And it’s not goal setting.
When I came across Richard Rumelt’s book, Good Strategy/Bad Strategy: The difference and why it matters, the subject matter caught my attention for several reasons.
Too many people misunderstand the purpose of creating a business strategy and, not surprisingly, fail to implement one effectively. Even highly experienced executives, including those whose titles are CEO, CFO, owners, or founders, often need clarification about developing strategic goals that deliver desired outcomes.
I wanted to share my thoughts about Rumelt’s book because he clearly diagnosed, expressed, and offered solutions to what I’ve observed firsthand, as well as details and guidance missing from almost all “strategy development” efforts. And because his insights and observations often reflected many of my own, I wanted to highlight some of his key points to help business leaders achieve tangible results by creating and implementing their specific strategic plans.
The difference between goal setting and strategy development.
One of the main points I took away from the book is the difference between goal setting and strategy development. I believe this is why most strategy development efforts fail. The author uses multiple real-life experiences to show how successful strategies specify not only the desired outcomes but also the actions that need to be executed to obtain them. He calls this the “kernel” of good strategy that becomes the bare bones center of a strategy – the “hard nut at the core of the concept.”
A client success story using Rumelt’s “kernel” concept.
Here’s an example to illustrate Rumelt’s “kernel” concept when I worked with a small healthcare practice. While successful, the practice struggled to reach the next level of higher revenue. The owner wanted to break through their apparent revenue ceiling and asked me to help them with a revenue growth strategy. Shattering the revenue ceiling was our “kernel.”
First, I needed to help them identify the cause of this revenue barrier. We examined if this ceiling was primarily due to a lack of patients, a limit to their capacity to provide services, or an obsolete service pricing model.
While the practice was well known in the area, this awareness and positive notoriety did not support revenue growth by acquiring new patients. This led us to examine their sales practices. Basically, there weren’t any structured sales techniques being used. Once we found the correct sales training tools and partners, the practice began to increase the number of new patients through referrals and more effective asks in their marketing efforts. Measurable growth by new patient acquisition was achieved within five months. It also increased the revenue per existing patient by educating them on additional beneficial services where medically appropriate.
Two outcomes from the strategic plan implementation.
While undefined in the initial discovery, it became apparent that the existing staff was being underutilized. With the practice’s growth came a challenge: helping the staff meet new job expectations and increased capacity requirements. Adjustments were quickly made, and some new hires were onboarded.
The client’s revenue ceiling was shattered within the first 12 months; however, the practice began to experience another capacity challenge with the increased business over time. This resulted in going back to the strategic planning stage, but this time, we built a strategy to recruit and onboard additional medical providers. This experience reinforces the idea in the book that a successful strategy needs not only to specify an overall desired outcome/goal but also to define the specific actions required to obtain that outcome.
One more observation for good strategy development.
While Good Strategy/Bad Strategy: The difference and why it matters was initially published in 2011, the 2017 version I read did have more current real-world examples. Fast-forward to 2024, and I would like to add that much of the strategic planning and development of written growth plans to support the strategy is done more efficiently with more transparency and expediency given the technology used in the discovery phase and throughout the growth plan implementation to accomplish the strategic goals. When used effectively, technology can accelerate the opportunities to hit the benchmarks within the growth plan and achieve the strategic goals.
Rumelt offers an excellent overview of strategic planning questions and considerations. Following his advice and tips, you can create a basic strategic plan to guide your efforts using the insights provided.
If you’re interested, you can click now to order Rumelt’s book online.
Here are a few other books that I recommend reading to bring purpose and clarity to your strategic plans.
The Strategist: Be the Leader Your Business Needs, Cynthia Montgomery, 2013
The Crux: How Leaders Become Strategists, Richard P. Rumelt, 2022
Competitive Strategy: Techniques for Analyzing Industries and Competitors, Michael E. Porter, 2008
I am happy to discuss your strategy development. Please schedule a call with me.
