The Business Book

184

T H E E S S E N C E O F

S T R A T E G Y I S

C H O O S I N G W H A T

N O T T O D O

GOOD AND BAD STRATEGY

S

trategy is a concept with

its roots in military history,

when army generals planned

campaigns of war. Today, it is an

overused and often misunderstood

word in business theory. Put

simply, strategy is the way a

business gets from where it is to

where it wants to be; it involves

identifying the choices that must

be made to overcome the obstacles

that lie in the way. Often, choosing

what not to do is as important as

what to do. Strategy guru Michael

Porter first drew attention to this in

1985, then specifically explored it in

his 1996 article “What is Strategy?”

For businesses, it is just as

possible to follow bad strategy

as good. Richard Rumelt’s Good

Strategy/Bad Strategy (2012)

explained that good strategy

should emerge out of an analysis

of the company itself, and its goals.

SWOT analysis (strengths,

weaknesses, opportunities, and

threats) is one of the most popular

systems for such audits, and to be

effective it should be conducted

among middle managers and

people across the organization, not

just those at the top. Good strategy

requires analysis of the competition

and any threats to the organization,

and may involve painful decisions.

It should result in a strategy based

on clear goals that capitalizes on

the company’s strengths and can

be flexible if external factors change.

Bad strategy often goes hand in

hand with setting a simplistic goal

or vision. Leaders in organizations

may use powerful rhetoric about

“winning” to motivate staff, but

empty goals are easy to set—

formulating the strategy required to

achieve them is much more difficult.

Executives bent on pursuing a bad

strategy will ignore problems and

Kodak failed to recognize that

film-based photography was effectively

“what not to do.” Choosing to move away

from this area could have made Kodak

a market leader in digital technology.

IN CONTEXT

FOCUS

Strategic thinking

KEY DATES

1960s Strategic planning

grows in popularity, and is

enthusiastically adopted in the

new field of management

consultancy.

1962 Alfred Chandler’s

Strategy and Structure sets out

a model in which a company’s

structure matches its strategy,

not vice versa.

1985 Michael Porter’s

Competitive Advantage

redefines business thinking

on competition, repopularizing

the ailing field of strategic

thinking in the process.

1990s/2000s Strategy is

increasingly practiced as a

continuous process by all in a

business, not just by those at

boardroom level. Nokia says

that strategy should be “a daily

part of a manager’s activity.”