I read the book Good Strategy/Bad Strategy when it first came out years ago and it is a book I plan to revisit more frequently as I advance in my product career. If you only had time to read one business book this year, I highly recommend it.
Recently, a product lead who started at a new company was tasked with setting up strategy for her product. She had no idea where to begin. I gave some quick guidelines on my approach so she could get started. After I gave her some guidance, I began to revisit and evaluate my current approach to setting product strategy.
I re-read (or rather skimmed) the book Good Strategy/Bad Strategy to remind myself what constitutes a good or bad strategy. I was quite surprised at how quickly I failed to apply some of the learnings from the book. Like most product leaders and business executives, I had fallen into a trap and couldn’t remember how to distinguish bad strategy from good strategy.
How to Identify Bad Strategy
Let’s start with the bad before defining the good. Richard Rumelt describes four major hallmarks of a bad strategy:
- Fluff: Using gibberish and masking that as strategic concepts. It relies on utilizing superfluous verbiage and inflated words to create the illusion of high-level thinking.
- Failure to face the challenge: A bad strategy fails to identify the challenge that needs to be overcome. If the challenge is not defined, it is difficult or impossible to assess the quality of the strategy.
- Mistaking goals for strategy: Many bad strategies are just statements of desire rather than plans for overcoming obstacles.
- Bad strategic objectives: A strategic objective is often set by a company executive as a means to an end. Strategic objectives are “bad” when they fail to address critical issues or when they are impracticable.
Besides the aforementioned hallmarks, Rumelt discusses other forms of bad strategy that I am sure many of us working at various companies can relate to.
Bad strategy “ignores the power of choice and focus, trying instead to accommodate a multitude of conflicting demands and interests.” Bad strategy results when leaders are unable to make choices amongst competing priorities, values, and parties. Essentially, when there is universal buy-in to the strategy, that is a red flag. A leader setting a strategy has to be willing to make a difficult choice as to the guiding policies and actions necessary to overcome challenges. Criticism and opposition to a strategy is healthy and should be encouraged.
Essential Components of a Good Strategy
“The purpose of good strategy is to offer a potentially achievable way of surmounting a key challenge.”
Richard Rumelt, Author of Good Strategy/Bad Strategy
According to Professor Richard Rumelt, author of Good Strategy/Bad Strategy, a good strategy consists of three elements:
- Diagnosis: You have to know where you are first to figure out where you are going. Diagnosis is about assessing the current state of affairs, challenges, obstacles, and impact. It is a judgement about the meaning of the facts. With diagnosis, you are asking “What’s going on here?” and “Why should we care?”. The diagnosis for the situation should distill the complicated reality of the problem into a simple story.
- Guiding Policy: Based on learnings from diagnosis, you want to set guardrails for how to address those challenges. Good guiding policies are not goals or visions of desirable end states. Once you’ve figured out what is going on and why to care, you need to figure out where you want to be. The guiding policy provides directions and constraints but doesn’t define steps or action that need to be taken. This comes in the next stage.
- Coherent Actions: Use the output from the diagnosis and guiding policy stages to determine a set of coherent actions that need to be carried out. The key word here is coherent i.e all efforts pertaining to resources, processes, and policies should be coordinated to support one another. They shouldn’t be independent or compete with one another. A good guiding policy prevents your actions from being incoherent and inconsistent.
Strategy is the craft of figuring out which purposes are both worth pursuing and capable of being accomplished
Richard Rumelt, Author of Good Strategy/Bad Strategy
The Problem with Template-style Strategy
As product managers, we love frameworks and templates. Pretty much all the product interviews expect you to use a framework and if you don’t, you more than likely won’t get the job. (<rant>: This is a topic for another day but many product interviews are pretentious. </rant>)
When it comes to defining product strategy, we are quick to rely on a template like a crutch. As perfectly described in the book, these templates typically go something like this:
- The Vision: Fill in your unique vision of what the school/business/nation will be like in the future. Typically starts with “the leading” or “the best”.
- The Mission: Fill in a high-sounding politically correct statement of the purpose of the school/business/nation.
- The Values: Fill in a statement describing the company’s values. Make sure they are noncontroversial.
- The Strategies: Fill in some aspirations/goals but call them strategies.
More often than not, this leads to mindless completions of the forms without critical evaluation. Rumelt says that this template-style strategy skips over the hard work of painstakingly analyzing the key challenges and opportunities.
Back to the product lead who needed direction on setting product strategy for her product area, I gave her this template that I typically use for my clients when I first start a consulting project.
While I still think the template is not entirely useless, I do agree that it tends to lead to filling out the form hastily without proper diagnoses of the challenges and opportunities.
So then… How do I set Product Strategy?
If I were asked to set product strategy or determined a new strategy was need, rather than hastily fill out a template, here’s what I would do going forward:
- Assess your company’s strategy: Perhaps a change in company strategy warranted a new product strategy or your company strategy remained the same. Hopefully, the company’s strategy is not a surprise to you. Regardless, assess your company strategy to ensure that it contains the kernels of a good strategy. Understand the diagnosis that was done, Determine the guiding policy and the coherent actions to be taken. If your company’s strategy contains the hallmarks of a bad one, use your influence to garner a better one. If you are unable to influence a better strategy, ask yourself whether you want to work at such a company. A bad strategy lead to chaos and I’ve been through enough unpleasant experiences to know how maddening this is.
- Your company’s overall strategy determines your product strategy: I believe your product strategy should come from the coherent actions from your company’s broader strategy. Product strategy connects the company strategy to the product roadmap. It answers the question “How will the product drive the company strategy?”
- Product Strategy Results from Coherent Actions: The coherent actions from your company strategy should funnel into your product strategy. For instance, if it was diagnosed that one of the product lines at your company was underperforming and has lost significant market share to competitors, some coherent actions might be to i) shut down the underperforming product and reassign employees, where possible, to other parts of the business. ii) focus all product development efforts on serving other product lines and customer segments where there is a competitive advantage. While you can’t do much about i), your product strategy can be derived from ii) by outlining the steps to develop products that delight other customer segments to yield business outcomes.
- Develop Product Roadmap: Product roadmap is the plan to implement your product strategy over a reasonable period of time. A reasonable period of time to execute on a product roadmap can be anywhere from 6 months to 2 years depending on the product.
What about the mission and vision?
Those are still important but are more of the supporting cast rather than the lead factors. The strategy should reinforce your company’s vision and mission. If your company’s new good strategy no longer supports the company’s mission, then the mission needs to change.
At the end of the day, Strategy is Hypothesis
A strategy can’t be proven to be right until the outcomes of its execution are clear. As such, it behooves product leaders to treat product strategy like a hypothesis. It is an educated judgement. Business leaders should listen for signals as to whether the strategy is or isn’t working and make adjustments accordingly. Product leaders should be strategists, ruthlessly iterating on solutions until identified challenges are overcome.
Key Takeaway
Good strategy:
- identifies a major obstacle or challenge
- determines necessary actions to overcome such a challenge
- seems simple and obvious in hindsight
- requires coherence i.e. all actions taken must support each other. Everything must be connected
- means saying “No” and making difficult choices when it comes to people, resources, orgs amongst others
- applies inversion thinking
- addresses “what” you are trying to do, “why” and “how” you are doing it
