Good strategy is built on functional knowledge about what works, what doesnāt, and why. Generally available functional knowledge is essential, but because it is available to all, it can rarely be decisive. The most precious functional knowledge is proprietary, available only to your organization.
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A good strategy includes a set of coherent actions. They are not āimplementationā details; they are the punch in the strategy. A strategy that fails to define a variety of plausible and feasible immediate actions is missing a critical component.
A good strategy has an essential logical structure that I call the kernel. The kernel of a strategy contains three elements: a diagnosis, a guiding policy, and coherent action.
āIf the business is really successful, then there is usually a good strategic logic behind that success, be it hidden or not. But the truth is that many companies, especially large complex companies, donāt really have strategies. At the core, strategy is about focus, and most complex organizations donāt focus their resources. Instead, they pursue multiple goals at once, not concentrating enough resources to achieve a breakthrough in any of them.
In the same way, a good business strategy deals with the edge between the known and the unknown. Again, it is competition with others that pushes us to edges of knowledge. Only there are found the opportunities to keep ahead of rivals. There is no avoiding it. That uneasy sense of ambiguity you feel is real. It is the scent of opportunityā¦
Similarly, we test a new strategic insight against well-established principles and against our accumulated knowledge about the business. If it passes those hurdles, we are faced with trying it out and seeing what happens.
Given that we are working on the edge, asking for a strategy that is guaranteed to work is like asking a scientist for a hypothesis that is guaranteed to be trueāit is a dumb request. The problem of coming up with a good strategy has the same logical structure as the problem of coming up with a good scientific hypothesis. The key differences are that most scientific knowledge is broadly shared, whereas you are working with accumulated wisdom about your business and your industry that is unlike anyone elseās.
A good strategy is, in the end, a hypothesis about what will work. Not a wild theory, but an educated judgment. And there isnāt anyone more educated about your businesses than the group in this room.
To create strategy in any arena requires a great deal of knowledge about the specifics. There is no substitute for on-the-ground experience.