QUESTION $1$

$[20$ MARKS$]$

Atsmon:

What are the differences between what you call good strategy and bad strategy, and why is the latter

on the rise?

Rumelt:

Certainly, the trend over the past $30$ to $40$ years has been in the direction of bad strategy. It$$s a social

contagion of sorts. In fact, my provisional title for the book was Breaking the Bad Strategy Habit. Many

companies treat strategy as a way of presenting to the board and to the investing public their ambitions

for performance, and they confuse that with having a strategy. Some of it is the victory of finance as

the language of business because we talk about shareholder return as the ultimate measure of

success. Executives end up saying, $$Our strategy is to achieve these results,$$ but that is not strategy.

Strategy is problem$-$solving. It is how you overcome the obstacles that stand between where you are

and what you want to achieve. There are, of course, companies and individuals with brilliant insights

into what$$s happening in the world and how to adapt to or take advantage of it$,$ but I am often asked

to participate in strategy sessions, and a lot of them are awfully banal. In a typical session, the CEO

will announce certain performance goals: $$We want to grow this fast, and we want to have this rate of

profitability.$$ Maybe they will throw out some things about safety and the environment, and that$$s their

strategy. But that$$s not a strategy $$ that$$s a set of ambitions.

Strategy is how you overcome the obstacles that stand between where you are and what you want to

achieve.

Nowadays, I first ask, $$What are your ambitions?$$ If you have six or seven senior leaders in the room,

you get a big spread. It$$s not just about shareholder returns; it$$s about success, and respect, and

responsibility. That$$s fine. We all have ambitions. In The Crux, I write that when I was $25,$ I wanted to

climb the big mountains of the world. I wanted to be a professor of business and an inspiring teacher.

I wanted to marry a beautiful woman and have successful children. I wanted to drive a Morgan Plus

$4$ Drophead. Those were desires. Could I accomplish them all at once? Of course not. The beginning

of strategy is$,$ which of these ambitions can we make progress on today or in the near future? Then

you formulate an action plan. This gap between action and ambition is where most bad strategies

come from. Bad strategy is almost a literary form that uses PowerPoint slides to say, $$Here is how we

will look as a company in a year or in three years.$$ That$$s interesting, but it$$s not a strategy.

$$Strategy is how you overcome the obstacles that stand between where you are and what you

want to achieve.$$ What are your thoughts on this straight$-$forward statement made by Rumelt,

given the complex nature of planning, management, and strategy and its differing facets in

terms of corporate, functional and business strategy?