What is Strategy
Strategy is an amorphous term. Even when we started IBR four years ago as a journal for students and alumni of the Ivey Business School to discuss their thoughts on strategy it was difficult to articulate. I’ve found Richard Rumelt to do an exceptional job at defining what good strategy is in his work Good Strategy / Bad Strategy. In it, Rumelt defines good strategy as an essential logical structure that has three components:
- A diagnosis: This is a clear definition of the nature of the challenge. Ideally, the diagnosis takes away much of the complexity and distraction of a situation and distills it down to the a clearly defined core problem.
- A guiding policy: This specifies the approach to dealing with the obstacles called out in the diagnosis.
- Coherent actions: Feasibly coordinated policies, resource commitments and cations designed to carry out the guiding policy (tactics).
In short these three things can be summarized as the why (diagnosis), what (guiding policy) and how (coherent actions) of strategy.
Bad Strategy, Rumelt proposes is anything outside of that. This can often be disguised as good strategy and is often the result of logical thought. For instance, Bad Strategy might be a set of objectives or even a legitimate guiding policy with an absence of a clearly defined diagnosis that leads to such a policy.
It is important to realize that good strategy may not result in a company succeeding, however it provides a foundation from which decisions can be made in a coordinated way.
I find this framework is very helpful to keep in mind when crafting strategies for the market.