Good Strategy and Bad Strategy (Part 1)

Intro: Focusing on Obstacles

A strategy is like designing and throwing a bunch of punching combos: where is the enemy? Where to punch? Where NOT to punch? How to punch? How does your first punch help the second and third ones?

The key idea of this book is the kernel of good strategy. Kernel of strategy = diagnosis + guiding policy + coherent actions.

PART I GOOD AND BAD STRATEGY

1 GOOD STRATEGY IS SURPRISING

A good strategy is surprising but reasonable. For example, when Steve Jobs returned to Apple, he cut the product lines to a few profitable ones. When asked how to compete against the Wintel standard, he just smiled and said, "I am going to wait for the next big thing."

Another example is Desert Storm. While the media exposure was focusing on the main troops moving slowly in the frontline, another group of military force was moving across the empty desert of southern Iraq as a "left hook."

Doing everything and thinking everything is important means everything is equally unimportant. Good leaders are supposed to know what to do and what NOT to do.

2 DISCOVERING POWER

When we ask what a strategy 101 is, a fundamental answer is SO strategy (Strength + Opportunity).

Shakespeare says in Helmet: there is nothing either good or bad, but thinking makes it so. From a dynamic perspective, strength and weakness are relative. The story of David and Goliath is a good example. People may think that David, the small and the inexperienced, can never fight against Goliath, the giant and the experienced. However, the truth is that David leverages the shepherd's sling to beat the slow and clumsy Goliath.

Walmart vs. Kmart is another example of finding strength out of where people hardly see. The traditional wisdom of retailing believes that a full-category grocery store has to be placed in an area with the population of at least 100K. However, Walmart can launch its store where there is less population than 100k. How could this happen? It is because that Walmart has a way more efficient supply management system, which makes those stores into an organic network; on the contrary, Kmart does not have close relationships between stores, and they cannot get united, cannot lower inventory costs, and cannot negotiate against suppliers as a whole.

In Cold War, Andrew Marshall designs the strategy to compete against the Soviet Union with comparative advantages - back by the economic and technological advantages of the US, developing things with huge costs but cannot establish actual offensive threats, like increasing the accuracy of missiles or quiet submarines.

3 BAD STRATEGY

Bad strategy is formalism. People mistakenly think the form of the strategy is the most important and cannot embrace the reality. There are four hallmarks to detect bad strategy.

1. ==fluff==: strategy should not be just a collection of fancy buzzwords.

   • e.g. a major bank says, "Our fundamental strategy is one of customer-centric intermediation." = "Our bank's fundamental strategy is being a bank.".

2. ==failure to face the challenge==:

   • If you fail to identify and analyze the obstacles, you don't have a strategy. Instead, you have either a stretch goal, a budget, or a list of things you wish would happen.

   • It takes caution to establish =root-level metrics. ==If you can't measure it; you can't improve it. However, are you improving the right thing?==

     • OKR-driven Google vs. KPI-driven Baidu

   • A successful example is DARPA.

3. mistaking goals for strategy.

   • e.g., a 20/20 goal - We will grow revenue by at least 20% each year. We will maintain a profit margin of at least 20%.

   • metrics themselves are not a strategy.

4. bad strategic objectives
   • Objectives are sub-goals of your goal.
   • A good strategy works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes.
   • What are bad objectives?
     1. Dog's Dinner Objectives. Again, everything important equals to everything unimportant.
     2. Blue-Sky Objectives.