Good Strategy vs Bad Strategy - Assignment Example

Strategic Management Good versus bad strategies Strategic management involves strategic decision making which is concerned with firm’s operating environment, resources and stakeholders. Making quality strategic decisions is influenced by organizational structure and culture, environment, team and individual characteristics, and nature of strategic problems (Rumelt, 2011). Strategic management has however been faced by numerous shortcoming that have led to failure of some companies. Some of its main failures are the inability to anticipate financial crisis, its economic heritage deficiencies, and possibility of great companies succumbing to inertia and complacency. Strategies are based on vision, mission and objectives which make it empty by promoting similarity and convergence without focusing on uniqueness and divergence. This made Rumelt to come with a different management style based on differentiating between good and bad strategies. This approach has enabled managers to know where they get it wrong when it comes to management (Rumelt, 2011). Various companies have put in place various strategies but some of them end up failing duet to their in ability to differentiate good and bad strategies (Harney, 2011). Many of these strategies are unable to be evaluated before they are put in action and therefore they are evaluated by their outcomes. This evaluation system is outdated since it may end up making a big company fail. Most managers get it wrong when setting company’s strategies by failing to face problem at hand. This is because managers draw a list of things that should happen within a company as a sign progress. According to Rumelt (2012), this approach lacks sense of realism because a strategy cannot be evaluated based on a list outcomes. Managers also make stretch goals focusing ideal state of affair which they confuse with strategy. A good strategy in this case should involve identification and analysis of obstacles a company of a business entity is facing at the time of lying strategies (Harney, 2011). Failure to consider these obstacles in management leads to implementation of bad strategy. On other cases, managers mistake goals for strategies. Mostly, ambitious goals are set without appropriate consideration on the means through which they will be realized (Harney, 2011). This presents difficulties in the later stages of operation as the arising situation may need more resources than it was projected. Also, set plans can fail to comply with the course of action and consequently the company disoriented (Rumelt, 2011). In real sense, strategic objectives address specific accomplishment or processes which will firms set an entity on its success path. This way, the strategy set in place magnifies the effort put by the management and other stakeholders. In other cases, managers fail to identify good strategic objectives which fail to solve critical issues within an organization. This mostly occurs when objectives set are very many and confused or is simply impracticable (Harney, 2011). Objectives set should not be many in order to define a good viable way to achieve them. A good manager should be in a position to adjust or create a bridge between goals which are mostly broad and more operational objectives to ensure success (Rumelt, 2011). Objectives, vision and mission of an organization should not be just set for the sake of their existence but they should be set on the basis of existing resources for them to be achievable. In most cases, managers draw objective, set vision and mission without critically evaluating possibilities of them being achieved (Harney, 2011). When set this way, they put an organization unnecessary pressure to achieve objectives which are unattainable based on available resources and course of action. Business specialists such as Rumelt believe that some mission statements are made using poetic turns and high sounding words which conceal their meaning instead of revealing it. This may declare set objectives impractical and consequently hinder future direction of an organization (Rumelt, 2011). When managers fail to be realistic about their objectives, they set a bad strategy which will prevent them from achieving reasonable results for an organization. Bad strategy is simply caused by failure of managers to make tough choices and work hard. It is also cause by the tendency of management to make a strategy through filling in blank strategy template and overreliance on positive mind set to succeed (Rumelt, 2011). This makes management fail terribly of realize that their strategies are not working when it s too late. In order to avoid bad strategy, management should be realistic in setting their goals and measure their objectives against available resources and course of action. They should also be concerned about the problem at hand and focus on its solution (Rumelt, 2011). Good strategy in any organization involves discovering critical factors in any business situation and influences design of a way of focusing and coordinating action to address these factors. An honest acknowledgement of existing challenges and means to overcome these challenges in a cohesive manner must be fully involved. Good strategy focuses on several areas within a business organization but each one is handled specifically. Driving logic is one of the main areas that are mainly focused by good strategy (Rumelt, 2011). Driving logic involves a cohesive response to existing organizational challenges. This makes strategy to be more than simplistic, dream visions of success because it honestly acknowledges barriers and challenges. Setting good strategies involves consideration of possible outcomes of business operations which includes unwelcome events. Managers should not only design their programs based on their image or expected positive outcome but also by considering models of failure (Rumelt, 2011). This makes performance checked and measured against all possible outcomes which can either be positive or negative. This is an indicator that good strategy cannot be equated to slogans, buzzwords, financial goals, or play solutions. The platform of making good strategy is examined properly and extensively to ensure that important points are not missed out (Harney, 2011). There should be well informed diagnosis which explores the nature of existing and potential problems for better solutions to be tailored. Guiding polices should be examined in order to devise overall approach to overcome identified operational obstacles. There should also be a coherent action that equates to coordinated steps to facilitate accomplishment of various policies in place (Rumelt, 2011). A good strategy is therefore a mixture of action and argument which aims attention and resources on some objective or goals in expense of others. Going by this criterion, many business organizations and entities have no strategies leave alone good strategy. Good strategy uses a numbers of fundamental power sources within the organization. These include proximate objectives, leverage, design, chain-link systems, growth, focus, dynamics, advantage, entropy and inertia (Rumelt, 2011). After identifying critical issues within a business environment, good leaders use these pivot points to maximally utilize the efforts put by all stakeholders. This clarifies what need to be done in any organization setup and therefore setting basis of achieving the best out of the available resources and efforts. In order to avoid coming up with bad strategies, business entities do not set their goals or objectives based on their expectations only. Available opportunities and challenges must be considered so as to create controls in business operations (Harney, 2011). In order to set in place a good strategy and avoid all possibilities of coming up with a bad one involves use of the following power sources. First is leverage which comes from mixture of expectations, insights into most important things in an organization and concentrated efforts application. Important factors in an organization help managers to transform their insights into value and magnify effects of applied efforts (Harney, 2011). Positive anticipation creates a workable future of a business organization. Efforts concentration enables talented managers to focus their resources in the areas that can make difference in the general performance of an organization. Second is the use of proximate objectives and determine their feasibility. To come up with a proximate objective, an organization needs to examine what it knows as well as what it doesn’t know (Harney, 2011). This helps it to survive times of high uncertainty because it has options to handle prevailing conditions. Bad strategies try to achieve the objectives which were set before the start of actions which can prove unrealistic with time. Third is the use of chain-link systems which bring all the business units together. This helps business organizations to avoid sticking which is brought about by low quality units. Making all units of the organization harmonizes action takes and reaps maximum benefits from applied efforts (Rumelt, 2011). Lastly, good strategy use designs to interpret strategic context. Good strategic designs are based on premeditation, anticipation and coordination of action. Plans must be made for actions and responses of others in order to create a face of options and situations which are not clear-cut in all times. Rumelt (2012) points out that performance is the cumulative outcome of clever design and capability. This explains distinctive and specific configuration of available resources and relationships that yield competitive advantage. Actions of business entities should be based on the prevailing conditions rather that managerial experience which is not always successful. Although bench making activities among various business organizations are widely used they are likely to give rise to a bad strategy and consequently make an organization fail (Rumelt, 2011). This show that it is the only consideration of prevailing condition and match it up with available resources which can give rise to a good strategy. To what extent does Rumelt’s viewpoint challenge the conventional models of strategy? Many managers in the modern world prefer strategic management over other management styles. They use conventional models which enhance strategic decision making and are concerned with firm’s operating environment, resources and stakeholders. Making quality strategic decisions is influenced by organizational structure and culture, environment, team and individual characteristics, and nature of strategic problems. Strategic decision making is a central and integral concept of how firms achieve their objectives. Strategic decisions resulting from conventional models have similar characteristics by which they can be identified. They have major propositions on resources of any organization or business entity. In this case, strategic decisions define how to possess new resources, reallocate or organize other resources (Johnson& Scholes, 2001). They are concerned with the extent to which existing resources are suited to organization’s environmental opportunities as well as the extent to which resources can be controlled or obtained to develop organization’s future strategies. Strategic decisions help to harmonize resource capability with organizations opportunities and threats to maximize benefits in long-term (Johnson& Scholes, 2001). Strategic decisions deal with a wide range of organizational activities without being specific on some critical issues. They serve to match organizational activities with organization’s operating environment. Since modern organizations operate under changing environment, strategic decisions enable it to adapt to possible changes although not always (Johnson& Scholes, 2001). They are complex compared to other decisions. Strategic decisions are high level decisions that can make organization remain successful for a foreseeable future. Most of strategic decisions deal with the future of organizations and therefore they face uncertainty. They also involve a lot of risks. Strategic decisions define long-term direction of an organization and they try to secure more advantages than competitors (Johnson& Scholes, 2001). Strategic management aims at improving business operation, image and supply. Achieving these objectives sometimes raises various dilemmas. Most of dilemmas in strategic decision making comes from Suppliers, Distributors, sales agents and contractors (Sonenshein, 2009). Occurrence of dilemma in strategic activities is influenced by setting very high expectations that are hard to achieve while operating ethically. Suppliers sometimes need more workers which are not always available. This tempts them to employ under-age workers (Sonenshein, 2009). Others face dilemma of whether to produce in sweatshops or not. When pressed with need for increased labor while faced by financial constraints, some organization may be tempted to increase working hours for their employees under the same pay. Maintain recommended safety, health and environmental standards are very expensive hence may tempt some organizations to neglect them (Sonenshein, 2009). Strategic decisions to make brand popular may make advertisers to provide misleading information. Sales agents sometimes charge more prices to meet their set goals. These dilemmas can be solved if an organization always set goals which are achievable through ethical activities (Sonenshein, 2009). Organization may set standards within so as to act as pressure to operate ethically. Production of genuine goods and services leads to positive customers support. This makes strategic decision makers to prioritize customer support and consequently they will generate higher revenues (Sonenshein, 2009). Employees need to be empowered so as to realize their rights. This keeps organizations on their toes to work ethically. Organizations should also partner with ethical investors so as to avoid ethical dilemmas caused by unethical investors. Ethical businesses are discouraged by high costs of operations, high overheads and danger of creating false expectation (Sonenshein, 2009). Strategic decision makers can help organizations to avoid operating unethically by avoiding these sources of discouragements. Conventional models have not proved to look into the future in the constructive manner. Many managers and scholars led by Rumelt have consequently doubted it because they perceive it to be fully at odds with its reality (Ngeleza, 2012). They have concluded in unison that better strategic decisions than those made using conventional models are needed when issues and opportunities arise. This should not rely on planning timetable because issues and opportunities are independent of it. Conventional models and approaches to strategic planning create expectations that managers will come up with an inspiring vision and boldly stick to it for a long term. According to Rumelt, this is not the best approach because success of any business entity depends on its adaptability and general sense of direction (Ngeleza, 2012). Traditional strategic approaches have led to poor collapsing of many business entities due to their rigidity and in ability to cope with the changing business environment. Growth of market scale is very fast and changes in business operating environment has been very rapid. This shows that long-term planning is not required anymore because changes in the environment occur in short-term. Failure to cope with this changing operating environment will make companies unable to meet their primary goals. Rumelt’s views point that long and medium-term strategic planning emphasized by conventional models are not reliable based on the modern economic trends. Operation environment for any business entity is competitive, complex and full of uncertainty which requires entities’ planning systems to be more sensitive. Richard Rumelt in his book Good Strategy Bad Strategy disapproves the use of fill-in-the-blanks template system of planning (Ngeleza, 2012). This approach state vision, mission, strategic goals and key values. There is also a list of strategies to be adopted for every goal. He argues that this process is more theoretical and less practical making it unable to accomplish goals of any organization. Most of goals in conventional models and approaches are wishful thoughts and cannot be achievable. Most people believe Rumelt’s critique is very harsh but clear examination of operations among the modern corporation leaps into his support. Many institutions put in place numerous goals which are indicator that there is no specific priority (Ngeleza, 2012). They may achieve better results if they can prioritize their goals over a short duration of time. This will enhance their accomplishment before enormous change in the environment occurs. Prioritizing goals makes sure that available resources are mobilized efficiently. Rumelt does not recognize strategies made from conventional models as real strategies. A good strategy according to him should focus energy and resources on one of vey few goals in order to achieve the best outcome (Ngeleza, 2012). This indicates existence of priorities in good strategic approach which concentrates on offering rigorous problem solving mechanism and makes the most appropriate decisions on critical issues affecting the entire organization. It also demands consideration of all available alternatives before appropriate decision is made. Real strategic approach to management issues should clearly define what an organization should or should not do with precision. Rumelt’s approach to strategic management explains that good strategy has to be clear and understanding in order to make a decisive policy response and devise a clear action towards any critical issue, challenge or opportunity (Ngeleza, 2012). This indicates redirection of resources, energy toward specific areas and to serve specific purpose within an organization. The time for taking any particular action is not defined because changes within operation environment are not defined. Conventional models and approaches leave critical issues arising within the business environment to compete with other less important issues affecting the organization. This makes them unable to get the attention they deserve and they can consequently lead to organization’s failure. Rumelt’s strategic approach requires putting decision making process at the heart of strategy developing process without prioritizing goals (Ngeleza, 2012). This brings together effective diagnosis, guiding policy, and coherent action. This involves diagnosis of business situation and identification of facts which should be subjected to more research, consultation and analysis. Diagnosis helps to reduce complexity of organizational situation by breaking it into various elements which are easier to handle. It also clarifies areas that need urgent actions to avoid organizations down fall. Before choosing actions, alternative are debated and evaluated for the best choice to be made. Conventional models are not complete strategies because they lack coherent actions based on effective guiding policies. They also lack specifications in all their decisions which make them vulnerable to challenges arising from rapid changing environment (Ngeleza, 2012). Resources and efforts are divided in the awkward way that makes them unable to reap the highest returns possible. Rumelt disapproves conventional models of strategic management in totality without anything to spare (Ngeleza, 2012). This, according to him, is the only way organizations can succeed against the waves of the changing global situations. The issue-based strategic approach makes organizations respond very fast to unexpected changes in the operating environment. It also ensures that organizations take evidence based and systematic approach to make crucial decisions which are always effective. Rumelt harshly criticizes conventional models of strategic management because they do not embark on understanding operation environment. They also do not identify specific issues affecting organizations. This makes than unable to focus resources, efforts and time to most demanding areas of the organization. Under critical examination of conventional models, Rumelts concludes that they have not achieved organizational goals because they are uncertain and addresses issues generally instead of specifying actions. References Harney, B. 2011. Book Review and Commentary: Good Strategy/Bad Strategy: The Difference and Why It Matters. Richard Rumelt, London: Profile Books. Retrieved on 2/8/2014 from: http://doras.dcu.ie/17598/1/IJM.pdf Johnson, G. and Scholes, K. 2001. Exploring Corporate Strategy, Fifth Edition, Prentice Hall, New York Ngeleza, B. 2012. A critique of prescriptive views in strategic management. Retrieved on 2/8/2014 from: http://www.researchgate.net/profile/Bangani_Ngeleza/publication /233985620_A_CRITIQUE_OF_PRESCRIPTIVE_VIEWS_IN_STRATEGIC_MANAG EMENT/links/0912f50dc200e24de9000000 Rumelt, R. 2011. Good strategy bad strategy: The difference and why it matters. New York, NY: Crown Business. Sonenshein, S. 2009. Emergence of Ethical Issues During Strategic Change Implementation Organization Science 20 (1), pp. 223–239. Jesse H. Jones Graduate School of Management, Rice University, Houston, Texas Read More