Leaders create bad strategy by mistakenly treating strategy work as an exercise in goal setting rather than problem solving.  ~Richard P. Rumelt

Here’s where I see a lot of organizations getting stuck when trying to create a strategy.  They start the strategic planning process with a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats).  They typically have no problem identifying their strengths.  However, I’ve found it helpful to push back on their strengths and ask on which of those strengths are they out-performing their competition.  Now we’re really zeroing in on where they might have an advantage (it takes an advantage to truly be strategic).  Suddenly, the list of strengths narrows fairly quickly.

The next place they get stuck is on the opportunities.  Their first inclination is to try and turn fixing every weakness into an opportunity and that’s missing the point.  Weaknesses are internal to the organization; opportunities are external.  What’s happening external, which in many cases is a problem that needs to be solved?

Once opportunities have been identified, how can you take the most promising opportunity (i.e., problem to be solved) and leverage your strengths (advantages) to solve the problem?  Now we’re talking strategy.

The weaknesses (internal) and threats (internal) need to be addressed; most specifically those that could be barriers to executing the strategy, but they likely aren’t going to be the core of the strategy.

Richard P. Rumelt, author of Good Strategy Bad Strategy says:

A good strategy does more than urge us forward toward a goal or vision.  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.

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 a coherent action.

Here’s an example using Rumelt’s kernel to describe Southwest Airline’s strategy.

1. Diagnosis (why it’s important, the problem you are going to solve, the most promising opportunity)

Air travel was mostly for the wealthy and business travelers.  Southwest Airlines was going to democratize air travel so families could use air travel as an option.

2. A guiding policy (how you are going to solve the problem, strengths or advantage)                                                                                                                                                                    Always have the lowest fare, the most on-time flights, and make air travel fun.

3. A coherent action (what, specifically, you are going to do to solve the problem)

No seat assignments                                                                                                                         Bags fly free                                                                                                                                             Hire only employees who are the right personality fit                                                                     Be the first to offer profit sharing for employees                                                                               Etc.

With that example and using Rumelt’s definition—”A good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them”— does your organization have a good strategy or a bad strategy?