Build your confidence and knowledge about strategy with this episode of HR Coffee Time. Fay talks you through the key takeaways from Richard Rumelt’s modern business classic, “Good Strategy, Bad Strategy: The difference and why it matters.”

Not only will this help you create more powerful People and HR strategies, but it will also help you understand how to craft and contribute to the overarching strategy for the whole organisation you work in.

This episode will be helpful for you, no matter which role you’re ultimately aiming for, but it will be especially useful if you’d like to move into a Board-level role (or are already in one).

Ideas shared in the episode, include:

The kernel of good strategy is made up of:

• A diagnosis that defines or explains the nature of the challenge
• A guiding policy for dealing with the challenge
• A set of coherent actions designed to carry out the guiding policy

9 sources of power:

1. Leverage
2. Proximate objectives
3. Chain-link systems
4. Using design
5. Focus
6. Growth
7. Using advantage
8. Using dynamics
9. Inertia and entropy

Useful Links

• Connect with Fay on LinkedIn
• Fay’s website: Bright Sky Career Coaching

Buy the Book Recommendation

(Disclosure: the book link is an affiliate link which means that Fay will receive a small commission from Amazon if you make a purchase through it)

• Good Strategy, Bad Strategy: The difference and why it matters, by Richard Rumelt

Other Relevant HR Coffee Time Episodes

• Episode 26: How to be strategic in your new HR leadership role
• Episode 61: The 4 pillars that will help you be strategic in your HR role
• Episode 77: How to create an effective DEI strategy, with Metra Rowe
• Episode 98: HR insider insights: how to create a powerful people strategy for an SME, with Kelly Vincent

Looking For the Transcript?

You can find transcripts for all episodes on the HR Coffee Time section of the Bright Sky Career Coaching website.

Rate and Review the Podcast

If you found this episode of HR Coffee Time helpful, please rate and review it on Apple Podcasts or Spotify. If you're kind enough to leave a review, let Fay know so she can say thank you. You can always reach her at: fay@brightskycareercoaching.co.uk.

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Welcome back to HR Coffee Time. It's great to have you here. I'm your host, Fay Wallis, a career and executive coach with a background in HR, and I'm also the creator of the HR Planner. I've made this podcast especially for you. to help you have a successful and fulfilling HR or People career without working yourself into the ground.

Before diving into the main part of the show today, I just wanted to do a quick shout out to all the HR Ninjas I met this week at a local HR Ninjas meetup. So, Katryn, Charlotte, Karen, Eleanor, Claire, Louisa, and India. It was lovely to meet you all this week. Thank you to Katryn for arranging our get together and I hope you're all going to enjoy listening to this episode and that I'll get to see you again soon.

Today for this episode we're going to be taking a look at strategy again. It's a topic that we've covered a few times on the podcast before, and I'll be covering it again in the future, because I know it's one that's really important to you.

00:01

Today's episode is a bit different to the other HR Coffee Time ones you've listened to about strategy before. Because instead of just focusing on HR strategy specifically, the ideas I'm going to be sharing will also help you learn how to create or to contribute to an effective overall strategy for the organization you work in.

So you'll be boosting your strategic knowledge to step up and succeed in your HR role when you're expected to create the HR strategy, but you'll also be learning concepts that can help you advise on the overall organization strategy. And I'm going to do this by sharing some key takeaways from a brilliant book which is regarded as a modern business classic.

00:02

It's called Good Strategy, Bad Strategy, The Difference and Why It Matters by Richard Rummelt. I'm hoping this episode will be helpful no matter what role you're ultimately aiming for. But especially if you want or already have a board level role. Or you perhaps even want to become a CEO one day where you're responsible for the entire organisation and being able to create a successful strategy is critical.

There is so much packed into the book, there's no way I can cover everything in this episode, so I've done my best to pull out the things that I think are going to be most helpful for you, but I would really encourage you to get the book and read it if you start to feel interested after hearing what I've shared with you today.

00:03

The first thing that struck me when I read it is the fact that the author doesn't agree with a very popular approach to strategy, which is that it's about everyone moving towards a vision. In fact, he's pretty scathing about strategies that rely on vision, and this is for lots of reasons, but one of the main ones is that it means people can skip over a crucial step, which is to figure out what challenges the organisation is facing, so that you can come up with a plan to overcome them.

And to quote him, he says, 'A good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them. And the greater the challenge, the more a good strategy focuses and coordinates efforts to achieve a powerful competitive punch or problem solving effect.'

00:04

A theme that keeps on cropping up throughout the book is the importance of focus.

As humans, I don't think we're always that good at honing all of our efforts and focus onto one thing, because there are so many other things that can feel interesting and exciting or feel like they could be important as well. But when we do apply that laser focus, that's often when we get the most successful results.

And you'll know this from your own work, how much easier is it to focus on one project at a time and do a brilliant job with it, getting it done on time and knowing that you've done great work, rather than trying to juggle multiple projects and feel like you're not really making any progress with any of them?

It's something that crops up in goal setting literature all the time and it's something that we see a lot in this book. Richard Rummelt describes good strategy as consisting of at least one kernel. And the kernel of a good strategy is made up of three things. The first thing is a diagnosis that defines or explains the nature of the challenge.

00:05

Another way it can be helpful to think of this is to think of it as the 'why'. So why you're going to be taking action on anything. The second part of the kernel is to create a guiding policy for dealing with the challenge. So, this answers the 'what'. We've had the why we're doing something, this is the what we're going to do about it.

And then the third aspect of the kernel of a good strategy is to come up with a coherent set of actions designed to carry out the guiding policy. So this answers 'the how'. We've looked at the why we're doing something, the what we're going to do about it, and how we're going to do it. And one of the examples he uses to bring this idea of the three elements of the kernel to life is to think about a doctor. A doctor will have someone in front of them describing symptoms. So in your organisation you'll have symptoms, you'll see things that could be causing problems. The doctor then has to diagnose what is wrong and name it. So that's the diagnosis part of your kernel.

00:06

Then, once they've made a diagnosis, they'll recommend a therapeutic approach. And this is the equivalent of a guiding policy. And finally, the prescriptions that the doctor issues for things like medication, therapy and diet, they are the coherent actions that are designed to carry out the guiding policy.

I'd love to encourage you to think about this with the organisation you work for. What is the biggest challenge that it's up against? What diagnosis would you give it as a doctor? And this challenge could be external, so for example, you could have a big competitor undercutting your prices and hoovering up all your clients.

00:07

Or it could be that you're losing funding from a government agency, which means you're not going to have the funds you were expecting to run the organisation. Or you could find that interest in your company's main product is waning because of the cost of living crisis. The possibilities are absolutely endless.

Or, of course, the challenge could be internal. Maybe your systems are outdated and it takes forever to get anything done. Or perhaps you've got infighting between two departments that is causing a terrible atmosphere and meaning that everyone's leaving or is really disengaged at work. Or perhaps you've merged with another organisation and there's huge resentment.

Again, the possibilities are endless about what that challenge could be. But of course sometimes you might not be able to answer that question straight away, so you may be thinking, 'I actually really don't know Fay, what the biggest challenge is at the moment'. You might have to ask some more questions before you can really manage to get down to the nub of it.

00:08

But once you have identified the biggest challenge, your next step is to create your guiding policy. Richard Rumelt describes guiding policies as being 'a method of grappling with the situation and ruling out a vast array of possible actions'. So again, it's about focus. Often there will be lots of different ways you could potentially solve the problem, but the strategy is much more likely to be successful

if you just pick one. Where strategy can go horribly wrong is when it turns into a big long shopping list of things that you would like to do and it's impossible to get through them all and actually if you were to start trying to work your way through them all it just dilutes the impact that you could have.

He also explains that a good guiding policy will draw on any sources of advantage that your organisation has. And he has a great example in the book of one of his friends to bring this to life. So he talks about his friend who owned a grocery store and she was called Stephanie. Stephanie had diagnosed her challenge as being competition for customers with the local supermarket.

00:09

She knew that most of her customers tended to live within walking distance to her store, more of her customers were students, but she also had busy professionals who came in

and when they came in, they made much larger purchases than the students.

Although there were loads of different ways that she could have tackled the challenge, Stephanie decided her guiding policy would be to serve the busy professional.

And then she tweaked it to be 'serve the busy professional who has little time to cook'. This meant instead of trying to implement changes that could have cancelled each other out or competed with each other, she was able to have a laser focus. On point three of the strategy kernel, having a set of coherent actions that fed into her guiding policy.

00:10

So she went on to do things like allocating space in the store, especially to stock high quality foods for the professionals to take home to cook.

She installed an extra checkout that could be used in the busy period at five o'clock to keep the queues down, as well as doing other things as well. What I found quite reassuring at this point is that Richard Rummelt said there was no way of knowing this was the best possible guiding policy. But it was much better than not having one at all.

Because I think that when we're entrenched in our businesses or in our organisations, it can be easy not to take action, if you're worrying about picking the wrong thing or you're feeling overwhelmed by all the possibilities. So I hope that this will reassure you too that there isn't necessarily going to be one right answer but picking one and trying it out is going to be a much better idea than doing nothing at all.

00:11

Now you've heard this example, what could your guiding policy be? Whether that's a guiding policy you think could be useful for the organisational or business strategy, or a guiding policy that could be perfect for your HR strategy. And when you think of one, I'd love to know what you come up with. You can always let me know by getting in touch with me on LinkedIn.

I'm on there as myself, Fay Wallis. So that's Fay without an E on the end, and Wallis is spelt with an 'is' on the end. It's always wonderful to hear from anyone who listens to the show and it's great to have feedback about the episodes. But now I'm also going to move you on to tell you about another part of the book.

A huge chunk of the book, in fact the whole of part two, focuses on what the author calls sources of power. These are nine sources of power that we're introduced to that he explains are often used in good strategies. There are other sources of power as well but he just lasers in on these nine. And I thought this was one of the most interesting parts of the book because I think that knowing about these sources of power can really help you in your HR or People role when you need to think about how to succeed with a strategy.

00:12

Or you find yourself being asked to advise on the organisation's strategy. So I'll explain what these nine sources of power are and I'll also give you some examples of how you could apply some of them in an HR context. The nine sources of power are, number one, leverage. This involves looking where you can apply a lever to a small spot that is going to make a big difference.

From an HR perspective, this could be about identifying key skills within the organisation that are absolutely essential for driving the organisation's success. So instead of thinking, oh, let's see what we can do about skills across everybody, you focus in on this one critical spot. You develop plans to amplify, develop or acquire these skills, knowing it can make a big difference.

00:13

The second source of power is called prox, see if I can pronounce this, proximate objectives. This means choosing an objective that is feasible, something that is attainable, something that is in reach, rather than something that feels like a huge stretch or it's unclear whether it's achievable. Again, reading about this, I found this quite reassuring because I think we can sometimes convince ourselves that to have an impact we have to do something really, really hard or we have to be sort of shooting for the moon with what we're doing.

Thinking about it from an HR perspective this could mean instead of setting a broad goal like improving company culture, you could focus on more proximate and measurable objectives. Things that feel more tangible and easy and within reach. So an example could be you might want to introduce a peer recognition program within the next quarter.

00:14

This objective is actionable, it's got a clear timeline, and it contributes to the broader goal of enhancing company culture. The third source of power is chain link systems. For this source of power, the author explains that when there is a weak link in a chain, the chain isn't made stronger by strengthening the other links.

So instead, if there's a bottleneck or there's an issue in one place, you need to fix it before you worry about making improvements in other areas. Sometimes you'll have a few weak links in the chain, and in that case you need to start focusing on each of those weak links. Again, thinking about this from an HR perspective, this could mean identifying processes or elements that if you improve them, they're going to enhance the overall performance.

00:15

This could be something like the onboarding process or looking at internal communications. But by working on these weak links, the entire chain or the entire organization can operate much more effectively. The people within it can operate much more effectively.

The fourth source of power is called using design.

And this really is about systems thinking. It means looking at your organisation and the products or services it provides as an ecosystem. You make a change or adjustment to one aspect of it and it will have a knock on effect to another. This means that you need to look at all the different pieces and make adjustments and coordinate them so they fit together to achieve what you're aiming for.

From an HR perspective, this could mean streamlining your processes and making sure that different parts of the HR function are working together in an integrated way instead of sitting in silos. The fifth source of power is focus. I said focus is a big theme within the book, here it is showing up again.

00:16

By having a clear focus on your strategy, by focusing everything on one clear goal like Stephanie did in the example earlier, you are so much more likely to succeed than trying to pursue lots of different goals, which would just water down the effect. Let's think about it from an HR perspective again.

So another example of what you could do from an HR perspective. Let's imagine your company is facing a big challenge with retaining talent in a particular department like IT. Instead of launching a company wide retention program, you could laser focus on the needs and the challenges of the IT department.

This could involve things like specialized career development paths for IT professionals, tailored benefits like certifications or courses, or even hosting tech focused events to foster community and learning. By targeting your efforts specifically where the pain point is, where you can really focus, you could then really address the issue and see a big improvement in retention rates for that department, which is then going to have a hugely positive impact on the whole organisation.

00:17

The sixth source of power is called growth, and I read this one as more of a warning than anything else and how dangerous growth can be for the sake of growing. The book gives examples of companies that have encountered huge problems by acquiring other businesses or merging with other businesses just because they thought growth is automatically a good thing.

Instead, the author argues that healthy growth is normally the outcome of having superior skills and services instead of acquiring other organisations. The seventh source of power is called using advantage. And Richard Rummelt explains that you have a competitive advantage if your business can produce at a lower cost than your competitors, or it can deliver more perceived value, or you've got a mix of the two.

00:18

And to be able to sustain your competitive advantage, your competitors mustn't be able to duplicate it. And he goes into detail on all different mechanisms for making sure that this happens. That your competitors can't duplicate it.

The eighth source of power is using dynamics. He explains that in military strategy, which is where the concept of strategy actually originates from, the defender prefers the high ground, because it's harder to attack and easier to defend.

To get to the high ground in business, you can create it yourself through innovation, by doing something or creating something no one else has done. Or by riding a wave of change. And when he talked about riding the wave of change, it made me think of the businesses that have benefited from the pandemic.

00:19

The book was written years before the pandemic, so he doesn't give any examples about the pandemic, but if you think of how, at the time, Zoom pretty much cornered the market for video conferencing, that's an example of a business riding the wave of change. It's funny to think now it doesn't have such a stronghold anymore.

I've found more and more people are using Microsoft Teams now that Microsoft has improved that functionality.

But from an HR perspective, if we're going to think about this, this could mean things like pioneering new employee benefits models like remote working or providing training options that competitors in the talent market aren't offering or are being slow to adopt.

Being an early adopter of things and being innovative with what you're doing can make your organization a much more attractive employer than your competitors.

00:20

And then finally, the final source of power is inertia and entropy. Successful strategies often owe a lot to the inertia of their rivals, where their rivals don't move, they don't change, they don't adapt.

The example that he gives in the book is of Netflix becoming hugely successful when Blockbuster wouldn't or couldn't adapt, and it stuck to having physical buildings that people had to go into to rent a video or a... I guess it was a DVD by that point, but I remember going into Blockbuster when I was young to get a video every week.

It was really exciting. I think it's a bit sad there isn't Blockbuster anymore. But inertia or lack of movement and progress shows up in other ways too, like inertia in routine. And you will have seen this at work, I'm sure. So you see this when you're in an organization and it's hard to change anything because everyone says.

00:21

'This is the way we do things around here. You just don't understand. This is how we've always done it.'

And I mustn't forget the entropy part of this one. So I said the ninth source of power is inertia and entropy. So entropy is about disorder and decay. And an example from an HR perspective of how you could work against that would be to make sure that you've got feedback loops with employees to understand what's working and what's not, and then be ready to make iterative improvements.

So they haven't got to be massive, massive changes, they can just be tiny tweaks and adjustments, just to make sure that you are constantly improving and growing and you're preventing stagnation and decline. You're not going to end up like Blockbuster Video.

That brings us to the end of the nine sources of power. As I was talking you through all of those, were you able to spot whether your organization is already using some of those sources of power? Or have you started thinking about whether it could start using them? Again, I would love to know.

00:22

If you've enjoyed today's episode and would like to learn more, I'd highly recommend you read the book. I've put off creating this episode for ages because I was so worried about being able to do the book justice. It isn't a quick read, there is a lot to get through, but it is totally worth it.

I ended up buying a paperback version and I also downloaded the audiobook, so I could listen to parts of it while I was driving, because I could see it would take me a while to get through it if I was just reading a few pages at night before I go to sleep. But I learned loads from it and I hope you've learned lots from listening today and that you learn even more if you decide to read the book.

If you've enjoyed today's episode, please can I ask you for a small favour? I'd be hugely grateful if you could do two things for me. Firstly, if you could share the podcast with a friend who you think will find it interesting and useful, that would be brilliant. And secondly, if you could rate and review HR Coffee Time for me on Apple Podcasts or Spotify, that would be wonderful. It makes such a difference in helping the show get discovered by more people and I would love to help as many HR and People professionals as possible with this free podcast. Thank you so much and I look forward to being back again next Friday with the next episode.