Rumelt on strategy as an act of design

Richard Rumelt on why strategy work is a form of design.

This is more than just an interesting analogy. Design as we normally think about it brings with it a different way of working – one which has been explored by design theorists over the past 30 years, often under the banner of ‘design thinking’.

If we take this analogy seriously, the dominant mentality (and toolkit) we apply to strategy work today is inadequate. And the opportunity for growth enormous.

In business, the challenge is usually dealing with change and competition. The first step toward effective strategy is diagnosing the specific structure of the challenge rather than simply naming performance goals. The second step is choosing an overall guiding policy for dealing with the situation that builds on or creates some type of leverage or advantage. The third step is the design of a configuration of actions and resource allocations that implement the chosen guiding policy.

Strategic coordination, or coherence, is not ad hoc mutual adjustment. It is coherence imposed on a system by policy and design. More specifically, design is the engineering of fit among parts, specifying how actions and resources will be combined.

When someone says “Managers are decision makers,” they are not talking about master strategists, for a master strategist is a designer.

Competitive strategy is still design, but there are now more parameters—more interactions—to worry about. The new interactions are the offerings and strategies of rivals.

Business and corporate strategy deal with large-scale design-type problems. The greater the challenge, or the higher the performance sought, the more interactions have to be considered. Think, for instance, of what it takes to give a BMW 3 Series car that “driving machine” feel. The chassis, steering, suspension, engine, and hydraulic and electrical controls all have to be tuned to one another. You can make a car out of high-quality off-the-shelf parts, but it won’t be a “driving machine.” In a case like this there is a sharp gain to careful coordination of the parts into a whole

I am describing a strategy as a design rather than as a plan or as a choice because I want to emphasize the issue of mutual adjustment. In design problems, where various elements must be arranged, adjusted, and coordinated, there can be sharply peaked gains to getting combinations right and sharp costs to getting them wrong. A good strategy coordinates policies across activities to focus the competitive punch.

This trade-off way of thinking about design has, for me, become central to my view of strategy: A design-type strategy is an adroit configuration of resources and actions that yields an advantage in a challenging situation. Given a set bundle of resources, the greater the competitive challenge, the greater the need for the clever, tight integration of resources and actions. Given a set level of challenge, higher-quality resources lessen the need for the tight integration of resources and actions.

Source: Richard Rumelt – Good Strategy Bad Strategy: The Difference and Why It Matters

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s