Book notes: Good strategy, bad strategy by Richard Rumelt

A very interesting book on buisness strategy. It focuses on what makes a strategy and how to distiguish the good from the bad. I would recommend it for anyone involved in running a buiness who would benifit from a framework for thinking about strategy. Some of the best stuff in the book is going in to detail about why a strategy is bad and how organizations end up choosing bad strategies. If you’ve worked in certain organizitions you may find this uncorfortably close to home(or just quite funny).
“My strategy is to win.” this is a common example of bad strategy, the problem is, it is not a strategy, it is an goal. A strategy should define how to achieve an goal. Executives who complain about a strategy failing because of execution problems have also confused strategy with goal setting. A good strategy should be achievable and define the steps to achieve a goal.
A strategy has 3 components:
  1. Diagnosis: This is the challenge we are facing. Should replace the overwheling complixity of reality with soemthing the gets to the heart of the issue faced.
  2. Guiding principle: An approach to facing the problem laid out in the diagnosis.
  3. Coherent action: A set of actions to take to achieve your goals.
Good strategy is as much about what you are not going to do as what you are. By definition focussing on one area means deciding you are not going to focus on something else. Good strategy focuses your strengths on your oppenents weaknesses. What is the area in which you can win? How can you move the conflict there?
4 Marks of bad strategy
  1. Fluff – Example of a real world banks strategy: “Our fundemental strategy is one of customer-centric intermediation” translated means “Our fundemental strategy is being a bank”
  2. Failure to define challenge – International Harvester had a detailed strategic plan borken up into 5 keys sections around how to increases revenue and reduce costs in each LOB. But the real problem was  it had half the profit of it’s compeitiors because of it’s terrible labour relations and archiac company rules. After implementation the plan worked for a while before internal labour relationtion started to pull the company apart, there was a 6 month strike and then the company had to be borken up and sold.
  3. Mistaken for goals: “My strategy is to win”.
  4. Wrong  objectives: Either because they don’t lead to good outcomes are are unachievable.
The reason there is so much bad strategy is because decisions are hard. Good strategy requires choosing one option over another.
Often bad strategy comes from trying to please everyone politically.
Bad strategy can also come from New thought, the desire to not consider any negativity and have everyone thinking the same way.
Good strategies:
Strategy is visible as a coordinated action impossed on a system. It is an exercise in centralized power used to overcome the natural workings of a system. This coordination is unnatural in the sense that it would not occur without the hand of strategy.
Attacking a segment of the market with a buisness system supplying more value to that segment than competitors is called focus. A concentration and coordination that creates an advantage.
It has become an article of almost munquestioned faith that growth is a good thing. The problem with growth by aquisition is you normally over pay by about 25% for a public company. Unless you can buy the competition for less than they are worth or add more valur to the target, you will be making a loss.
Improvement is not a natural process. Bricklayers had been laying bricks for 1000s of years with no improvement in efficiency before Frank Gilbreth studied the process and was able to double the productivity by moving the pallets to chest hieght so the bricklayers didn’t have to stoop and adding movable scaffolds. Incentives alone are not enough. The details of a process must be re-examined and assumptions challenged.
Broadening competitive advantage means expanding an existing advantage into new areas. Expansions based on knowledge/expertease based advantage is not used up by the exapnasion, and may even be enhanced by it. But extention based on brand/relationship/reputation may be dilluted or damaged by careless expansion.
An example is Disney did not diluting their brand by expanding there movies outside of there traditional animated movies.
All things succub to entorpy, most of a mangement consultants job is undoing entropy. An example is General motors. There numbers of cars lines they had expanded to 12 with many competeting with each other for the same market. The simple solution was to massively scale back the number.
3 habits of good strategy thinking
  1. Have a variety of tools for fighting myopia and guiding attention.
  2. Develop the ability to question your own judgement.
  3. Cultivate the habit of recording judgements so you can improve.

Book review: The lean manager

The lean manager is a book about the manager of a car factory in France. His company has just gone through a takeover and the new CEO informs him he must close the factory. After begging the CEO agrees that if significant improvements are made to productivity, before the closure can be arranged(it’s France, labor laws are very complex), he may keep it open.

How is our hero to make these improvements at a factory that has been stagnating for so long?

Through the application of LEAN principles.

If you have worked in any manufacturing/tech industry jobs you will have heard the term LEAN. LEAN management was a system developed by Toyota that led to huge improvements in their productivity. This book is from the same family as the Phoenix project, which I wrote about here, a management book in the form of a novel. Like the Phoenix project, it is also a surprisingly good novel. A few empty characterizations aside the story was engaging and I found myself really hoping the factory would turn around and the jobs would be saved.

What is interesting from a management/LEAN point of view is in the book the factory already follows LEAN processes. They have a continuous-improvement officer and the main character has already gained various LEAN certifications. What the company CEO teaches the manager is there is a difference between the LEAN process, which is a prescriptive set of actions to apply and true LEAN working, which is more about educating employees to collectively solve problems.

The CEO’s first advice for improving the factory has 3 parts:
1: Fix quality problems
2: Reduce inventory to free up cash
3: Lower costs by eliminating waste found doing 1 and 2

From this advice the manager tries installing red bins at every point in the factory. When a part comes off a line in a defective state it is put in the red bin. Multiple times a day, inspections are made to check on the contents of the red bins. At first parts are put into the red bins, but this doesn’t feed through to improvements. Senior managers argue about the reason for different defects and nothing is really done.

This leads to next issue in order for people to solve problems there needs to be agreement on what the problem is. Only then can group problem solving begin. There can only be agreement on what the problem is, if these things are clearly tracked. This involved better monitoring and much more education of the workers in terms of what the quality standards were.

Once there was clear agreement on what the problem was and how progress could be tracked then they could start to look at which teams and people were the most productive and start to feed the improvements they had across the factory. This is where continuous improvement could start to happen.

My take-aways

To create a good product, you must have a good process. But a good process only comes from good people and having those people engaged with the process. The first step to improving your product is improving your people. Improving people is not simply a matter of sending existing employees on training courses or hiring new more qualified new staff. It is about building a culture of continuous improvement and collaboration where the best ideas from one employee are adapted by the rest of his team and then the rest of the company. A factory is not just about part flow, but also knowledge flow. To improve parts, improve people.

In trying to create such a culture the first problem encountered at the plant is that it is very hard for employees to work together to solve problem. People look to avoid blame. If something goes wrong, the warehouse will blame the engineers, who will blame the maintenance teams, and so on. In order to solve problems together the first barrier is there must be consensus on what the problem is. When there is a problem it must be stopped at source. A bad part must be caught at the place it is made and not become the part that caused the problem in a larger component.

This is why the pull system goes hand in hand with LEAN. The shorter work cycles in a pull system mean it is much easier to identify where the process goes wrong and get people together to fix it.

Kaizen is term used by Toyota. It roughly translates to change for better. But as applied by Toyota is a thing meet for. When engaged in Kaizen there is a checklist to go through:

  1. What is the problem we are trying to solve?
  2. What result do we expect?
  3. What principle should we apply?
  4. Did we get the result we wanted? Why? What did we learn?

The Toyota 4 obsessions

  1. Managing production sites through stable teams of multi-skilled workers
  2. Get everyone involved in quality
  3. Just in time process by reducing lead time
  4. All around cost reduction by eliminating waste

Another big theme in the book and a solution to so many problems is what they term “Go and see”. How do you get people to improve productivity? Go and see who is doing a good job and what they are doing. How do you reduce waste? Go and see what is being wasted. How do you get people to take responsibility for process? Go and see what they are worrying about. This really rang true to me, so much of what I’ve seen when I’ve worked at organizations with bad cultures is a lack of managers actually looking into what is going on.

The book makes clear the distinction between this and micro managing. Your not going in to fix the problem, you don’t need to have the solution to a waste or productivity issue. Your going in to listen and understand, to see why things aren’t happening and bring the right people together to solve the right problems. The Toyota way says that a manager should wash his hands 3 times every day, because every day he is going to the factory floor 3 times to see what is happening.

This concept of go and see is the thing I most took away from the book. There are all kinds of tools for tracking performance and productivity, and many of them are great, but there is no substitute for actually going and seeing.


Overall I really enjoyed this book and would recommend it for anyone involved in management or just interested in understanding LEAN a bit better. You can pick it up on amazon here.

Book: Python Deep Learing

Me and my co-authors recently finished work on a book called Python Deep Learning. It is now available on amazon 

The book aims to give a broad introduction to deep learning and show how to implement and use various techniques in Python. It includes examples of many applications of deep learning, including image recognition, speech recognition, anomaly detection in financial data.

My 2 chapters focus on my particular interest in using deep learning to play games. I’ve included examples of building AI in Python with Tensorflow that can master  Pong, Breakout and Go.

If you are interested, this code KVGRSF30 gives a 30% discount for the e-book version from the publishers website.

Book review: The Phoenix Project

This book is about IT project management, but unlike most management books, instead of being a series of case studies, it is written like a novel. The main character, Bill, is suddenly promoted from head of middleware technology to CTO at a time when the company, Parts limited, is failing apart at the seems.

What I found most surprising was that the book actually worked as a novel. I found myself genuinely caring about Bill and people he worked with and getting sucked in to the drama of delivering the project.

Also for a book about IT project management it’s amazing what a page turner it is. Especially in the early sections of the book where everything is going wrong. I found myself wondering how I would deal with his different problems which made me really wish there was a deathtrap dungeon style “choose your own adventure” book based around IT project management:

  • Your CEO is demanding you release the project at the pre-agreed date though you have major worries that it will not scale in production, do you:
    • Accept his demands release the change: turn to page 72
    • Refuse to do the release: turn to page 143
Maybe one day…
As a developer I also found it interesting learning how other aspects of the IT organization work. There is quite a lot of details on what a CIO, CEO and head of sales actually do.
Also though I’m sure the transformations they make in the book are possible, many companies have successfully made it, I found the time scale for these changes a little improbable and it seemed too easy to get buy in from people who were initially so sceptical.

Things to take away from the book

  • In order to mange anything you need to know what work is actually happening.
  • If you have a constraint on any system improving anything but that constraint is not actually going to make things better. In the book a single operations guy is the constraint for half the IT organization.
  • IT should be integrated into all aspects of an organization not seen as an external department in itself.
  • Operations and development need to be integrated.
  • Limit work in progress.
  • Understand The 3 ways:
    • Systems thinking: The flow of work from business requirements through development and ops to the customer.
    • Amplify feedback loops: Make sure issues found in any part of the process are fed back to where they can be fixed. If ops had a problem it may have started with dev. If dev had a problem maybe it needs to go back to the requirements.
    • Culture of continual experimentation and learning: Take the time to improve things, it will be worth it.
  • For IT there are 4 types of work:
    • Business projects
    • Internal projects
    • Operational changes
    • Unplanned work