These notes are adapted from David Drysdale's Moby Diction digital garden (publish.obsidian.md/mobydiction, now offline). They summarize Richard Rumelt's Good Strategy Bad Strategy (2011), Simon Sinek's The Infinite Game (2019) and Rita McGrath's Seeing around Corners (2019), with Cedric Chin's 2020 essays on the OODA loop. Han curated and edited them for the Dwarves research vault. They treat strategy as a way of seeing before it is a plan. Richard Rumelt argues that having a strategy is itself a competitive advantage, because few organizations actually have one. For Rumelt a strategy rests on a kernel of three parts: a diagnosis, a guiding policy and coordinated action. The other notes here ask what feeds that diagnosis. Their answers are sensemaking, honest data, signals that arrive early, and a horizon longer than the next quarter. The page follows that order.
1What a strategy is
1.1The kernel and the simplification
Rumelt's kernel is a diagnosis (a clear, honest description of the challenge at hand), a guiding policy (a general approach to overcoming it) and coherent action (a set of coordinated moves that enact the policy).
Good strategy simplifies. It focuses on a limited number of critical insights, and when it is done well it looks obvious. That is because it has brought clarity to a complex, dynamic problem space. It is a narrative that simplifies complexity, draws attention to some facets of the issue and away from others, and points to the right domain of action. Rumelt calls a strategic diagnosis a "simplified model of reality."
This is the essence of strategy: find the right fulcrum point and apply the right pressure to move an object. Strategy creates leverage.
The original notes on Rumelt's book branch into three groups. Each was a separate note in the source garden, which is now offline.
The nature of strategy
- Strategy unflinchingly identifies the nature of the challenge ahead
- Strategy creates advantage by generating new perspectives
- Strategy requires rejecting some good opportunities in favour of others
- Strategy is more design than decision-making
- Sustainable strategy cannot be easily replicated
- Strategy cannot be discovered through deduction alone
The kernel of strategy
- Strategy revolves around a diagnosis, a guiding policy, and coherent action.
- Strategic diagnosis is a clear, honest description of the challenge at hand
- Guiding policy is a general approach to overcoming a challenge
- Strategy defines coherent action -- a set of coordinated moves that enact a guiding principle
Inertia and entropy in organizations
- Established organizations tend to optimize for inertia
- Entropy forces organizations to waste energy on alignment
- Chain link systems cannot be improved by focusing on one link alone
1.2Strategy cannot be copied from a book
Good strategies are doomed by their own success. An effective strategy gets studied, repackaged by consultancies and adopted by competitors, until it becomes a best practice. A best practice is never a winning strategy, because the core of strategy is differentiation. Publishing a strategy marks the end of its useful life. In a dynamic environment a published strategy reflects only the past, so using one is like fighting with the rules of the last war.
Cedric Chin makes the same point in a passage the note quotes at length:
At this point, the idea-industrial complex whirs into work: the management consultants will turn the strategy into a set of cookie-cutter recommendations and sell it to competitors in adjacent (or even not-so-adjacent!) fields; the business professors will race to write papers and books to be sold to the management masses... This marks the beginning of the end of the effectiveness of the strategy. As more competitors learn the specifics of the winning approach, they either begin to adopt the strategy for themselves or learn to counter the strategy (if at all possible). This then makes the winning strategy less effective.
The publication of a specific strategy often changes the environment necessary for the strategy to work, or at least triggers the countdown to the eventual demise of the effectiveness of that strategy. This is the problem that sits at the root of all strategic thinking: it is not enough to learn the strategies of the last war.
1.3Specialists see a narrow slice
Problem-solving means identifying the salient features of a problem. That is subjective, and different thinkers find different things salient. Specialization narrows what we see as salient and biases us toward certain mental models and thinking tools. We focus on the aspects of a problem we are best trained to recognize and handle.
When a challenge arrives we turn to specialists for their honed expertise. In particularly wicked problem domains, a specialist may be the worst fit, because specialization undermines the ability to consider the problem as a whole. The note links this to narratives (specialization inures us to specific narratives about the world), to the way people fill information gaps with assumptions (specialization conditions the assumptions we apply under uncertainty), and to why radical uncertainty cannot be resolved by probabilistic thinking alone (we rely on familiar mental models there). The source is Roger Martin's The Opposable Mind.
2Sensemaking and the OODA loop
2.1Winning strategies come from good sensemaking
Sensemaking is the practice of interpreting disparate sources of observed information. You can do it as analysis, which applies an existing mental model to the data deductively, or as synthesis, which creates new mental models inductively from the available information.
Applying an existing mental model is unlikely to produce a winning strategy. As Cedric Chin argues, deductive analysis cannot produce the differentiated insight a defensible moat needs. A mental model known to you is probably known to others, so the strategy it yields is predictable. That is why strategy is about developing perspective. A winning strategy comes from a unique perspective, and once a strategy is known it loses its potency as a sustainable advantage.
2.2The OODA loop
The OODA (observe, orient, decide, act) loop is a decision-making concept developed by the military strategist John Boyd. It describes how an enemy can be defeated, or a goal reached, despite an imbalance of strength. It has since been applied in business, litigation, law enforcement and other fields.
Observe. Build a comprehensive, accurate understanding of the situation. That takes complete awareness of the environment and of what the available information means. Learn to assess quickly which information is valuable and which distracts.
Orient. This phase is often overlooked, yet it holds the greatest opportunity and the greatest risk. Boyd called it the schwerpunkt, "the main thing." In orienting we do sensemaking: either develop a new narrative from observed facts (synthesis) or apply an existing mental model to the situation (analysis). A good strategist can do both and draws on the tools of different disciplines to build an understanding of the information. Adjust mental models as new information arrives. If you create a mental model without being willing to destroy it, you are vulnerable to disruption. Stay alert to bias too. Boyd warned in particular about our cultural traditions, our genetic heritage(?), our ability to analyze or synthesize, and the constant influx of new information, all of which inhibit orientation.
Decide. Make an informed decision from the available options. Treat each option as a hypothesis that can be tested and refined. Any issue you uncover feeds back into new rounds of observation and orientation.
Act. Then learn, and cycle back to the beginning.
To gain an advantage over an opponent, focus on the Orient phase:
- Speed up your execution tempo. This disrupts your opponent's ability to orient among the new information you generate.
- Overwhelm your opponent by acting with great, sudden force.
- Disrupt your opponent's orientation with false information that reinforces mistaken mental models and inhibits their sensemaking.
Sources and further reading: Chin, Much ado about the OODA loop, Chin, Good synthesis is the start of good sensemaking, Farnam Street and Wikipedia.
2.3Strategy is time-sensitive
Building an effective strategy is time-sensitive work. The longer you take to respond to changing conditions, the fewer options you keep. As soon as you react to conditions, you change them. You must keep reading the landscape and adjusting your perspective.
Strategies also have a shelf life. The longer a strategy is in the wild, the more time competitors have to respond and adjust their own mental models. That changes the conditions again and forces a revision to your mental model.
3Data, signals and evidence
3.1Garbage in, garbage out
In almost any process, the quality of the input limits the quality of the output. The phrase comes from programming, where bad input data gives bad output, and the idea appears in many domains. Many thought leaders in personal knowledge management, for example, stress implementing an effective filter on the content you consume. It ties to the compounding value of knowledge in the slip box notes and to the earlier points on leading indicators and sensemaking.
3.2Collecting analytics data is not the same as doing research
Devices and software create what Davis and Davidson call "data exhaust", the detritus of our interactions with interfaces. It is a by-product, and it is not designed with falsifiability in mind. Collecting it is not research.
Analytics data cannot measure intentionality. It needs an analyst's interpretation, and one analyst's reading may not match another's, because each brings their own values. With so much data available, we spend more time building data sets so we can ask questions than asking the questions. Worry less about hoarding data and more about collecting the right data. A related note observes that abundant data makes us jump to quantitative data as the solution to every problem. The source is Sam Ladner's Mixed Methods.
3.3Base strategy on leading indicators, not lagging ones
Many organizations lean too hard on lagging indicators for strategic decisions. Those measurements report what has already happened and do not signal what may happen next. Deciding from them means reacting too late.
Leading indicators look different. They are more qualitative and often arrive as stories rather than charts. They are less concrete and just as important, because these narratives show where the future is.
Strategic degrees of freedom and signal strength have a roughly inverse relationship. The longer you wait to act on a signal, the fewer options you have. Early on, signals are weak and a big move at that level of uncertainty would be foolish. Wait too long and the inflection point is obvious and you are too late to benefit. Where signal strength and degrees of freedom cross lies the period of optimum warning, so stay on top of signals to find the right moment to act.
Related notes in the source garden (offline): Inflection points reveal themselves first at the edges, Quantitative analysis is not inherently more reliable than qualitative data, Qualitative research creates mental models about the problem space, Sensemaking MOC and Our vision of the future is always constrained by our view of the past.
4Seeing change coming
4.1Strategic inflection points
A strategic inflection point is the moment a business's fundamentals shift and the basic assumptions that structure its relationship to its environment come into question. It feels sudden and usually gestates over a long time. Spotting the signs early can be a gift: it opens new opportunities for those who can use it, and companies that respond well are not forced to restructure in a hurry. Companies that notice late stall, must reorganize fast and can fail outright if the response does not work.
Inflection points develop in four stages: hype, dismissal, emergence and maturity.
- In hype, the change is loudly proclaimed and "true believers" drive a bubble.
- The bubble bursts when those first actors underestimate the collective consequences of their actions. That provokes widespread dismissal of the trend. A handful of entrants survive and build the foundation of the future, and this is where the greatest opportunity lies.
- In the emergent phase, stable players see how the world is changing.
- The shift reaches maturity and is absorbed into the everyday assumptions of the organization. Organizations that adjusted at the right time thrive at the expense of those that did not.
The source is Rita McGrath's Seeing around Corners. A related note says that change happens gradually, then suddenly.
4.2Organizations that depend on tolerability are ripe for disruption
Some organizations rely on "tolerable" attributes, basic features customers put up with but view negatively. Customers tolerate them only until a viable alternative appears, and then the tolerable thing becomes a dissatisfier or worse. Customers often cannot even say what bothers them. They simply put up with it or lean on workarounds. These friction points are the places most exposed to inflection points, and understanding them is key to survival.
Ask who else fulfills the same or similar jobs to be done. Then evaluate the consumption chain a customer goes through to complete the job and look for where it breaks down. What are the positives and negatives of doing business with you along that chain? Finally, consider how these configurations may change at possible inflection points. Organizations should try to identify the points where a change in constraints would let a competitor serve your customers in a new or better way. The source is McGrath's Seeing Around Corners; related notes cover innovation cascades.
4.3Work backwards from a long-term vision
Discovery-driven planning defines the parameters of a future state and then works backward to ask what would have to be true for that future to happen. Before a big commitment, make "little bets" designed to yield new intelligence, which breaks the large inflection point into smaller, manageable pieces. Set checkpoints where you can learn something and decide whether to go on or pivot.
Strategists start by defining success. The point is not to predict what will happen. It is to build alignment around the value of an initiative. Benchmarks or key outcomes then measure on an ongoing basis whether the vision is becoming real. At key checkpoints, pressure-test the fundamental assumptions by looking for disconfirming evidence.
A related concept is Rumelt's "proximate objective", an objective near enough to be reasonably attainable by the organization.
Sources: McGrath's Seeing around Corners and Rumelt's Good Strategy Bad Strategy. Related notes in the research vault are listed at the end. See also winning strategies come from good sensemaking.
4.4Volatile environments motivate us to avoid uncertainty
Long exposure to volatility can disrupt our ability to deal with other kinds of uncertainty. We may develop inaccurate views of the world, such as learned helplessness, the state of mind in which we doubt our ability to bring about the result we expect.
If we repeatedly meet volatile situations in which we cannot learn from and adapt to fast-changing contexts, we may come to believe we have no power over outcomes. In response we may build environments that exclude whatever clashes with our model of the world, or set up "filter bubbles" that confine our interactions to people who reinforce even maladaptive behaviours. Our brains have evolved to minimize surprise, and we may be predisposed to seek environments that match and reinforce our expectations and to avoid those that do not.
The source is Miller, Nave, Deane and Clark in Aeon.
5The long view
5.1Build organizations around a long-term narrative
To stay sustainable over the long term, an organization needs a long-term objective, a mission or vision that gives it its reason to exist and animates its activities. Simon Sinek calls this the organization's "just cause." It orients the organization to horizons longer than the quarterly or annual report and gives people a sense of purpose. It also works as a first filter against unethical or counter-productive ideas. Narratives let us act decisively under uncertainty, and the just cause applies that at the organization level: a kind of narrative that guides decisions and strategy. It may help express strategy as simple rules, as shorthand that guides action.
A just cause, Sinek writes, is never money. Money is the means to the end of the cause. The garden author reads the just cause as almost an ideology. Sinek's example is Apple positioning itself against a "worthy foe" in IBM: IBM was conservative and business-like, and Apple defined itself as creative and individualistic.
Organizations that adopt Sinek's "infinite perspective" need not fear disruption and change. They can use change to advance the larger cause. Some business challenges, such as digital transformation, only work with a longer view.
That long-term vision runs against a present tendency of organizations to focus on the short term. The bias connects to presentism, a resistance to thinking past the tyranny of the present. One possible cause is a growing emphasis on quantification and metrics, itself a symptom of a decline in social trust.
Similar ideas include Jay Acunzo's "aspirational anchors" and the "shared value" model of Jim Kalbach, Michael Tanamachi and Michael Schrage in the context of jobs to be done. The source is Simon Sinek, The Infinite Game, Portfolio, 2019.
5.2Short-term results and the rental mindset
The short-term view treats the world as a finite game: contained, with limited players and clear rules. According to Sinek, recent years have brought a pronounced shift toward short-term thinking. He calls it a rental mindset. There is less sense of ownership, and businesses are built to be sold rather than sustained.
Part of the shift may come from changing attitudes toward the role of business in society, from a business that serves society to the Friedman doctrine, which says a business's first commitment is to its shareholders.
Ignoring the long-term effects of chasing short-term metrics can lead to prioritizing the wrong things. As Sunil Gupta points out, digital transformation often means accepting a short-term hit for a longer-term play. Erika Hall argues that designers have an ethical responsibility to consider the second-order effects of their work on the customer and on the business.
Real change needs delayed gratification. Many of the most valuable things in the long run require enduring short-term pain. That holds for individuals and organizations: we struggle to choose what we know pays more later when the short-term cost is higher than another option's.
Related notes: Fixating on metric data biases us to the short term, Efficiency is over-valued, Loss aversion creates tension between the need to innovate and the need to protect the status quo in large organizations and Varol, Think like a rocket scientist.
6Related notes
These notes link out to others in the research vault:
- abductive-reasoning
- deductive-reasoning
- falsifiability
- de-risk-innovation-by-making-smaller-bets
- narratives-generate-real-world-effects
- narratives-enable-us-to-act-decisively-in-conditions-of-uncertainty
- brains-have-evolved-to-minimize-surprise
- rationalistic-models-of-human-behaviour-are-limiting
- the-opposable-mind
7References
- Drysdale, David. Moby Diction (digital garden). publish.obsidian.md/mobydiction, now offline. The reading notes on Rumelt, Sinek, McGrath and Chin on this page are adapted from it.
- Chin, Cedric. “Much Ado About The OODA Loop.” Commonplace - The Commoncog Blog (blog), May 19, 2020. https://commoncog.com/blog/much-ado-about-the-ooda-loop/.
- Chin, Cedric. “Good Synthesis Is the Start of Good Sensemaking.” Commonplace - The Commoncog Blog (blog), May 26, 2020. https://commoncog.com/blog/good-synthesis-adapting-to-uncertainty/.
- Gupta, Sunil. Driving Digital Strategy: A Guide to Reimagining Your Business. Boston, Massachusetts: Harvard Business Review Press, 2018.
- Ladner, Sam. Mixed Methods: A Short Guide to Applied Mixed Methods Research. Sam Ladner, 2019.
- Martin, Roger L. The Opposable Mind: How Successful Leaders Win Through Integrative Thinking. 1st edition. Boston, Mass: Harvard Business Review Press, 2007.
- McGrath, Rita Gunther. Seeing around Corners: How to Spot Inflection Points in Business before They Happen. Boston, Massachusetts: Houghton Mifflin Harcourt, 2019.
- Miller, Mark, Kathryn Nave, George Deane, and Andy Clark. “Use Uncertainty to Leverage the Power of Your Predictive Brain.” Aeon. Accessed October 21, 2020. https://aeon.co/essays/use-uncertainty-to-leverage-the-power-of-your-predictive-brain
- Rumelt, Richard. Good Strategy Bad Strategy: The Difference and Why It Matters. Illustrated edition. New York: Currency, 2011.
- Sinek, Simon. The Infinite Game. New York: Portfolio, 2019.