down to 3 hrs?” This challenge appears to meet all three characteristics. The challenge author also had know-how about how much a 3-D printer costs and how much it can bring down prototyping time etc.

Blue-sky challenge: Enhancing customer satisfaction is an important challenge for many businesses. In fact, “customer delight” is part of core values for most of my customers. However, it hardly reflects in the actions demonstrated on a day-to-day basis. This is the reason a challenge to “enhance customer satisfaction” may be looked upon as an empty rhetoric. “How do we connect with international customers?” is a challenge meant to reach out and satisfy international customers better. It looks more focused.

More solution, less challenge: “ERP” gives an impression that there is a need to implement ERP solution. This could very well be the case. However, why that is required is not clear. Perhaps information about which parts are coming / when is not available easily. Perhaps products delivered are not reaching on time. It might be a better idea to focus on the challenge than on the solution.

The analysis is not meant to judge the challenges as good or bad. It is only meant to give an indication of further improvement – perhaps by framing the challenge better.

I asked the author of the challenge “General rural employment through sustainable business” if this was related to his business. He said it is not. However, he said he is passionate about this challenge and would like to pursue it along with his family business.

My reading list for the rest of 2013

My reading has been poor in the last few months. So I did a bright spot analysis. i.e. went hunting for situations when I did good reading in the past. That is when I recollected that last January (2012) I did systematic reading of “Thinking, fast and slow” – one chapter per day and drew a one-pager chapter-map after each reading. I still refer to the map-book.

Now, I have decided to focus on a chapter at a time – not the entire book. And I have already made progress. I have a tendency to reflect a lot when I read. Hence, the reading speed is slow. I have come to live with it. Here is what I have planned to read in the rest of the 2013. Let’s see how it goes.

Good strategy, bad strategy: Among the strategy gurus my favourite is Richard Rumelt – I don’t know why. The first time I wrote a blog referring to Rumelt’s work was 5 years ago (titled “Predatory leap metaphor of Prof. Rumelt”).  My friend and collaborator Prof. Rishikesha Krishnan also an authority on strategy has recommended this book to me. I am currently on chapter 3 and enjoying it. I am also finding very interesting intersections of this book with our book “8 steps to innovation”. I hope to finish this book in April.

Against the Gods: The remarkable story of risk by Peter Bernstein: Today I met Rajiv Mody, CEO of Sasken, my ex-employer and a man I carry a lot of respect for. He strongly recommended me this book. He felt that one reason why we Indians are not very innovative is because we haven’t paid attention to systematically assessing the risk. It also meant collecting data systematically, validating it etc. One of the three myths about innovation we emphasize in our book is the saying “innovation is about risk taking”. We argue that it is not just about risk-taking, it is also about risk assessment and risk mitigation. I want to see if this book can shed some more light (one way or the other) on our hypothesis.

Uncontrolled: The surprising payoff of trial-and-error for business, politics and society by Jim Manzi: I have been sharing my blogs and getting useful feedback from Prof. Stefan Thomke of Harvard, an authority on experimentation. He has been generous in giving endorsement for our book. Thomke has suggested me this book last October. He said that it has a thoughtful treatment of business experimentation. Helping organizations (for-profit & not-for-profit) build experimentation capacity is really at the heart of what I do. I hope this book will give me a fresh perspective.

Strangers to ourselves: Discovering the adaptive unconscious by Timothy Wilson: Daniel Kahneman referred to this book in “Thinking, fast and slow”. I had made a mental note of this while reading TFS. And then I forgot about it. Last week Sukumar Rajgopal, SVP, CIO and Head of Innovation at Cognizant mentioned to me that he enjoyed this book very much. I am captivated by Kahneman and hence sometimes I feel that a fresh perspective on the topic will be useful to have.

Anti-fragile: How to live in a world we don’t understand by Nassim Taleb:  I have been deeply influenced by  NNT's The Black Swan. Black Swan was more philosophical than practical (how-to). The only chapter in Black Swan which talks about what to do is chapter 13. Anti-fragile is primarily about “how to”. Or so it seems. I would like to find out.

Five books in nine months is roughly a book in two months. I feel it is a reasonable target. Only time will tell…

Highlights of “Systematic Innovation” workshop for technical experts

I facilitated a 2-day workshop on innovation for technical experts at Hotel Grand Mercure, Bangalore last month. The participants were Senior Engineers, Architects, Product Managers, Engineering Managers and entrepreneurs. I have been facilitating such workshops for the past six years. However, this workshop stood out for following 4 unique things.

Challenge book from technology-trend: Unlike in the Design Thinking workshop where we build a challenge book through “pain”, we began our challenge definition journey from technology trends (“wave”).

Each participant identified a technology trend (s)he is excited about and then mapped it on the Gartner’s hype cycle (See the picture). Some of the trends that showed up were: brain-computer interface, geriatrics (early phase), Big Data (peak of inflated expectations), Video analytics (trough of disillusionment), cloud computing (slope of enlightenment).

Then each participant did a secondary research and made a presentation on: (1) What makes the trend interesting today? (2) What were the breakthroughs for the technology trend? (3) What are the key challenges? (4) What adjacent skills do you possess?

Prototyping through storyboarding: During this session, participants explored various forms of early stage prototyping. One such form was storyboarding – perhaps one of the simplest form of prototyping. Each participant presented his idea through a “Before” and “after” scenario expressed in the form story. You don’t need fancy drawings. A lot can be done just using the stick figures.

Idea socialization through blogging: During this session we explored blogging as a medium to socialize your idea. For most of the participants, they were writing a blog for the first time. We followed 3 simple rules: (1) curiosity before content (e.g. Is the problem definition clear?) (2) options before solution (e.g. have you discussed options and trade-offs before proposing a solution?) (3) Prototype is the best presentation (e.g. have you given a glimpse for the reader to experience the idea?) Each participant also commented on at least one blog. Here we followed a simple rule – bright spot before grey spot – i.e. do you have anything good to say about the article before you talk about improvements? Please check out the blogs we wrote.

Chat with industry experts: We were fortunate to have two informal discussion sessions with two industry experts: Dr. Milind Bhandarkar, Chief Scientist at Greenplum (EMC) and Hadoop evangelist and Dr. Dinesh Nair, Chief Architect at National Instruments. Milind graciously agreed to skype from Bay area and gave us an overview of his career from CDAC’s Param to SUNY Buffalo to UIUC to Yahoo to Greenplum etc. He told us what it meant to be part of the founding team of Hadoop at Yahoo and how it helps to have a competitor like Google to get internal buy-in for a new technology like Hadoop. As a leader of the Big Data consortium Milind also shared some of the key challenges and opportunities associated with the technology.

 

Dinesh heads the Center of excellence on vision and machine learning at NI Bangalore. He belongs to the rare species which has stuck with a single company in his career. A prolific inventor (holding over 30 patents) Dinesh shared his experiences on variety of topics such as role of patenting and prototyping, role of blogging in socializing ideas, how he tracks technology trends, how one needs to let go of an idea when the time is not right and a bunch of other things.

Catalign Quarterly – March 2013

Catalign Quarterly is an attempt to put together insights relevant for fostering a culture of innovation in organizations – both for-profit and not-for-profit. Through articles and interviews we explore principles, practices and policies that help organizations become more innovative.

Theme for this quarterly is “How to run innovation campaigns effectively?” We begin by summarizing the 4 characteristics of effective innovation campaigns as presented by Prof. Karl Ulrich of Wharton. We apply these 4 characteristics to assess the effectiveness of the charkha design campaign executed by Gandhi in 1920.

The other articles are:

“4 choices in the design of an innovation campaign” – This articles summarizes the 4 choices: Open vs closed, Pure cascade vs renewal, One round vs multiple rounds, Absolute vs relative filter

“Idea selection methods: balancing efficiency vs accuracy” – This article looks at different methods like 2-1-0 method, Real-win-worth it of reviewing ideas to find a balance between speed and accuracy.

“3 characteristics of a good challenge statement” – This article look at 3 characteristics – emotional appeal, concrete goal and hooks for exploration.

3 characteristics of a good challenge statement

Challenge campaigns have played a crucial role in pushing the innovation boundaries. Take the case of the Google Lunar X Prize challenge announced in September 2007. The challenge calls for “privately-funded spaceflight teams to compete to successfully launch a robotic spacecraft that can land and travel across the surface of the Moon while sending back to Earth specified images and other data.” Currently the closing date for the challenge is Dec 31, 2015. India’s Team Indus is one of the 23 teams worldwide who are actively competing today for the challenge. How many teams will achieve this? We don’t know. However, what is clear is that the challenge has spurred a lot of enthusiasm, collaboration and is likely result into innovations – small & perhaps big. The question I want to explore here is: What is it about the GLXP challenge that has resulted in such excitement? Are there any inherent characteristics of the challenge statement that makes it so popular? If so, then perhaps it will be useful to any manager to create his own version of GLXP. Let’s look at 3 such characteristics: emotional appeal, concrete goal and hooks for exploration.

Emotional appeal: A good challenge statement should appeal to the emotional side. To use the Elephant-Rider metaphor, motivating Elephant is an important aspect. Reaching the Moon has always carried the fancy of mankind. Hence, GLXP carries a natural appeal. Contrast this with statement like “Improve team productivity by 20%” or “Reduce inventory by 40%”. Each of these could be an important challenge for the team. However, it is unlikely to make an emotional appeal to the team members. One way to create such an appeal is to address to a feeling people already have. For example, a challenge related to saving on paper cups in the organization may appeal to the environmentally conscious employees or a challenge related to geriatrics may appeal to the middle-aged working people whose parents are aging.

Concrete goal:  The GLXP has a well-defined goal: soft-landing on the moon, traveling 500 meters on the lunar surface and transmitting high definition images and video back to earth. Contrast this with the goal “Become a center of excellence”. It may appeal to the emotional side but gives no concrete image of what this means. In contrast, “reduce inventory by 40%” is concrete. A concrete goal helps in assessing whether the goal is met or not.

Hooks for exploration: A concrete challenge is good but not good enough especially for tough challenges. It should give some hints as to where to begin. In the words of Prof. Richard Rumelt of UCLA – it brings out a domain of action. In case of GLXP, it is believed that the toughest part of the challenge is soft-landing on lunar surface. Slowing down an accelerating spacecraft in a controlled fashion involves complex engineering.

In 1920, Thomas Edison contemplated exploring the field of Atomic energy. However, he abandoned it eventually by noting, “There is nothing to hang the imagination on”. Neither “Become a center of excellence” nor “Improve sales by 30%” provide any hooks for exploration.

In short, a good challenge statement should have an emotional appeal, a concrete goal and one or more hooks for exploration.

Sources:

Richard Rument presents his ideas on “domain of action” in the chapter 5 “Kernel of good strategy” in his book “Good stregy, Bad strategy”, Profile Books, page 81.

Thomas Edison’s comment is from “Edison on innovation” by Alan Axelrod, Jossey-Bass, page 17.

Image source: http://www.googlelunarxprize.org/ 

Idea selection methods: balancing efficiency and accuracy

A couple of weeks back I witnessed the fastest idea review session in my consulting career. In less than an hour 50+ ideas were reviewed and put into four categories: (1) needs more study (2) go for pilot (3) implement and (4) dropped for now. That meant each idea got roughly a minute’s attention from the reviewers. Isn’t that too short? How accurate can such a review be? Well, that depends upon whether accuracy was the main criteria in the review. This being the first round of idea review, efficiency was given a priority over accuracy. In this article let’s look at different ways of doing reviews that are either efficient or accurate.

Efficient reviews

Review by walk-around & sticker-voting: How did the speedy review mentioned above take place? 50 sheets with one idea per sheet were spread on a long oval boardroom table. 3 CXOs – CEO, CFO & CTO – walked around the table reading the ideas. They were given coloured sticky dots – one colour indicating each type of decision mentioned above (e.g. go for pilot). Idea authors were present in the room while this was going on. If any of the reviewers wanted to ask a question to the idea author, the discussion happened right there and a decision was taken. Finally, for each idea that was going for pilot or implementation, a champion was identified. Imagine if each of the 50 ideas were given 10 minutes for presentation. It would have easily taken a whole day.

2-1-0 method of review: Terwiesch and Ulrich present a variant of the above approach in their book “Innovation Tournaments” called 2-1-0 review. Two minutes per presentation, one slide or poster per idea and zero questions. Reviewers vote and select the best ideas. With 2-1-0 method you can review 50 ideas in a couple of hours.

With the advent of social networking / collaboration tools, it is easier to do reviews online. For example, the Starbucks idea site shows how each idea gets comments from various other people.

Now, let’s look at a few methods of reviewing ideas where accuracy is more important than efficiency.

Accurate reviews:

Science fair-style review: A couple of months back I got an opportunity to be a review panellist in Titan’s Innovation Bazaar. This was an annual event where 75 project teams were given a booth each to present their idea. Team in each booth had put up prototypes, posters, videos to explain the idea and its benefits. I along with a colleague was responsible for reviewing 25 of these 75 ideas. We had a criteria consisting of 10 parameters on which each innovation project was to be assessed. It took all of us an entire day to assess and shortlist the top ideas. The accuracy of this review is higher than the walk-around-sticker-voting review. However, it takes that much more time.

Real-win-worth it: Another criterion of idea review which I like is called “Real-Win-Worth it”. The name of the criteria tells us what it is about and that makes it easy to remember. See the picture below. Another thing I like about this criterion is that it can be applied progressively through the life of the idea. For example, in the early phase, we can just focus on the “Real” part. Some prototypes and customer feedback would give us some idea on this. Once we are convinced of that, we can focus on “Win” part etc.

To summarize, before planning for an idea / innovation review, we need to decide whether the focus is primarily efficiency or accuracy. There are multiple options available to fulfil either of these needs.