Coherent Action

Strategy is about action, about doing something.

Many people call the guiding policy "the strategy" and stop there.  This is a mistake.  Strategy is about action, about doing something.  The kernel of a strategy must contain action.  It does not need to point to all the actions that will be taken as events unfold, but there must be enough clarity about action to bring concepts down to earth. To have punch, actions should coordinate and build upon one another, focusing organizational energy.

ACTION POINT: Have a bias toward action.

The Guiding Policy V

...the policy itself also created advantage by resolving the uncertainty about what to do, about how to compete, and about how to organize.

A guiding policy creates advantage by anticipating the actions and reactions of others, by reducing the complexity and ambiguity in the situation, by exploiting the leverage inherent in concentrating effort on a pivotal or decisive aspect of the situation, and by creating policies and actions that are coherent, each building on the other rather than canceling one another out.

For example, Gerstner's "provide customer solutions" policy certainly counted on the advantages implicit in IBM's world class technological depth and expertise in almost all areas of data processing.  But the policy itself also created advantage by resolving the uncertainty about what to do, about how to compete, and about how to organize.  It also began the process of coordinating and concentrating IBM's vast resources on a specific set of challenges.

ACTION POINT: Reduce complexity and ambiguity and use anticipation to create advantage. 

The Guiding Policy IV

the heart of the matter in strategy is usually advantage. 

A good guiding policy tackles the obstacles identified in the diagnosis by creating or drawing upon sources of advantage.  Indeed, the heart of the matter in strategy is usually advantage.  Just as a lever uses mechanical advantage to multiply force, strategic advantage multiplies the effectiveness of resources and/or actions.  Importantly, not all advantage is competitive.  In nonprofit and public policy situations, good strategy creates advantage by magnifying the effects of resources and actions.

In most modern treatments of competitive strategy, it is now common to launch immediately into detailed descriptions of specific sources of competitive advantage.  Having lower costs, a better brand, a faster product-development cycle, more experience, more information about customers, and so on, can all be sources of advantage.  This is all true, but it is important to take a broader perspective.  A good guiding policy itself can be a source of advantage.

ACTION POINT: Take a broad perspective and understand your advantage when developing strategy.

The Guiding Policy III

 Good strategy is not just "what" you are trying to do. 

Many people use the term "strategy" for what we are calling the "guiding policy."  Defining a strategy as just a broad guiding policy is a mistake.  Without a diagnosis, one cannot evaluate alternative guiding policies.

Without working through to at least the first round of action one cannot be sure that the guiding policy can be implemented.  Good strategy is not just "what" you are trying to do.  It is also "why" and "how" you are doing it.

ACTION POINT: Understand the "why" and "how" of what you are trying to accomplish.

The Guiding Policy II

they define a method  of grappling with the situation and ruling out a vast array of possible actions.

Good guiding policies are not goals or visions or images of desirable end states.  Rather, they define a method  of grappling with the situation and ruling out a vast array of possible actions.  For example, Well Fargo's corporate vision is this: "We want to satisfy all of our customers' financial needs, help them succeed financially, be the premier provider of financial services in every one of our markets, and be known as one of America's great companies."

This "vision" communicates an ambition, but it is not a strategy or a guiding policy because there is no information about how this ambition will be accomplished.  Wells Fargo chairman emeritus and former CEO Richard Kovacevich knew this an distinguished between this vision and his company's guiding policy of using network effects of cross-selling.  That is, Kovacevich believed that the more different financial products Wells Fargo could sell to a customer, the more the company would know about that customer and about its whole network of customers.  That information would, in turn, help it create and sell financial products.  This guiding policy, in contrast to Wells Fargo's vision, calls out a way of competing--a way of trying to use the company's large scale to advantage.

ACTION POINT: Understand the distinction between guiding policy and vision.