Richard Rumelt is a professor at UCLA’s Anderson School of Management. A decade ago he published ‘Good Strategy/Bad Strategy’ which remains one of the best books on strategy we have read. Earlier this year, Rumelt published ‘The Crux’. Knowing Rumelt’s no-nonsense attitude to practical corporate strategy formulation we hit the ‘Buy’ button on Kindle unhesitatingly. We weren’t disappointed. Rumelt makes three critical points that we in Marcellus’ Leadership find useful to keep in mind when we try to steer our franchise forward.
Firstly, none of this vision-mission stuff which people tend to paste on the walls of their offices has any bearing on strategy. Whatever financial goals Marcellus’ staff or Leaders might have for the business, they should NOT be central to strategy formulation for Marcellus. Rumelt says: “The essence of strategy is a design of policy and action aimed at resolving a high-stakes challenge. By “challenge,” I include opportunities that may be difficult to grasp. If you don’t identify the nature and structure of your challenge, then you cannot surmount that challenge—meaning, you cannot have a strategy. Strategy is a form of problem-solving and to do good strategy work you have to put aside the language of goals and ambitions and instead concentrate on the changes and challenges that block your way forward.” Throughout the book, Rumelt keeps reminding us to “Start with your challenges, not your goals”.
Secondly, strategy formulation requires business insight (usually “original” business insight) and if you as a leader don’t have it, it is unlikely that you will get very far by hiring management consultants. In fact, over the years we have seen amongst our investee companies this aspect truly separates the women from the girls and the men from the boys – the promoters who have original business insight will be able to help you see their business (and your business) from a completely original perspective (whilst their competitors will be stuck in the same old rut of pricing, market share, quarterly earnings, share price, etc). Rumelt says: “Most serious strategy problems are gnarly. That is, there is no clear definition of the problem and its structure. There is no simple list of alternative actions—they have to be created—and the connections between potential actions and possible outcomes are fuzzy, at best. When we study a challenge, we should look for its central paradox, the core of what makes it difficult, the tension which might allow us to move to a solution, if resolved.”
Rumelt illustrates this important in the book using several case studies including: “An example is Elon Musk’s solution to the long-standing problem of rocket reusability. After a failed attempt to buy a Russian launch vehicle in 2001, he began to study why rockets were so expensive. He realized that the problem was the high-heat generated by re-entering the atmosphere which destroys key components of the rocket. One solution, he hypothesized, would be carrying more fuel (fuel is cheaper than rockets) and using that extra fuel to slow the rocket’s return to Earth, having it softly land on its tail. This insight was the birth of SpaceX, which has made putting a pound into orbit 25 to 40 times less expensive than the old Space Shuttle.”
The third point is what gives the book its title. At any point, we as leaders can do a range of things to impact Marcellus’ future outcomes. Where we have to demonstrate judgement and skill is to choose that pressure point – that one business problem – where we can have a big impact on a difficult problem holding back our franchise. This is the “crux”. In Rumelt’s words: “The essence of strategy is a concentration of effort, resources, and/or force if the opportunity is great or the opponent is weak. Without that concentration, there may be little gained. To gain that concentration, organizations must focus their efforts on only one or two critical challenges. When you try achieving too many things at once, policies and activities proliferate that work against each other—friendly-fire—that reduces overall effectiveness.
The crux challenge is the most critical, but also realistically addressable, problem. Wasting effort on the unimportant or unsolvable is a luxury of politicians, not strategists.
To find the crux, first look at the broad array of challenges and examine potential ways to solve each of them. This will bring you face-to-face with the fact that you lack the resources to tackle them all at once. Also, it will be evident that many of the proposed actions are inconsistent, proving that the solutions themselves would fight against one another. When you identify a critical challenge (or opportunity) that can be surmounted, you have found the crux.”
Since the crux will keep changing every so often, the leader’s strategy will also have to change. And Rumelt says once again that strategy isn’t something that you do once every few years in an offsite and then stick it to the wall of your office. This is why the phrase ‘long-term strategy’ is an oxymoron: “I find that too many companies that I get hired to help, or that I talk with, or that I visit, get bemused by this long-term vision. And it distracts them from concentrating force on the immediate problems that they face.”
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