Rating: 10/10

Favorite Line #1: A great deal of strategy work is trying to figure out what is going on. Not just deciding what to do, but the more fundamental problem of comprehending the situation.

Favorite Line #2: To detect a bad strategy, look for one or more of its four major hallmarks: Fluff. Fluff is a form of gibberish masquerading as strategic concepts or arguments.

Overall Impressions

Clearly, there was some misunderstanding. I had been doing everything wrong. That’s how it seemed the minute I finished this beautiful book in 2016. I come back to it regularly and it always makes my work so much better every time.

This book came at the perfect moment. Had I read it sooner, it might not have had the right effect. When I got to it, I had already written several city plans, participated in strategic retreats, and scratched out business plans for my various departments. I had tried various frameworks in each circumstance. None of it was ever as effective as I wanted it to be.

The Balanced Scorecard, Five Forces, the Rational Planning Model. By learning about the different frameworks for strategy, I had the chance to question why any of those approaches mattered. Why was one better than another? Is there really a distinction between McKinsey’s Strategic Horizons and the Ansoff Matrix? Aren’t there countless examples of companies that have been successful without using any of these tools?

So much of this stuff felt like the diet fads of the wellness industry. Try Atkins©! No, try Body for Life©! No, go Paleo©  instead! Those are frameworks, too. Some people treat them as religions–the One True Path–but it’s more like software that works on top of the operating system. And that’s fine but what’s the operating system? What, at the core, are we trying to do with all these styles of strategy?

Rumelt’s book gives the clearest, most accurate answer I’ve ever read:

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.

It’s so obvious when you read it. But it gets lost so quickly. Especially for those who haven’t tried several frameworks beforehand. 1

Strategy is a thought exercise and thought exercises quickly become complicated when they desperately need to remain simple. Our natural inclination is to make it more complex so that we can hide the reality of our muddled thoughts behind what Rumelt properly calls the “fluff”.

When formulating strategy and working with others to identify what it is, I’ve always struggled to find a simple, core idea to keep people grounded. Rumelt has clearly faced this, too, because he gives it a name. The kernel. It is the perfect label; it’s a word we don’t use enough today outside the context of operating systems. We refer to “first principles” as a means of thinking clearly, which I fully endorse, but before first principles there is this.

But again, what’s the big deal? This feels so obvious to some, I’m sure. What matters here is the fact that most strategic plans are not built on a proper kernel. I honestly can’t think of one such document that explicitly states it in any of the work I’ve done. Certainly not in local government. The closest I come to it is in the shareholder letters from Bezos or Buffet but that doesn’t fit perfectly either. These companies and others don’t exactly put their strategies out in places I can easily find them.

Granted, I’m probably looking in the wrong places. Such strategies don’t have to be in big, official documents. We only put stuff in official documents when we’re ready to ignore it.  

Anyway, this concept of the kernel can unpack every planned action—from the content of your grocery list to the maneuvers of the D-Day invasion. Which is to say that no one needs any strategic framework. We just need clear thinking. That’s what strategy is all about.  Additional elements like timeframes, goals and objectives, market segments, and all the rest might be helpful but, again, it isn’t necessary. Or as Rumelt puts it:

I call this combination of three elements 2 the kernel to emphasize that it is the bare-bones center of a strategy—the hard nut at the core of the concept. It leaves out visions, hierarchies of goals and objectives, references to time span or scope, and ideas about adaptation and change. All of these are supporting players.

Supporting players. Mission statements, vision statements, gantt charts, scope. They’re all a bunch of appurtenances. Millions of hours of staff time (to say nothing of the financial cost) has been spent writing the perfect vision statement and color-code our critical paths. I should know. I’ve done a lot of it myself. I love it. But more times than not, it is creating the beautiful outer body of the car even as the kernel—the actual engine—is still ignored.

A Test Drive

So let’s apply Rumelt’s idea here in the body of this article. Let’s examine strategy documents and figure out a way to make them more meaningful and effective. This will be the most meta thing we can do—a strategy for strategy! It starts with the question: how can a strategy document be more effective?

Well, actually, it starts with a definition of the strategy document itself. In my current line of work, the typical strategy document is at least fifty pages and has statements of mission, vision, and values. Then there is a framework for describing all the different problems (literally everything is a problem) followed by prescribed actions. The document has some timeframes, a list of participants or project owners, and it often spells out some vague set of outcomes. In other words, 90% of these documents are a glorified list of tasks rather than a system for defining the best course of action. Google the phrase “city strategic plan” and you’ll see plenty of examples.

From these examples, we can derive our kernel. It has three phases: diagnosis, guiding policy, and coherent action.

Diagnosis of the problem: strategy documents fail to produce a genuine kernel and thus are empty documents. They suffer for being a means of deciding what to do without ever figuring out what’s going on.

Guiding policy: no strategy document will be developed until a kernel is fully formed and articulated front and center. Furthermore, strategy documents may be considered wholly unnecessary if and when a kernel is fully developed and agreed-upon by the primary actors.

  • The kernel will consist of the diagnosis, guiding policy, and coherent actions.
  • The diagnosis will require data and experimentation to prove itself (this is a guiding policy).
  • Guiding policies will be simple, clear, and easily enforced.
  • Coherent actions will be styled in a manner that is entirely within our control and possess as much of an economy of resources as possible (this is a guiding policy).

Coherent action: eliminate strategic plans that don’t follow this structure. And when building future strategies, begin with the diagnosis of the problem. Assuming we’ve chosen the problem to address. If we haven’t chosen the problem to address, we will work on that for as long as necessary. Once diagnosed, actions will be built over a relatively short period of time and the next cycle of diagnosis-guiding policy-coherent action will begin.

The result is a new strategic plan that is simple, brief and refreshed regularly. It will be less but it will also be better.

Conclusion

There’s so much more that this book captures. I’ve barely given a preview. The thoughts on bad strategy are just as valuable as the thoughts on good strategy. And for all of us who have suffered through long retreats and strategy sessions that kinda lead to nowhere, Rumelt’s measured critiques are wildly cathartic. This brilliant man shares our frustration! Strategy can be so simple and so effective and yet it seldom is.

Buy it on Amazon

Mental Models

  • Real strategy requires the kernel: problem diagnosis, guiding policy, and coherent action.
  • A problem well-defined is half-solved —Oscar Wilde
  • Vague language is a sign of confusion and fear to choose.
  • Bad strategy is not the lack of good strategy. It is its own dangerous thing and crowds out good strategy.
  • Goals are often just statements of desire; they aren’t strategy.
  • Strategy is a plan to overcome an obstacle.
  • Great strategy honestly acknowledges the problems and provides coordinating and focused actions to overcome them.
  • Actions must coherent, direct responses to the problem and must be immediate.
  • Markets do not evolve from simple to complex; it’s the other way around.
  • Managing the bridge between goals and objectives is a leader’s top job.
  • Good strategy focuses on one, or a very few, pivotal objectives. A’la Michael Porter’s straddling problem.
  • Never label a condition as a problem. A condition, like underperformance, is a result or symptom. The problem is the cause, something deeper.
  • Strategy determines what purposes are worth pursing *and* achievable.
  • If you don’t have a competitive advantage, don’t compete.
  • Strategy is about figuring out what is going on; comprehending the situation is half the battle before deciding what to do.
  • Deep change in a system requires a deep change in diagnosis. Diagnosis is a leverage point. A’la Harai’s power of narrative; to change people, change the narrative. And Tim Ferriss’s “Let it serve you”, reframe the problem as a benefit. And Tony Robbin’s additional reframe: “Think of this as a gift” a setback that actually helped you in some other way.
  • You can use a shoe to hammer a nail but it will take a long time. Find the power tools.
  • Seek coordinated actions only when the gain is large. Otherwise, keep people in their specialty silos.
  • Certain aspects of future events are predetermined. Find out which ones.
  • Pivot points, by definition, emerge from the imbalance of a situation.
  • Understand the equilibrium, sense the imbalance, and act with the small adjustment that unleashes much larger pent-up forces.
  • Like people, an organization can only focus on a few critical issues at any one time.
  • Remember the power of the proximate objective—something close enough to feasibly achieve and even overwhelm.
  • Ignore ambitious goals; test their feasibility instead by judging the level of ambiguity about the obstacles to overcome.
  • Just improve your position. You don’t win chess by trying to to checkmate with every move.
  • A chain is only as strong as its weakest link. Either replace it or eliminate it.
  • There is little payoff in incrementally strengthening the link.
  • To assess potential, identify the limiting factors.
  • Never accept the first reasonable answer to a hard question or problem. Test it.
  • Most advantages only extend so far. Look for an advantage that is sustainable, something others can’t duplicate.
  • Increasing value requires progress on at least one of four fronts: deepening advantages, broadening the extent of advantages, creating higher demand for advantaged products or services, or strengthening the isolating mechnisms that block easy replication or imitation.
  • Preventing duplication or imitation is the best defense and best generator of value. Continually improve methods, products, or services. A’la Bezos’s statement that old business was 70% marketing, 30% quality, and now it’s flipped.
  • Favor a business or service that can rapidly redevelopment and improve.
  • You can’t show your skill as a sailor when there is no wind.
  • Organizational inertia falls in three categories: the intertia of routine, cultural inertia, and inertia by proxy.
  • Inertia by routine is the result of bad management.
  • To kill cultural inertia, simplify routines, processes, and eliminate the hidden bargains, excess layers of administration, and halt nonessential operations. A’la Jobs’ quip that simplicity is the ultimate sophistication. And Tim Ferriss’s question: What would it look like if it were easy?
  • To change a group’s norms, change the alpha.
  • Inertia by proxy is dealt with by creating separation. Fragment units, eliminate their cross-subsidies and dependencies, destroy political coalitions, remove those who do not need to work in close coordination.
  • A loss of organizational coherence increases internal competition. Departments fight when they’re confused on a crowded dance floor.
  • A good strategy is a hypothesis of what will work.
  • To be innovative, or just plain effective, focus not on what is done but why.
  • Always start with why. Question it all.
  • Enlightened observation is built on the eternal question of why.
  • Never build a system so complex that you can’t understand or analyze its failure points and failure modes.
  • Avoid, forever, the inside view that “this time is different”.