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Good Strategy/Bad Strategy (Bad Strategy (Fluff (Generous sprinkling of…
Good Strategy/Bad Strategy
Book is the learning of Richard Rumelt as consultants to many organizations
Good Strategy
Acknowledges challenges
Provides an approach to overcome challenges
Focuses & coordinates efforts
It is not just about what. It is more about why & how
It is about action. just not documentation
Bad Strategy
Skips details
Ignores power of choice and focus
Accomodates conflicting demands and interests
Embrace broad goals, ambition, vision and values
Avoids analyzing obstacles
Fluff
Generous sprinkling of buzzwords
Examples - "Our fundamental strategy is one of the customer centric intermediation"
Example - "DEC is committed to providing high-quality products and services and being a leader in data processing"
Failure to face the challenge
Ignoring the elephant in the elevator
Goals are not strategy
Just statements of desire rather than plans for overcoming obstacles
Chad Logan, CEO of Graphic Arts Company. 20/20 plan. Revenues 20% growth and profit margin of 20%
He thinks "will to win" is required
Unwillingness or inability to choose
Digital Equipment Corporation(DEC) Story of 3 executives discussing on direction.
Template style strategy
Kernel
A diagnosis
explains the nature of the challenge
A guiding policy
Overall approach to overcome the obstacles.
Coherent action
Feasible coordinated policies
Resource commitments
actions designed to carryout guiding policy
Ex - Business
Dealing with change and competition
Diagnosing the specific structure of the challenge
Guiding policy for dealing with the situation that create some type of leverage or advantage
Design of configuration of actions and resource allocations.
Wells Fargo
Guiding Policy - Using the network effects of cross selling
"We want to satisfy all of our customers financial needs, help them succeed financially, be the premier provider of financial services in every one of our markets and be known as one of the america's great companies"
US Government's Strategy
2008 Financial Crisis
No official diagnosis
Strategy
Application of Strengths against weakness
Creates strengths thru coherence of its design
Creation of new strengths thru subtle shifts in viewpoint
Apple's fall story 1995
Windows 95 released
Apple fell in death spiral
101 ways to save apple
Jobs join back as interim CEO
15 to 1 product strategy.
Jobs handled fundamental problem with a focused and coordinated set of actions
I am going to wait for next big thing
Discovering Power
David & Golliath Story
David - Very Brave - Small & Inexperienced
Goliath - Huge, Strong, Experienced & Brave -?
King Saul cringed in terror
Walmart success
big stores in small towns
everyday low prices
computerized, low administrative expenses
Competition with kmart
kmart spent much of 1970s and 1980s expanding international
Ignored walmart innovations in logistics
Integrated design
barcodes, integrated logistics, just-in-time deliveries, low inventory.
Sources of power
Leverage
Anticipation
Pivot Point
Concentrate application of effort
Proximate Objective
more uncertain and dynamic the situation
Guided by forecasts
Take a strong position
Have more options
Have hierarchy of objectives
Chain Link Systems
Ikea owned stores
Giant stores in suburbs
Ample car parking
Huge selections
Ikea sells ready to assemble furniture
Flat packed furnitures
Reduces shipping & storage costs
Advertised by its own catalogs
Substitutes sales force
Integrated chain link business design
Design
Romans vs Hannibals
Hannibals won after 10 years of battle
hannibal had arrange the troops in a broad arc.
Anticipation
Anticipate behaviors of others
Design of Coordinated action
Parts of the whole
BMW Story
Focus
Crown Cork & Seal Case Study
Metal Container Manufacturing
Direct Competition
Profitability of Crown is more than competitors
Technical Assistance
Rapid Response
Manufacturing
Smaller Plants
More Customers per Plant
Excess capacity for rush orders
Hold Inventory for customers
Growth
Crown Cork & Seal
William Avery, New CEO
Initiated program of growth thru acquisition
1990, Crown acquired Continental Can's Domestic & International Businnesses
1992, Crown acquired Constar, Leading maker of plastic containers
1995, Acquired Carnaud Metalbox, Largest maker of plastic and metal containers in Europe
1997, Crown became the world's largest can manufacturing company.
Advantage
what is the advantage of 2 skillful chess players?
Dynamics
Inertia
Entropy