The Crux

Highlights

• EFFECTIVE PEOPLE GAIN insight through finding and concentrating attention on the crux of a challenge—the part of the tangle of issues that is both very important and addressable (which can be overcome with reasonable surety).
• To be a strategist you will need to embrace the full complex and confusing force of the challenges and opportunities you face.
• To have someone believe you and trust in your strategy, there has to be a logic and argument, and some evidence, as to how you are dealing with the challenges you face.
• You solve a gnarly challenge by beginning to dig into the nature of the challenge—in figuring out “what is going on here.” What is the paradox or central knot of the thing? What constraints might be relaxed?
• Faced with a gnarly challenge, the strategist recognizes or forges an embedded solvable problem—not the whole gnarly challenge, but one with kinship to its key elements. And it is a problem that we are capable of addressing.
• When the problems are strategic, by searching more widely, you may dramatically improve your ability to see better solutions.
• A MAJOR IMPEDIMENT to insight is unconscious constraint, an unrecognized assumption or belief about the world, or about the problem situation.
• Diagnosis will always reveal multiple challenges. To focus, some challenges must be put aside or deferred. One must choose which challenges to confront. In this sense, the crux itself may be a choice. Choose the crux that strikes at critical issues and can be surmounted.
  • Tags: [[strategy]] [[leadership]]
• Strategic extension is the act of taking your unique value system and extending it to cover more buyers or similar products, or both.
• “Executives seek and execute acquisitions that have little to do with shareholder value because they help boost metrics such as sales, EPS [earnings per share], or EBITDA that determine their bonuses. In addition, a big acquisition will put the company in a peer group with larger competitors, which also tends to boost executive pay.”
• Equity issues by established public firms tend to cause a stock-price dip of 2–3 percent.
• There is no escaping that strategy is an exercise in power.
• Strategy means asking, or making, people do things that break with routine and focus collective effort and resources on new, or nonroutine, purposes.
• COHERENT ACTIONS SUPPORT one another. At the simplest level, coherence means that actions and policies do not contradict each other. In the best of cases, coherence comes from actions working synergistically to create additional power.
• Having seventeen inconsistent goals is the indulgence of politicians. A strategist would face such an exuberance of inconsistent ambition by selecting a consistent subset and pushing the rest aside, at least for a while.
• To be clearheaded is to be aware of the concepts, analogies, frameworks, models, and other assumptions being used to simplify and structure the situation.
• Injecting more money into an inefficient system is just feeding the bloat. Fix it before you grow it.
• Each of the five forces—the strength of competition, the ease of new entrants appearing, the bargaining power of suppliers, the bargaining power of customers, and the threat of substitute products—is a threat to an industry’s profitability.
  • Tags: [[strategy]]
• The real challenge of “disruption” is not that you don’t see it coming. The real challenges are: (A)  that it costs more profit to respond than it seems to be worth (B)  that your organization lacks the necessary technical ability, financial strength, or organizational skills to respond (C)  that it is the destruction of the whole ecosystem in which you live
  • Tags: [[strategy]] [[innovation]] [[favorite]]
• We look for advantage in four basic places: in information, knowing something that others do not; in know-how, having a skill, or patent, that others do not have; in position, having a reputation, brand, or existing market system (for example, distribution, supply chains) that others cannot readily imitate or push aside; in efficiency, whether based on scale, technology, experience, or other factor that others cannot easily attain; and in the management of systems, whether bridging complexity or moving with speed and precision, that others do not have.
• There are clear economies of scale in many activities. The strategic issue is the scale or size required to be efficient. If good efficiency is obtained at a scale of one-tenth of the whole market, then there is room for ten efficient firms. That means that scale will not be a source of advantage or edge.
  • Tags: [[leadership]] [[strategy]]
• There is a large logical gap between production economies of scale and those that simply have a larger organization. In fact, larger organizations will generally require more layers of managers and committees to coordinate the whole. For this reason, many of the mergers based on the hope for “economies of scale” fail.
  • Tags: [[strategy]] [[organization-design]]
• The strategic issue with experience is the degree to which it can drive an advantage over competitors. Just as is the case for simple scale economies, beyond a certain point, factors other than accumulated experience become decisive.
• Whereas economies of scale drive down unit costs, network effects drive up the value of the product. For a network effect to happen, the value of a product or service has to rise as more and more people use it.
• In general, the further into the future one looks, the more unpredictable technology becomes.
• “There are a lot of talented people,” he concluded, “but it feels as if all their energy is directed inward, dealing with each other, rather than outward, dealing with the marketplace.”
• “The only way to change a group’s norms is to change the alpha. In all human groups, the alpha person defines the ‘right’ way to think and act. Change the alpha, and you change behavior.
• Good strategic leadership should confront internal issues with the same vigor it uses to advance its external purposes.
  • Tags: [[leadership]] [[strategy]]
• Unfortunately, there is no magic calculator connecting strategic choices with financial or other metrics of success. Consequently, there is no way to work backwards from broad goals to strategy.
• The answer is that good strategic goals are an outcome of working the gnarly problem of strategy, not an antecedent.
• The pop-psychology belief is that goals motivate. Stupid arbitrary goals don’t motivate achievement. They motivate cynicism and fabrication.
  • Tags: [[favorite]] [[leadership]]
• A collection of goals or metrics is not a strategy. A strategy is a reasoned argument about the forces at work in a situation and how to deal with them. Don’t let the metrics drown out thought.
• The value of a corporation depends on all the future dividends or other payments it may make to shareholders, adjusted down for the risk of default, and adjusted upward for its possible acquisition by an optimistic buyer.
• With more uncertainty, stocks tend to drop in value. Options, on the other hand, tend to rise in value with more uncertainty because the downside is limited. The bottom line is that you cannot make managers face the same situation as shareholders with option-like payments. Shareholders own shares, not options.
• If a challenge is not owned, it cannot be surmounted. Good strategy can only flow from senior executives who own the critical challenge.
• In my experience, it is not group process per se that causes too early convergence on action. It is the habits of viewing strategy as setting overall goals or as decision making among predetermined alternative actions.
• Deferred judgment helps avoid the problem of too early convergence on an answer, an issue Irving Janis pointed out in his analysis of groupthink. Convergence on action can be deferred by conscious attempts to focus instead on the identification of challenges and diagnosis of their inner logics.
• Executives have a relatively easy time identifying challenges. But addressability is more complicated. The question that often breaks this into pieces small enough to think about is “Why is this hard?” That is, what are the obstacles to dealing with this challenge?
• There is a sense in which strategy is almost always about some sort of focus. Absent a crisis or very competent strategic leadership, most organizations gradually defocus. They try to do fifty different good-sounding things and do none of them well.
• There is nothing that motivates an army or company better than winning. By tackling an important objective and overcoming it, leadership sets the stage for the next battle. Think of strategy as a series of proximate objectives rather than a long-term vision.
  • Tags: [[leadership]] [[favorite]] [[strategy]]
• You do not want to create the sense that a strategy document is mentioning everything that is important, that it has a present under the Christmas tree for each interested party. This may be a break with tradition, but it is a necessary break. Good strategy is about focus, not about everything that everybody does.