business strategy book by Richard Rumelt, on need to focus on key addressable strategic challenge (cf bottleneck)


  • Part V is the meat here
  • but, despite the various "case study" stories (see esp Ch 4 and 8), none of them are deep enough to help improve the quality of your thinking/process. I fear it will usually end up with note-and-vote mediocrity.
  • at the very least, a diagram of effects showing the interaction of the multiple challenges seems like a crucial tool/step

Excerpts (partial?)

Introduction: The Roof of the Dog’s Ass

Introduction The Roof of the Dog’s Ass

rock outcroppings that attract the best boulder climbers from all over the world.

On my walks I would sometimes pass the boulder route known as Le Toit du Cul de Chien (The Roof of the Dog’s Ass).

Climbers call such boulders “problems” and describe the toughest part as “the crux.”

The first climber said that he chooses the climb having the greatest expected reward and whose crux he believes he can solve. In a flash of insight, I realize this describes the approaches of many of the more effective people I have known and observed

The “art of strategy” is not decision making—that discipline assumes that you have been handed a list of possible actions from among which to choose

To be a strategist you will need to embrace the full complex and confusing force of the challenges and opportunities you face. To be a strategist you will have to develop a sense for the crux of the problem

I EXPLORE FOUR themes in the pages that follow

First, the best way to deal with strategic issues is by squarely facing the challenge

In that diagnosis, find the crux.

Second, understand the sources of power and leverage that are relevant to your situation

Third, avoid the bright, shiny distractions that abound

Fourth, there are multiple pitfalls when executives work in a group, or workshop, to formulate strategy. By starting with the challenge, and avoiding a too rapid convergence on action, a group can define the crux and design coherent actions to overcome it.

Part I: Challenge-Based Strategy and the Crux

PART I Challenge-Based Strategy and the Crux

1. Carolyn’s Dilemma: How Do I Create a Strategy?

1 Carolyn’s Dilemma How Do I Create a Strategy?

My 10:00 a.m. appointment is with a student in the UCLA Anderson Fully-Employed MBA program. About thirty-five, she has responsibility for business planning at a health-products company

“We have a new CEO,” Carolyn begins, explaining that the chief executive officer has asked her to rethink her division’s business strategy

The only problem is that process doesn’t produce strategy—it produces plans. The dirty little secret of the strategy industry is that it doesn’t have any theory of strategy creation


In 2011 Netflix faced a significant upset. It had been paying $30 million per year to Starz for access to its shows. At contract renewal, Starz asked for an increase to $300 million per year. Netflix had to raise subscription fees by 60 percent, and its stock price took a nosedive

The Snare of Long-Term Goals

THE IDEA THAT a person or organization has one or two primary driving goals is simply not true. It is a fantasy invented by economists and certain management thinkers. The reality is that most people and organizations have “a bundle of ambitions.”

By confronting the situation actually being faced, a talented leader creates a strategy to further some elements out of the whole bundle of ambitions

Diagnosing the Challenges

Gnarly Challenges

I think of strategic challenges as arising in three basic forms: choice, engineering design, and gnarly. Most that I see are gnarly, perhaps because companies don’t ask for help with easier ones.

A choice challenge

An engineering-design challenge

A more difficult situation is the gnarly-design challenge. Here there are no given alternatives, and there are no good engineering-type models to test your designs against. There is no guarantee of a solution of any kind. There are not clear causal connections between actions and outcomes.

A Diagnosis of Netflix

the overall challenge seems to have these elements

In order to show the value of the crux, of getting to the heart of the matter of the strategic challenge, let me quickly describe some of the alternative policies and actions Netflix could take that easily come to mind

Netflix’s overall challenge is that it can no longer count on contracting for existing good TV and studio films at reasonable prices

In competition it is useful to look for asymmetries—ways in which competitors differ

In the case of Netflix, my attention is drawn to its stronger position in the international arena, an interesting imbalance

In my view, the crux of Netflix’s situation is the opportunity to use its current international advantage to create sufficient material to feed both its domestic and its growing international markets.

For Netflix, the crux analysis leads one to seek a mechanism for stimulating the international creation of good content while, at the same time, making Netflix the favored distribution channel

THIS PROCESS OF diagnosing the challenge and then creating a response is the best theory we have for strategy creation

2. Untangling the Challenge: Finding and Using the Crux

2 Untangling the Challenge Finding and Using the Crux

Skilled strategists are happy to look at analysis and data, but they are also able to identify and focus on a critical challenge or opportunity and then create a way to address it. They had a “nose” for what was vital and an ability to concentrate energy on such issues

The result is a design rather than a choice. It is a creation embodying purpose. I call it a “creation” because it is nonobvious to most others

searching for the central paradox, asking themselves what it is that makes the problem so hard to solve


You cannot deduce a strategy from some set of always relevant preset principles. An example of a group of executives making this mistake was ‘Paradigm Corp.’

The top management team had turned to Michael Porter’s book Competitive Advantage

Carl Lang’s strategy team had chosen the broad-differentiation strategy for Paradigm because the company had a history of competing based on having the broadest variety of specialized shapes and sizes

Carl’s team had chosen “new-product time to market” because the other operational “strategies” seemed impractical to them

Carl’s strategy had nothing to do with the challenges Paradigm faced.

Paradigm’s basic problems were that it had no effective control over manufacturing and that its largest customers were slowly growing firms.


Herbert Simon was fascinated by the difference between deduction and design. He explained that normal science is about understanding the natural world. “Design,” he argued, “on the other hand, is concerned with how things ought to be” in order to carry out human purposes

My own life experience supports Simon’s comment about the replacement of design with deduction in professional schools

Much of design is a combination of imagination and knowing about many other designs, copying some elements of each


gnarly problems have these characteristics

There may be no clear definition of the problem itself (cf wicked)

Most of the time you do not have a single goal but a bundle of ambitions

Alternatives may not be given but must be searched for or imagined.

The connections between potential actions and actual outcomes are unclear. Opinions will differ sharply

So, we work to isolate the crux of the overall mix of challenges and opportunities

in 1999 Marvel had just come out of bankruptcy with a comic-book and toy business and with a huge debt burden. The company had an avid following among comic-book readers, but no general audience. Much of the debt was paid off by licensing out characters just for toys and games. The next opportunity lay in making Marvel characters into feature films

Marvel president Kevin Feige identified the crux of the problem as making the rest of the Marvel characters worth something. To attack that crux, he devised a plan to create value for a large group of Marvel characters by having them all inhabit the same fictional “universe.”

Locating the crux is the first maneuver in dealing with gnarly challenges. Discovering, or articulating, that solvable problem within the complexity of a gnarly challenge is not easy

use the practical tools of collecting, clustering, and filtering to help untangle gnarly situations

Collecting—making a list of problems, issues, and opportunities—ensures that you are looking at all the issues, not just the first to come to mind.

Clustering places problems and opportunities into groups

Often, these “challenges” are each really more than one challenge, so we break them apart. As things get broken down, we normally wind up with about twenty challenges and opportunities. We then try to cluster them into somehow related groups.

The purpose is not to establish scientifically solid sets but to explore the ways in which challenges differ

Following collecting and clustering, you realize that there are too many issues

They need to be filtered

The first step is sequencing: bringing to the forefront those that seem to be immediate, while deferring attention on many where action can be deferred

Once these challenges have been winnowed down, the next step in filtering is rating their importance and addressability. Importance is the degree to which the challenge either threatens the core values or existence of the enterprise or represents a major opportunity.

The judgment about addressability is the more contentious. Some challenges are clearly addressable. Some are very important yet fairly hard to address—that is where the crux will usually lie.

A critical challenge that does not seem easily addressable deserves great attention. Can it be divided into subproblems?

What is the single keystone constraint, which if broken, would make it addressable (the crux of the crux !) ?

The crux of a challenge is a point of tension where a constraint or conflict between resources and issues, or among policies, seems to chafe

When Amazon first opened its Marketplace service, it allowed outside firms to sell their products through the Amazon website. The conundrum was that some of these firms might gain scale and scope to challenge Amazon

Like so many insights, the solution seems simple in retrospect. Amazon began to greatly improve its logistics system and offered the Marketplace sellers use of its warehouse and shipping services

Another case of seeing the crux was Apple management realizing that Steve Jobs’s devotion to doing everything in-house was in stark conflict with the concept of an app store

You will have a much harder time dealing with a gnarly challenge if you have not distilled it down to a crux


Formulating a hypothesis about what will work follows from filtering the set of issues and breaking gnarly challenges into components. The design of action alternatives is the second maneuver in dealing with gnarly challenges.

Elon Musk, as we noted earlier, saw the crux of the challenge of cheaper cost to orbit as reusability.

Here are some more examples of audacious leaps to action based on a recognition of a crux:

Deng Xiaoping saw that China’s crux economic problem was dulled incentives to be efficient

Deng’s most important new bold action was to allow local communist collectives selling products and services to keep most of their profit

In Singapore the 1960 gnarly challenge was horrendous unemployment

Lee Kuan Yew believed that the crux of the challenge was that Singapore was a terrible place to do business

His actions were intensely coherent and, by developed Western standards, draconian. There would be no homeless squatters, no labor unions, no unrest

In 2003 Jason Fried was struggling to use email to handle the growing collection of contractors, consultants, and designers connected to his Web-design company’s expanding client base

Fried’s team boldly decided to invest in creating their own tool, now called Basecamp

Michael Eisner was named chairman and CEO in 1984, backed by the oil-rich Bass group. He began to see the crux of the challenge at Disney in its much-admired classic animated films such as Cinderella. These almost defined Disney to each generation when they were rereleased, but they could not be replicated

One key was breaking Disney’s culture of handcrafting its films by investing in computer-based animation. The other was expanding the company’s profit and growth beyond animated films to also center on creating new animated characters.


The flash of insight is the experience of creation, and we share it when we recognize a good strategy

People who study or write about insight usually imply that it is instantly gratifying

Insight is not always “aha”; it may instead be “uh-oh.”

Insight does not automatically awaken at our call. It cannot be guaranteed, but it can be aided. If you have not grasped the thorns of the problem, you cannot expect insight into a solution

I start my own search for insight in the yet-to-be-questioned assumptions about how things work, in the asymmetries among interests and resources, and in the habits and inertia of others.

John Dewey’s original argument remains sound. He wrote that the most reliable source of new design ideas is “reflection” on a “felt difficulty.”

The key source of design insight is a clearheaded diagnosis of the structure of the challenge, especially its crux, by employing a tool kit of persistence, analogy, point of view, making explicit assumptions, asking why, and recognizing your unconscious constraints

When you get lost, there are rising feelings of helplessness and anxiety. It is frustrating not knowing which way to go, with the temptation to grasp onto the first hint of a way

The strong temptation is to adopt the first solution offered

The most direct source of insights are analogies

Direct examples from direct competitors are the clearest, but also risk a head-on competitive shoot-out

many of the most useful analogies are taken from other industries, other countries, or other times. Or they can come from other situations entirely

Marc Benioff started as a direct analogy to Amazon. Howard Schultz started Starbucks after observing a coffee shop in Milan, Italy. Bill Gross started GoTo as an analogy to the yellow pages

We may also seek analogies that are closer to metaphor. If I draw a picture of this challenge, is it a spiral or a box? As Pepsi are we a grazing animal or a predator or a scavenger? In the United States, are we Rome in 50 BC, rising to world dominance, or Rome in AD 400, with barbarians using the empire’s own roads to invade?

FOCUSING IN ON the problem—looking only at a part, but in more explicit detail—can make parts of it clearer and easier to deal with. If you have a problem with the “customer experience,” looking just at the returns process, for example, may stimulate insights that can be used more broadly

Focusing out is the converse, where one sees the challenge as part of a larger landscape

MAKING ASSUMPTIONS EXPLICIT can sometimes indicate how a point of view can be usefully changed

For example, a large US automaker assumed that, by standardizing its parts-shipping containers, it achieved economies of scale and reduced the costs of their acquisition. This was true, but the additional, unstated, assumption that no other costs were imposed by this policy turned out to be false. Moving many parts in too large containers made for more damaged parts and costly rework

Asking “why” about the assumptions or about the way things are done is a way to break the existing frame

A MAJOR IMPEDIMENT to insight is unconscious constraint, an unrecognized assumption or belief about the world, or about the problem situation


I. M. Pei’s design for a new entrance to the Louvre is a wonderful example of someone finding the crux of a problem and then having insight into a solution

Pei quickly concluded that the great empty courtyard had to be the center of the renewal. At that time, it was a dusty parking lot. The courtyard would be dug up, and new offices and storerooms would be built under it. But what about an entrance? Pei didn’t like the idea of an empty courtyard but, at the same time, didn’t want to erect a structure that would block views of the classic buildings surrounding it.

Pei’s design insight was a transparent glass structure in the center of the courtyard

There was great furor over this design when it was announced, and there are people today who still hate it

A SECOND FASCINATING example of identifying a crux and then a solution are the stories of GoTo and AdWords

Gross’s insight into the crux came from looking at the telephone yellow pages. Almost every company had a listing, with those paying more having larger ads. Could he build a search engine where companies paid for their positions in the results?

Yet GoTo worked well only as a form of advertising. If you were looking for information on how to fix a car, you would have to wade through pages of sponsored links

there was further innovation on the way

Google... invented a clever algorithm (PageRank) that became best in the industry.

they also struggled with the how-to-make-money problem. They saw Gross’s GoTo but were dead set against ruining their PageRank search results with paid-for links

Sometime in early 1999, Sal Kamangar, Google’s ninth employee, managed a team that defined and built Google’s AdWords system. The AdWords design idea was to put text advertisements on the side of the search-results page. Instead of contaminating the search-results list, this design kept results and paid ads separate

3. Strategy Is a Journey

3 Strategy Is a Journey

There was a time when I was a mountain climber, spending all my summers in the Tetons or the Wind River Mountains or the Alps. When you try a new route on a mountain, you do not have a clear map of exactly how you will get to the top. Your plan is normally more like “Let’s go up that gully and exit on the ledge to the left. Then we will see if that crack above goes.”

Real-life business strategy is a bit like that route up a mountain. You may have an ambition to get to the top of a particular peak, but the route requires overcoming a series of difficulties

Some challenges are long-term and broad in scope. Others are more immediate blockages, or sudden opportunities, encountered on the way forward

I emphasize this because there is a widespread misconception that a business strategy is some sort of long-range sketch of a desired destination. I encourage you to think of strategy as a journey through, over, and around a sequence of challenges.

An organization doesn’t face a single “battle” or even a single “war.” If it is to persist over time, it will face an ongoing series of challenges, each of which should be dealt with


While at Oracle, Benioff became familiar with Oracle’s OASIS system for customer- relationship management.

CRM software traditionally ran on a company’s computers, managed by the internal IT (information technology) department. In the late 1990s the leading suppliers were Oracle (OASIS system), Siebel, and SAP.

Marc Benioff recalled how in 1996 he dreamed how to build a cloud-based CRM: “I came up with the idea about how to build in my sleep. Literally. I had a weird dream

He had been thinking about CRM systems for years and was deeply involved in looking for ways to reduce the large start-up costs customers had to bear

Benioff left Oracle in 1999 with the blessing of CEO Larry Ellison plus some $2 million in seed capital

The initial critical challenge he faced was attracting very good developers and more capital to feed them

Benioff’s approach was to build publicity

The first important product was SFA (Sales Force Automation). The next big challenge, not surprisingly, was getting companies to actually buy the product. The crux of this challenge was that such decisions were largely made by the IT department

The initial attack was to bypass corporate purchasing and have individual users directly purchase access for a low charge. That did not go well. So Benioff changed the policy to allow up to five users at a company to sign up for free. There would be a $50 per month fee for each user over five

The initial hypothesis was that the free sign-ups would generate inside influencers who would lead large companies to sign up. But sales analysis showed that smaller firms were actually the fastest-growing source of new customers. The company changed its policy to target small businesses

With the Internet crash in 2000, faced financial difficulties. Many of its small business customers disappeared.

An internal debate arose

Benioff chose to raise the rate for monthly customers and press his best customers for longer-term deals

As the technology began to mature, Benioff sought to add new solutions, some broad and some industry specific. This was a new competitive idea—taking advantage of the installed base to offer “apps” and, eventually, bundles of apps.

The key to making this work was AppExchange, which was essentially an app store for business software

as each challenge was met, the ambition shifted and escalated

It is common to say that strategy is about choice. The word choice implies a set of given alternatives from among which to choose

The approaches Benioff took were designs, not choices


He knew that Aer Lingus costs were bloated, as were sole competitor British Airways’, on that route. Ryan calculated that Ryanair could emulate the cost structure of American Airlines

The company’s original strategy didn’t work out. Good service and low prices were themselves inconsistent. And aiming at the London–Dublin route against two state-subsidized carriers was inconsistent with being a small start-up. British Airways could afford to lose money on one of its routes. That is exactly what happened.

During the company’s restructuring, CEO Michael O’Leary visited the United States to look closely at low-cost carrier Southwest Airlines. There he saw a cost structure much lower than American Airlines and a clever strategy of not competing head-on

With new capital, Ryanair resumed business with a bare-bones cost structure, flying Dublin to Luton rather than London’s Gatwick Airport

at Ryan, the paid ticket was for air travel for the person only. Baggage was extra, having your boarding pass reprinted was extra, food was extra

Ryanair’s cost of carrying most passengers was about equal to its fares. Its profit came from its fees

As it gained confidence, Ryanair began to expand to the European continent, again aiming its routes away from the major airports and carriers

Ryanair grew rapidly over the ensuing twenty-five years, becoming the largest budget carrier in Europe and carrying more international passengers than any other airline in the world

Today, Ryanair faces a new gnarly challenge brought on by COVID-19 and the delays in Boeing’s production schedule

O’Leary also took particular exception to the way several European governments were subsidizing the major carriers and ignoring the low-cost start-ups

This new set of gnarly challenges put the company’s low-cost structure at risk

4. Where You Can Win: The ASC

the essential idea of focusing where you can “win” is neither trivial nor always followed

People and organizations can spend enormous resources and effort on what, based on history, they think they “are good at,” or what others say they are good at, or doubling down on a losing position, instead of on what promises the greatest gain

Designing or choosing often means leaving aside multiple issues and desires and focusing, instead, on what will make the most difference


Diagnosis will always reveal multiple challenges. To focus, some challenges must be put aside or deferred

Choose the crux that strikes at critical issues and can be surmounted, a logic exemplified in Plan Dog.


Admiral Harold Stark, chief of naval operations, wrote a memo outlining the challenge: “If Britain wins decisively against Germany we could win everywhere

As a naval officer, he thought in terms of the two different hemispheres, or oceans. For him, the crux was that the United States could not really fight two world wars at once

he listed four strategic options, lettered A through D, summarized below:

President Roosevelt chose Admiral Stark’s option D, which became known by its letter as “Plan Dog.”

The two critical judgments behind Plan Dog were that the United States could not decisively prevail in both Europe and Asia at the same time and that defending Britain was more important than defending territories in the Pacific

Not everyone agreed. Many, like General Douglas MacArthur, saw America’s future with Asia, with Europe being the tired past


Stacy explained that she was facing a number of complex issues

One problem we face is new competition from an Israeli company with a sensor that combines pressure, vibration, and temperature readings, cutting the costs of having both

He wants to outsource our development work to contractors and brings this up at every meeting

Much of our product line requires encapsulation in quartz bulbs. We were experiencing quality and cost issues at our Ohio manufacturing facility, so three years ago the board decided to buy a small facility near Beijing and move quartz-bulb production there

After the move to a new building, production rates fell dramatically

Sales growth has been slow.

there is nothing new happening in nuclear power, jet engines, industrial furnaces, the chemical industry, or super-cold environments

the senior management team, more information was forthcoming

Stacy Diaz assembled a small team of herself and four other senior executives. This group worked to flesh out a diagnosis and examine alternative actions. Their summary diagnosis was that there was a saturated low-growth market for their sensor products; the company had a complacent internal culture, with marketing and sales adapted to the low-growth markets; and there was a lack of new technical ideas.

they knew the challenge of market saturation was the crux. It was important, but defining it that way made it seem unsolvable. The critical comment, one that pointed at the crux, was by the engineer who defended his idea about vehicle sensors by saying, “If our market is saturated, we have to find a market that isn’t.


When there are multiple values and desires, they together act to reduce the space of possible action as each creates new limits on action

Strategies are usually what I call “corner solutions.” The phrase comes from linear programming, where the solution to a problem is normally a set of actions defined by the intersection of various constraints—

When the constraints are so strong that no solution is possible, I call the strategy a “null set.” There is no solution without relaxing at least one of the constraints.

The standard human response to a null set is to behave myopically, giving obeisance to whichever value is most salient at the moment

When there are many conflicting desires, and conflicting theories about how they can be met, the consequences are indecision and myopic vacillation among various half measures

The crux in such cases is the strongest conflicting policies or values. To move out of the null, some constraints must be relaxed or removed. Some values held dear must be foregone

Competing ambitions and political constraints were also the issue at Microsoft in the years right after Apple’s iPhone appeared

needed to modernize its Windows-based mobile phone software. And, also facing the search-engine challenge from Google, it needed to break into the exploding Web-search marketplace. Instead of directly meeting these challenges, it put its best engineers on a complete redesign of Windows, trying to realize chairman Bill Gates’s dream of having a database-oriented file system

It is tempting to say that Microsoft would have done better had it concentrated on just one of these challenges

But, as many Microsoft employees have reported, there was a deeper challenge: a politicized internal culture combined with low skill at integrating newly acquired talent. Key creative talent abandoned the company


I call what passes the joint filters of critical importance and addressability an ASC (addressable strategic challenge).

The idea that some issues are more important than others is almost self-evident

But what is really meant by “important,” and how can one assess “importance”?

What is “important” depends on the situation and the interests of those asking the question.

An opportunity is important because it is large and risky and because it requires an adjustment in the company’s strategy.

the second test is addressability—the degree to which the challenge can be surmounted. Addressability depends on the skills and resources of the organization and the time span being considered

Mark remarked that “these are difficult judgments on two dimensions: there will be big differences in opinion. Whose should prevail ?” His was a deep question about how people should pool their opinions and information. The simple answer is that one purpose of hierarchy is to resolve such disagreements. The more complex answer is that intense discussion over why such judgments differ can lead to valuable insights.


stop thinking of “creating real differentiation” and “developing new capabilities” as being strategies. “They are,” I said, “more accurately described as being ambitions, intentions, or aspirations

You need to take each and break off a smaller ‘chunk’ that can be tackled and overcome, now.”

Paul was a very smart person. Yet, like many executives and political leaders, he had adopted the modern notion that “strategy” should describe a broad long-term path into the future. This certainly makes the job of writing down your strategy easier, but it dances around the hard part—distilling broad intent into actions that can be taken now.

The discipline of addressability does not pass over complex long-term challenges. It encourages breaking such challenges into smaller chunks, one of which can be tackled today


articles and a short summary on issues facing Intel

The purpose was to help develop skills at identifying challenges and evaluating their importance and addressability

After reading the materials, some in the group voiced the view that the company seemed to face an almost bewildering range of challenges. Others countered that most large companies face this range of issues but rarely recognize them all

A spirited discussion produced a list of eleven key challenges facing Intel.

After several hours of discussion, each of the five participants was asked to score the challenges on importance and their addressability

Each challenge was scored on a 1–10 scale, and the scores were averaged over the group members

The graph clearly showed the group’s view that the two addressable critical challenges were manufacturing (10nm) and culture

Not shown in the chart are the ranges of scores

The most significant spread was around the AI challenge. Some thought it subsidiary, and others thought it was the wave of the future, an opportunity outweighing the other troubles clamoring for attention.

To truly identify the crux at Intel, we would have to know more about its internal culture and about the sources of its recent difficulties in manufacturing

5. The Challenge of Growth

5 The Challenge of Growth

Part II: Diagnosis

PART II Diagnosis

8. What Is the Problem? Diagnosing Through Reframing and Analogy

8 What Is the Problem? Diagnosing Through Reframing and Analogy


A key step in diagnosis is testing, adjusting, and changing the frame, or point of view.


A common obstacle to a clearheaded diagnosis of the situation is that some managers believe that leadership means emphasizing the positive and hiding the negative

QuestKo’s past leaders had assembled the company from five acquisitions, and that era was held up as one of great accomplishment

But why was the CEO spending time on these apparently standard and innocuous issues? There was nothing really strategic about the plan

“What about all this is difficult?”

There was a sense of decline

A recent survey showed that the “customer experience” rating for QuestKo was poor—actually dead last compared to competitors.

The market was growing, so sales revenue kept inching up as it slowly gave up some market share.

the turning point came around the idea of a critical winnable challenge. Instead of looking at the difficulties as a morass, we began to zero in on which ones could be surmounted. Not at some distant horizon but fixed or dealt with in the near future—say, eighteen to thirty-six months. Given this reorientation, the group began to focus on customer satisfaction.

The customer happiness issue didn’t seem to have a single cause

The insight was to reorient the new computer system around customer satisfaction

This time, the strategy group created an action plan

Over two years the change in orientation not only built better software but also changed the behavior of frontline managers. The company’s customer experience evaluations rose to the best in its business. Market share and profits increased accordingly


Jobs returned to Apple in 1997 and saved it from bankruptcy

in the summer of 1998, I asked Jobs a question. I said, “Everything we know about the PC business says that Apple cannot really push beyond a small niche position. The network effects are just too strong to upset the Wintel standard. So, what are you trying to do in the longer term? What is the strategy?” In response, he just smiled and said, “I am going to wait for the next big thing.”

the next big things for Jobs were iTunes and the iPod, released in 2001

Having the iPod in hand, one development project at Apple was to couple it with a phone. Another was work on Jobs’s long-wished-for portable “book” computer. Jobs was more interested in the pad-like (tablet) device than in phones

when I saw the rubber band, inertial scrolling, and a few of the other things, I thought, ‘My God, we can build a phone out of this.’”2 With that, Apple switched its development focus from the pad to the phone

Steve Jobs’s diagnosis of the situation was that the technology was close to being capable of providing a phone that could also be a real portable Web-surfing device (and an iPod too). No market research. He simply “knew” that this was something people would want and pay for. The crux of the challenge was to create one now, while it was still hard, before technological progress made it easy.

The first stage of the rocket powering the new iPhone was how it put the Web in your pocket

The first iPhone included a few apps like Visual Voicemail, the Safari web browser, the iPod music and video player, and Maps (powered by Google)

When the Apple app store opened in 2008, it had five hundred apps. A year later, Apple’s app store had fifty thousand apps.

Also, in 2008, Google announced its “free” Android operating system

In the smartphone world the third stage of the rocket was mobile social media, something no one had seen before.


One of the most common tools of diagnosis is analogy

Analogy played a huge role in the success of Apple’s iPhone because a bad analogy drove key competitors in the wrong directions. When Apple introduced the iPhone in 2007, a number of industry experts predicted that it would not be a success

This conviction rested on making an analogy between the smartphone business and the older PC business.

But the analogy to the PC industry did not apply

PCs became clones because IBM made mistakes in design and in intellectual property protection

business demand in the phone market was already sated by BlackBerry. It was the consumer demand for Web-enabled smartphones that would explode. And Apple had not made serious blunders in design or the protection of intellectual property


The October 1973 Arab-Israeli War started with simultaneous surprise attacks by Egypt and Syria

in the late 1960s, spies finally got their hands on the Soviet Union’s war plans for invading Western Europe

The CIA was surprised by this plan for defeating NATO. They had long opined that the Soviet Union, like the United States, was mainly interested in deterring attacks, not in attacking

After a bit of serious war gaming, some US planners believed that the new weapons revealed in the Arab-Israeli War, together with the “double echelon,” would defeat NATO’s fallback defense. They came to the uncomfortable conclusion that the NATO war strategy for defending Europe was doomed to fail.

National planning is especially hard because every agency has reasons it needs more resources. And, military planning is especially hard. As one colonel told me in 2000

We have a reasonable handle on the evolution of weapon systems, but not on politics or even tactics. We have no idea where or when the president will ask us to go or what we will have to do.

As happens in some organizations, some managers below the very top ranks begin to work independently on solutions to the challenge.

General William DePuy, then commander of the new US Army Training and Doctrine Command (TRADOC), believed that the competitive gap could be closed with revised battle tactics and much-improved training

he diagnosed the crux of the challenge as being tactical—called “doctrine” in the military

At TRADOC, DePuy developed a concept called “Active Defense.”

The most important action taken to implement these new ideas was establishing the Fort Irwin National Training Center in the California desert. Fort Irwin became a “Top Gun” center for the hands-on training

Committing the Active Defense concept to training manuals invited a vigorous debate within the military that expanded from tactics to strategy. Many voices felt that the concept was insufficiently aggressive

Under the leadership of Lieutenant General Donn Starry, who had served with DePuy, a new doctrine was devised. First named “deep battle,” it reached its full expression in the 1986 edition of the field manual of operations (FM 100-5). Renamed “AirLand Battle,”

War gaming showed the new doctrine would work (with perhaps a 30 percent loss in NATO forces). Luckily, these scenarios never had to be put to the test.

9. Diagnose via Comparison and Frameworks

9 Diagnose via Comparison and Frameworks

Reaching further afield for comparisons can strain the analogy but can sometimes lend unexpected insight


In a reportorial coup, Brian Rosenthal, a New York Times reporter, published an article in 2017 titled “The Most Expensive Mile of Subway Track on Earth.” The project he studied was the East Side Access tunnel

Across the Atlantic Ocean, Paris is working on a project that brings the inefficiency of New York into stark relief. . . . while the Second Avenue Subway cost $2.5 billion a mile, the [Paris] Line 14 extension is on track to cost $450 million a mile

If you want to fix this, you have to know the contours of the problem. And, of course, you have to have enough executive power to do something about it.

The next time you hear a politician calling for massive “infrastructure spending,” remember Figure 12. Injecting more money into an inefficient system is just feeding the bloat. Fix it before you grow it.


Looking at existing data in new ways can reveal problems or opportunities

DelPiro,’ a Brazilian window manufacturer—

DelPiro’s surface issue was declining profit margins. The deeper problems were that management did not have a clear view of the differences in profitability across its product line.

Costs are tricky things. There is no such thing as “the” cost of making a casement window

To better understand the situation, we concentrated on understanding the costs of a batch

The results were eye-opening. The largest size windows had very high setup costs but were still much more profitable than management had thought. Seeing the high cost of setting up to make a batch of the larger windows, the company began to offer discounts for larger orders of the biggest windows. Moreover, the medium-size shutters were quite profitable. Given this new insight from the study, DelPiro began to push the marketing of these shutters


‘Courtney’ was the general manager of ‘SoPretty,’ a retail chain of thirty-eight stores that was a division of a larger corporation with activities in apparel, cosmetics, and accessori

One significant problem she faced in planning the chain’s expansion was choosing store sizes

It turned out that the number of competing women’s apparel shops within a one-kilometer radius was by far the most important determinant of PBT. Surprisingly, the poorest-performing SoPretty shops had only zero or one competitor nearby.

We divided the stores into three groups corresponding to low-, medium-, and high-traffic locations. Courtney’s analysts took as evidence that the larger shops were more profitable, but this original diagnosis that shop size was a key driver of profit was incorrect. Re-analysis of the company’s data showed that the amount of traffic was a key driver

within high-traffic areas, being larger hurt rather than helped

The MultiPlant Company

operated sixty-three production facilities around the world, each making a variety of consumer food products

senior management was united in their belief that costs were much too high in some of the plants

company had invested in an expensive SAP software

Bringing the price and cost data together, the result was surprising. There was no relationship between facility unit cost and gross margin per unit. The spread of profit rates among high-cost plants was just the same as for low-cost plants.

Gradually, an explanation emerged. The low-cost facilities tended to be in regions where retail prices were also lower. The high-profit facilities were located in areas with less competition from similar products


Despite its size and market share, Maersk’s profits were low compared to the enormous amount of capital invested in ships and offices. Looking at competitors, most also seemed to be in the same position

with too much capacity, vicious price cutting ensued.

The international airline industry had also faced profitless conditions. One step toward a solution was to have the United States and the EU agree to code-sharing alliances.

Working on the analogy to the airline industry, Maersk led an industry movement to form shipping alliances

By 2017 there were three large shipping alliances, with Maersk Line and Swiss-Italian MSC belonging to the biggest, “2M.”

not working. The container shippers were not breaking even.

The analogy between container shipping and the airlines was weak

old hub-and-spokes model

industry has moved to point-to-point traffic using medium-size single-aisle jets

In container shipping, by contrast, there remain sharp cost economies in ever-larger ships that constantly tempt companies into commissioning ever-larger vessels

In 2019, group CEO Soren Skou announced that Maersk’s way forward was to use global scale and digital technology to integrate shipping with land-based operations like freight forwarding

the new analogy was FedEx

My own view is that the crux of the shipping-cost issue is land transport.

Companies like Amazon have made strides in optimizing these systems. Can Maersk carve out a position by integrating sea-based transport with land systems? Perhaps


The case of Maersk fits nicely into one of the most popular tools for business analysis—Michael Porter’s “Five Forces” industry-analysis framework

But remember that the underlying model is about industry performance, not individual company performance

One issue with the framework is that most real industries contain firms with markedly different profit rates

10. Use Sharp Analytical Tools with Care

10 Use Sharp Analytical Tools with Care

The tools elaborated by top consulting firms are primarily focused on the diagnosis of competitive situations

In this chapter I will treat a few common frameworks or tools used in analysis or diagnosis. In each case I will provide a heads-up about what can go wrong.


It seems sensible, at first glance, to evaluate a proposed project or action by weighing its benefits against its costs.

The puzzling thing about this lovely theory is that only a few companies do it this way

in the real world, the largest risk in long-term investments is that the people proposing the investment are incompetent or lying.

The keystone of Project T had been a complex public test, enrolling hundreds of households in a trial rollout of the new technology. As I learned more and more of the details, I began to doubt

in the test market, the estimate of participants’ willingness to pay for the service was negative.

None of the ideas being deployed in Project T were proprietary, and most had actually come from outside firms. The financial projections were based on capturing most of the market and experiencing only price pressure from substitute products, not direct competitors.

As we sat there at ten in the evening, Bradley took a pair of scissors and cut the payback line out of the page. He worked with scissors and some transparent tape and pasted a revised payback curve back on the page. The chart now showed a payback in five years

“Professor Rumelt,” Bradley said, “you do not understand strategic planning. Strategic planning is a battle for corporate resources. It is a battle I intend to win.”

Despite Bradley’s resolve, Project T never went forward. The board decided that the project was too risky, and, as Bradley had worried, they wanted an even faster kick. The next year, the company sold off two divisions

Once you have to ask someone else how to allocate your resources, there is a potential problem

the best strategy work is rarely delegated but is done by the senior executive, or a small group of very senior executives, in discussion with highly trusted advisers. In this case, the company was so large that the very senior executives would not comprehend the various strategies and projects that vied for favor and funding

Although the board committee members were not knowledgeable about the technology involved, they were not stupid. They were aware of the existence of behavior like Bradley’s, and they knew that misrepresentations are most likely to be about the more distant future. They would, consequently, discount promises about more distant profits, forcing the company to behave myopically

This kind of situation is called an “agency” problem (Principal-Agent Problem), and a great deal of (mostly wasted) intellectual energy has been expended in trying to figure out how to produce good decisions in such messy situations


One method to cope with Bradley-type executives has been to transcend technical analysis by changing the language and rules of the game. An example of this was the development of the BCG growth-share matrix

The BCG matrix was largely the brainchild of BCG consultant Alan Zakon and arose out of a consulting project with Mead Corporation

In the mid-1980s I had a chance to talk with William Wommack, who had initiated the project with BCG. He was just stepping down from the board of Mead Corporation.

the company had used a very sophisticated capital budgeting system

“But,” he complained, “these businesses never made any money! We just kept pouring in capital.” Wommack indicated that he wanted a way to shift investment to newer, less capital-hungry, growing businesses. So they changed the language. The forest-based business “became a cash source whose role was to generate cash. Period.” The cash would be invested elsewhere.2

Jack Welch used the same method when he became CEO of General Electric in 1980. Looking across GE’s more than four hundred business units, he announced that each business should be “No. 1 or No. 2 in your industry.” Otherwise, “Fix it, sell it, or close it.”

A two-edged blade, the BCG matrix and Welch’s number 1 or 2 system have been used by companies without acknowledging the underlying rationale—transcending capital budgeting systems. Being clearheaded means understanding the analogy or framework you employ

DISRUPTION (disruptive innovation)

Like the old BCG matrix, its careless use can create more fog than clarity

Why weren’t previously successful companies responding effectively to these threats? Clayton Christensen and Bower’s explanation was that leading companies were too focused on their existing customers, especially their largest and most demanding customers. Following these customers’ desires for ever-larger, more powerful, or faster versions of products, companies lost sight of less effective but cheaper technologies

The Christensen theory had disruption coming from a low-price, less capable product. But there were glaring examples of the opposite

The iPhone was high priced, yet was clearly disruptive to RIM’s BlackBerry and Nokia’s phones

Consultants urged BlackBerry to continue concentrating on the enterprise market where it had a lock rather than the hypercompetitive consumer phone business

What directly destroyed BlackBerry was that during 2010, companies quickly, and surprisingly, began to adopt the “bring-your-own-phone” approach. Email was getting cheap, and people were bringing their own personal smartphones to work anyway. With iPhones and Androids appearing everywhere, security was lost.

A number of people have studied whether there really is a significant amount of disruption “from below.”

In sum, follow-on research has not supported the Christensen story of companies being too focused on main customers and missing the rise of low-performance

The decline of Kodak is often used as a warning about the fate of those who ignore the warning signals of disruptive forces. But there was no low-cost, low-performance “product” disrupting it.

Kodak was disrupted, but not by a competitor. It was disrupted by an entire ecosystem.

Kodak’s demise is also mirrored in the downfall of the Encyclopedia Britannica, done in by computers and the Web

It wasn’t Wikipedia, or Encarta, or Scholarpedia, or Digital Universe, or tablets, or phones that “disrupted” Britannica. It was the entire ecosystem of personal computers, phones, the Web, Google, bloggers, Google Books, and more

How to Deal with Disruption? The real challenge of “disruption” is not that you don’t see it coming. The real challenges are:

If you do not face any of these three sharp challenges, then you do not really have a disruption problem

there are many more—value-chain analysis, willingness-to-pay modeling, multinomial logit models of competition, McKinsey’s 7S framework, the Blue Ocean Strategy Canvas, scenario development, benchmarking, product life cycle, root-cause analysis, and more. Each narrows attention to just a few factors or issue, or even just one. And each tool is built on assumptions. Ignore those assumptions at your peril

Part III: Through the Crux

PART III Through the Crux

11. Seek an Edge

11 Seek an Edge

13. The Challenge of Organization Dysfunction

13 The Challenge of Organization Dysfunction

Part IV: Bright, Shiny Distractions

PART IV Bright, Shiny Distractions

14. Don’t Start with Goals

14 Don’t Start with Goals

15. Don’t Confuse Strategy with Management

15 Don’t Confuse Strategy with Management

16. Don’t Confuse Current Financial Results with Strategy

16 Don’t Confuse Current Financial Results with Strategy

17. Strategic Planning: Hits and Misses, Uses and Misuses

17 Strategic Planning Hits and Misses, Uses and Misuses

Part V: The Strategy Foundry

PART V The Strategy Foundry

The Strategy Foundry is a process by which a small group of executives can do challenge-based strategy, discover the crux, and create a set of coherent actions for punching through those issues

18. Rumsfeld’s Question

18 Rumsfeld’s Question

I tried to be a mini consulting firm

There were a good number of satisfying engagements

On the other hand, there were less successful efforts

Strategic analysis of the situation and recommendations for action were the warm-up routine—interesting but quickly forgotten. The starring show was the mainline annual “strategic plan.”

One example of the latter was ‘OKCo.’ In 2002 OKCo was a significant manufacturer of home and business-office climate-control systems

What I saw was that the company’s product line was stale and not up-to-date.

To compensate for the decline in the product’s performance, management had been lowering prices and increasing sales commissions

the company’s organization was sleepy and self-satisfied despite the slowly declining financial performance. Outsourcing the manufacturing of parts and assemblies to China had helped keep costs down.

The VP of strategy and I came up with a strategy to help build a better future for the company. The key was to invest in developing a microprocessor-based control system

In the early fall, the CEO and CFO presented the company’s “strategic plan.” Despite the study work, the “strategic plan” did not address issues we had raised, nor did it even glance at the recommendations

The problem at OKCo and many other companies was that the key challenge, already apparent to many, was not owned by the major policy makers

EXPERIENCES WITH OKCo and other organizations began to convince me that many organizations were sidestepping serious work on gnarly challenges

Delegating it to the VP of strategy turned it into a sideshow

It is natural to think that issues of great consequence should be considered by a small group of informed senior executives

Still, over the years, I have observed groups trying to do this and suffering more than a little confusion and dysfunction

One popular theory about this malaise was inaugurated by Irving Janis with his well-known concept of groupthink

Janis’s classic example of groupthink was President Kennedy’s 1961 Bay of Pigs fiasco invasion of Cuba. It is clear that the advisory group did not examine very many alternatives. But another main element, not spotlighted in Janis’s account, was the Central Intelligence Agency’s double game. The CIA, led by World War II spy Allen Dulles, wanted to displace Cuba’s Fidel Castro and also firmly believed that the invasion would not work unless US troops were involved. Kennedy did not want the political backlash that using US troops would produce. So there was actually a null set of feasible actions

The CIA nevertheless continued to go forward because Dulles believed that “when the invasion actually occurred, the president would end up authorizing whatever was required for success

But most such groups faced gnarly challenges: there were competing ambitions, no given action alternatives, and the links between proposed actions and results were very tenuous

In my experience, it is not group process per se that causes too early convergence on action. It is the habits of viewing strategy as setting overall goals or as decision making among predetermined alternative actions.

An uncomfortable example is the Second Iraq War. Its roots lie in an attempt to forge a new foreign policy. In 1997 twenty-five prominent conservatives signed on to the Project for the New American Century

For this group, the war in Afghanistan was a diversion. Early on in the Bush administration, attention focused on regime change in Iraq

The neoconservative group, led by Paul Wolfowitz and Dick Cheney, was convinced that the Middle East could be transformed.

I had the opportunity to interview then US secretary of defense Donald Rumsfeld in 2004. At that moment, he was trying to deal with a rising insurgency in Iraq

Almost as an afterthought, I asked him about his view on strategy or policy creation. His reply remains fascinating

The real problem,” he said, was pulling all of this expertise together into a coherent strategy. Rumsfeld said that “each morsel of expertise came with an agenda attached

Basically, you put a small group of smart people in a room and see what they come up with

The concept of decision making assumes that the issue is selecting the best action alternative

This is fine if you are trying to decide whether to buy or rent a forklift truck, but it is useless if you face the gnarly challenge of homelessness in San Francisco

Research on problem solving is even less helpful

Work on groups is even muddier.

As Dawn Farrell, CEO of energy company TransAlta, told me:

I had to work to build an effective leadership team

Starting with a small cadre, we now have a group of forty at the top who can and do work together to identify what needs to be done and then help each other to get it done


I began to apply my own framework to what I saw. What was my diagnosis?

What I began to see as the crux was the general belief that strategy is in the service of preset goals or policy objectives

19. A Foundry Walkthrough

19 A Foundry Walkthrough

‘Joanna Walker’ first contacted me by email. The CEO of ‘FarmKor,’ she was interested in a speaker for her annual strategy off-site

the Strategy Foundry should be a group of fewer than ten, preferably less than eight, senior leaders. It had to include the leader of the company or business division. And the group had to make a commitment to work with a challenge-based approach to strategy. The foundry worked best off-site and would usually take three consecutive days. There had been shorter sessions for smaller companies

I explained that the preparations were three steps

Paul, the CFO, asked about scheduling. The annual strategy off-site was normally held a month before the budgeting event. This is a key issue, and I worked to explain that the purpose of a foundry is to address the strategic issues. It will produce a set of critical challenges, guiding policy and action steps. However, the foundry is not a financial or accounting exercise.


The interviews resulted in these facts:

FarmKor products tracked the weather and ground chemistry and tried to provide crops with just the right amount of water and nutrients

FarmKor’s systems were used for growing tree and vine fruits, nuts, soy, herbs, beans, and a variety of vegetables

I interviewed the eight executives selected to constitute the Strategy Foundry and about five other key managers.

rest-of-world, or ROW). The company’s fastest growth was happening abroad, she explained, but it was thus far unprofitable. She needed someone to treat the ROW as a day-to-day responsibility rather than a monthly report-and-review exercise


After the interviews, I emailed each Strategy Foundry participant a list of questions to be answered in confidence directly back to me


In general, competitive pressures had gotten stronger over the past five years. Automating agricultural processes had gained currency, and it had become easier to develop the required software.

After a coffee break, I handed out a list of strategic priorities. I had constructed this list from presentations to the board and all of their responses to question 5 on priorities. The list had twenty items

“The list is too long,” offered one participant. “These ‘priorities’ are too vague,” said another.

what are the key difficulties or challenges or obstacles that prevent you from just going ahead and doing some of these things?”

The afternoon was focused on identifying challenges facing FarmKor. As they surfaced, I wrote a short description of each “challenge” on a five-by-eight-inch card and pinned it to a board

By the end of the day, there were ten five-by-eight cards

Diminished Advantage:

Big Players’ R&D

the basic super-high-volume crops that feed the world: rice, wheat, and corn


their interests seem to be more and more slanted toward a steady, predictable payout of dividends

Falling Revenue/Acre

Too Many Parts

Precision Farming

use robotics and AI to make fleets of lightweight machines and aerial drones that can give individual attention to plants.

Regional Baronies

handful of entrepreneurial characters

Each of these people has made a lasting imprint on the region or district they developed. This has made harmonization difficult

Less Talent/Acre

Nutrient Substitutes

High-Tech Start-Ups


why had the company’s responses been, thus far, so weak?

I then showed eight PowerPoint slides of quotes from my interviews

Of the ten issues we raised yesterday and today, are any of them impossible to confront if the company really focused on it?”

which one of ten is the most important?

I took the three cards representing those challenges and put them in the center of the board and collected all the others. “Let’s put aside all the challenges other than these three.

Which one would you pick, and what would be the action plan?”

I broke the participants into two groups

The three main action ideas

No group chose to work directly on the issue of regional baronies.

The crux of the challenge was their expansion into lower-value crops combined with diminished differentiation from large global competitors.


The key policy adopted by the Strategy Foundry group was a shift toward serving high-value crops.

In addition to the new guiding policy and specific actions, I tasked the group with making their key assumptions explicit

When you meet as a foundry group again, whether in five or eleven months, you need to look at whether these assumptions were correct

The final step in the Strategy Foundry was a “swearing in.”

20. Strategy Foundry Concepts and Tools

20 Strategy Foundry Concepts and Tools


be committed to using a challenge-based approach to strategy

The Strategy Foundry is best held off-site.

In simpler situations, two days may be sufficient

Occasionally, a foundry is split between two sessions some weeks apart

You can conduct a Strategy Foundry with an internal facilitator if there is enough insulation from some of the politics and kickback associated with real strategy debate. My experience, however, is that people will talk more frankly to a trusted outsider. Other gains arise from an outsider’s willingness to say things that others will not or cannot express

A third crucial role becomes important in the second half of the foundry—maintaining a pressure to focus on the critical, yet addressable, challenges


For challenges to be identified and strategies created, there must be knowledge in the room about product, markets, competition, and technology


Deferred Judgment

Exposed Beliefs, Observations, and Judgments

Written Questions and Answers

The standard questions I always ask are those shown for FarmKor in the previous chapter

Attention to History

highlight the actions and projects that have worked well in the past. Critically, the group should try to articulate what conditions or actions led to success in these cases. Then, equally important is a review of projects and endeavors that have not worked out. Again, the group must try to articulate what led to these failures.

Start with the Challenge

Think Again

The Time Viewer

looked ahead seven years

image of Fortune magazine’s cover

Company of the Year

The cover-story process can also be applied to envision failure

imagine that we have a way to send a message to the company CEO’s laptop seven years ago. There is only one message. It has to be short and cannot contain any specific information about the future

As the group discovers how hard this is, they gain a new appreciation for what they are trying to do in the foundry

Instant Strategy

There are times when a group gets a little too “deep into the weeds” and has trouble narrowing focus to a few critical actions.

I ask each participant to write down in one sentence their recommendation for action, not a vague strategy or a performance goal, but a focused action that has a good chance of being accomplished. They have two minutes to commit this to paper

I used this with XRSystems, whose story I described in Chapter 4.

Forced Inward Analysis

The natural tendency when executives discuss strategy is to define challenges in terms of financial outcomes or competitive position. It may take an outside facilitator to lead the conversation to the challenges created by how the organization actually functions.

the reasons for declining profits

discussion shifted from complaints about competition toward how the company was actually competing

in one-third of the cases, the true strategic challenge lay with the organization’s structure or processes

Why Is That Hard ?

Chapter 8 described the case of QuestKo and my question to the CEO: “What about all this is difficult?”

Many times, management has been encouraging a direct assault on metrics rather than obstacles

Red Team

assigning talented people to the red team and having them devise tactics and strategies for winning against the opposing blue team

Sometimes a red-team exercise is as simple as having a particular member of the group role play a competitor or other outside party. How would the company’s plans look from that point of view? Would moves be misinterpreted?

When creating a strategy, a red-team exercise forces the group to evaluate “frame risk”—the chance that the way they think about the world and competition is wrong or critically incomplete

Find the ASCs

One of the most powerful foundry tools is boiling the situation down to a few addressable strategic challenges, or ASCs.

One approach, detailed in the Intel exercise described in Chapter 4, is to formally evaluate both the importance and the addressability of each of a number of challenges

A second approach is to “take things off the table.”

One important result of this focusing is going more deeply into each challenge. As that happens, people realize how complex it is and the many subproblems it exposes.

Focus on One or Two Proximate Objectives

The task, or objective, is proximate in that it can be done and can be done fairly soon. There is nothing that motivates an army or company better than winning. By tackling an important objective and overcoming it, leadership sets the stage for the next battle

Time Horizon

emphasis on action

eighteen-month horizon

A shorter time horizon also helps with achieving agreement. Groups are hesitant to “take things off the table” because each challenge is often connected to favorite projects and initiatives

Reference Classes

A reference class is a group of comparable situations or companies or challenges

Strategic Navigation

Swearing In

Public Face

For too many executives, “strategy” is all about the public face. That is, it is about the shape and substance of a public statement of purpose and priorities.

demand, it is important for the foundry to spend time and effort on the public face of the chosen policies and actions. In constructing a public face of the strategy, it is best to avoid goals and objectives and instead speak to a few key priorities. (Having more than three priorities stretches the meaning of the word!)



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