Michael Porter wrote in his article ‘What is Strategy’ that operational effectiveness is not strategy. He then laid out three key pillars to what makes ‘Strategy’: strategy is the creation of a unique and valuable position, involving a different set of activities; strategy requires you to make trade-offs in competing—to choose what not to do; and strategy involves creating ‘fit’ among a company’s activities.
In short, when a company says ‘We want to have a growth of x per cent for the next five years’ or ‘We will be a dominant force in widget manufacturing’ or ‘We will be the technology innovator in our business’ these are nice statements but they are not ‘Strategy’. Companies are not just using the word strategy loosely; they often make a lethal cocktail of vision, mission, goals and strategy.
Prof Richard Rumelt has made it his life mission to get companies understand the importance of good strategy. In fact, he even wrote a book, Good Strategy–Bad Strategy (2011) to explain what is good strategy: ‘Good strategy is a specific and coherent response to the obstacles to progress’.
In his new book, The Crux, Rumelt has used a mountaineering analogy to make his point. In mountaineering, high mountain touring and rock climbing a ‘crux’ is the most difficult section of a route, or a place where the greatest danger exists. Mountaineers know that they have to prepare to handle the ‘crux’ if they want to complete the climb.
Now what does that have to do with corporate strategy?
Rumelt argues that strategy cannot be just a wish list of the CEO or the Board. Good strategy has to emerge from the challenge that is faced by the company and what it plans to do to overcome the challenge. He argues that there is folly in saying that the leader is someone who carefully crafts a ‘vision statement’, a ‘mission statement’, a’ statement of values’ and a ‘strategy statement’. While mission statements and vision statements may have their use, he argues, they cannot dictate strategy. ‘A strategy is a mix of policy and action designed to overcome a significant challenge. The art of strategy is in defining a crux that can be mastered and in seeing or designing a way through it’.
How do you develop a strategy for your company then? In the book he explains that it all boils down to three steps. First is collecting: making an exhaustive list of problems, issues and opportunities. Not the first few that a CEO can think of, but an exhaustive search using both insiders and outsiders. Second is clustering: here you place problems and opportunities into groups. Finally filtering: figure out the sequence in which the issues will be handled, what to take on immediately and what to defer. Rumelt quotes Desmond Tutu, “There is only one way to eat an elephant: a bite at a time.”
Finding the crux
The book is replete with examples of how business leaders spent time finding the Crux before developing a strategy. Elon Musk saw the crux of the challenge of cheaper space travel as reusability of space vehicles. His solution: space craft will return to Earth without burning up (by carrying extra fuel on its way up).
Examples are not just from the world of business. When French President Francois Mitterand hired Chinese American architect, IM Pei, to redesign the Louvre, Pei identified the crux as ‘creating an entrance and transform the empty courtyard while not blocking views of the classic palace’. The design insight led to the creation of the transparent glass structure at the centre of the courtyard.
Companies are advised to look for the right ASC–Addressable Strategic Challenge; things that are of critical importance and are addressable. The number of ASCs to be simultaneously worked on depending on the size and resource depth of an organisation or the graveness of the most serious.
The book is arranged into five parts. The first part explains the challenge-based strategy and the crux concept. The second part dives into diagnosis or figuring out the problem. The third part is about getting past the crux. The fourth part is about dangers of distractions. And the fifth part explains Rumelt’s own way of strategy workshop called The Strategy Foundry.
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