Good Strategy, Bad Strategy

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Good strategy almost always looks simple and obvious and does not take a thick deck of Powerpoint slides to explain. It does not pop out of some “strategic management” tool, matrix, chart, triangle, or fill-in-the-blanks scheme. Instead, a talented leader identifies the one or two critical issues in the situation — and then focuses and concentrates action and resources on them.

Identifying the “one or two critical issues” (Diagnosis) is just one piece of the problem. Good Strategy also involves defining a guiding policy and coherent actions.

A guiding policy “outlines an overall approach for overcoming the obstacles highlighted by the diagnosis and tackles the obstacles identified in the diagnosis by creating or drawing upon sources of advantage.” It channels a company’s energy towards the areas where it has unique advantages.

Coherent actions are the set of interconnected things that a company does to carry out the guiding policy, each reinforcing the other to build a chain-link system that is nearly impossible to replicate. Walmart isn’t the leading retailer because it has lower prices, or because it puts its stores in a certain type of town, or because it’s built up the right distribution network, or because of any single thing that it does. It’s the leading retailer because all of those pieces work together in such a way that no one could copy Walmart without copying the whole system.

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