What’s at the heart of your organization’s biggest challenge? How can you cut through complexity to find a solution that actually works?
Strategy expert Richard Rumelt shares a powerful approach in The Crux: How Leaders Become Strategists. His method helps leaders identify the core problem behind complex issues and build effective strategies to solve them.
Continue reading for an overview of this practical book.
Overview of The Crux: How Leaders Become Strategists
Do you have a complex problem you can’t seem to crack? According to Richard Rumelt in The Crux: How Leaders Become Strategists, you have to first identify its core problem (which Rumelt refers to as “the crux”). From there, you can build a successful strategy that not only solves the problem, but also keeps you from getting bogged down by less important issues.
Rumelt is a strategy expert and professor emeritus at UCLA Anderson School of Management. He has decades of experience in strategic consulting and is the author of Good Strategy Bad Strategy, a guide to formulating a powerful business strategy. The Crux was published in 2022, building on Rumelt’s previous work and responding to the increasing complexity of modern business environments. It’s written for business leaders, strategists, and anyone facing complex challenges in their professional or personal life.
In our overview, we’ll explain what core problems are and how to identify them. We’ll also explain how to use your understanding of the core problem to devise a strategy for overcoming your broader issue, and we’ll detail Rumelt’s advice for implementing that strategy.
(Shortform note: Rumelt discusses different levels of issues that an organization may face. For clarity, we’ll use the term “broad issue” to refer to large-scale, multifaceted issues; the term “challenge” to refer to the smaller-scale issues that comprise a broad issue; and “obstacle” to refer to the smallest-scale issues that comprise a challenge. The “core problem” is a type of challenge.)
What Is the Core Problem in Strategy?
All businesses will face major issues in their operations. For example, a company may create a new market with an innovative product but find that, despite high demand, they’re unable to turn a profit. Or a longstanding company might see their competitors overtaking their market share despite doing everything they can to remain competitive.
Rumelt focuses on complex, broad issues, which he says don’t have:
- Alternatives for solutions: You don’t know your options, so you can’t choose a direction based on what worked in the past.
- Reliable testing methods: You can come up with new solutions, but you can’t test them before trying them—so you don’t know what their outcome would be.
To illustrate what a broad issue might look like, imagine a pharmaceutical company that needs to develop a drug for a rare, novel disease. The disease doesn’t respond to any existing treatment (so there are no known alternatives), and the nature of the disease makes it impossible to test the drug on living subjects (so there are no options for testing). This company is facing a broad issue that will require a brand new approach.
Broad Issues Comprise Challenges
Every broad issue can be broken down into a number of smaller challenges. Rumelt explains that, in order to overcome a broad issue, you need to examine all these challenges and decide which one is the core problem (which he refers to as “the crux”).
He goes on to explain that a core problem is:
- The most impactful challenge in the broad issue—that is, if addressed successfully, it’ll have the most significant impact on your organization’s future
- Something your business is capable of solving
For example, imagine a small restaurant struggling with the broad issue of insufficient revenue. They identify several challenges comprising this issue, including food waste from fresh ingredients going bad, an unfavorable location with limited parking, and inefficient kitchen operations leading to long wait times and customer dissatisfaction. Upon examining these challenges, they determine that reducing food waste wouldn’t make enough of a difference to solve their issue (not impactful), and that moving the location of the restaurant isn’t feasible with their current resources (not solvable).
They decide that the core of their broad issue is inefficient kitchen operations. This core problem is both highly impactful and within their power to solve. Overcoming this challenge will not only resolve their broad issue, but will also substantially improve the future of their business.
Why Does Identifying the Core Problem Matter?
Rumelt explains that, when businesses attempt to tackle a broad issue without identifying and building a strategy around the core problem, they end up wasting time and resources on challenges that either don’t have a significant impact on the issue or turn out to be unsolvable. By focusing on the core problem, strategists can concentrate their efforts and resources on the most crucial aspects of their situation. This approach allows organizations to make meaningful progress on complex issues by identifying and working on the points of the issue that will lead to the best results.
How to Identify the Core Problem
Now that we’ve explained what the core problem is and why it’s important, we’ll discuss how you can identify it. According to Rumelt, the purpose of this process is to fully explore and examine the broad issue you’re facing. If you don’t understand what challenges the broad issue comprises, you can’t identify which of those challenges is the most significant.
Once you’ve confirmed you have a broad issue, you can begin identifying all the smaller challenges that comprise it. This process consists of three steps: 1) gathering information, 2) grouping your challenges, and 3) distilling these into your core problem.
Step 1: Gather Information
To gather information about your broad issue, make a list of every aspect of that issue. That includes not only the challenges it involves, but also the potential solutions and the opportunities your solutions might lead to. Seek input from your executive team and any employees who may have insight into the broad issue. These tactics will help you avoid the tunnel vision that causes you to focus only on the first few problems that you think of.
Rumelt provides some specific tools you can use to gather information about your core problem. These include thinking about the situation from different perspectives and using comparisons.
Different Perspectives
According to Rumelt, strategists should look at the broad issue from different perspectives to reveal aspects of the issue that weren’t immediately obvious. It can also help you uncover underlying assumptions and biases you weren’t aware of, question the established way of doing things, and extend your thinking beyond current constraints and mental boundaries.
Rumelt says that, to take on a new perspective about your broad issue, you should consider the many different ways other people in different positions might view your situation. This includes stakeholders, employees at all levels, customers, outside analysts, and competitors. Any of these perspectives could provide you with a brand new insight that helps you crack your core problem.
For example, imagine a retail chain that’s struggling to maintain its customer base. Looking at the issue purely from the perspective of an executive, it may seem inexplicable. But when the business asks frontline employees for input, they may discover that outdated inventory management is causing stock issues and lost sales. This perspective adds an essential insight to the business’s understanding of their overall broad issue and helps them zero in on the core problem.
Comparisons
Rumelt also advises using comparisons to assess your core problem. He emphasizes that comparisons across industries, countries, or even seemingly unrelated fields can offer valuable insights into organizational issues. This broader scope of comparison can help identify inefficiencies, uncover hidden opportunities, and challenge long-held assumptions. By comparing situations or issues to similar cases in different contexts, strategists can recognize patterns that might not be apparent when they focus solely on their specific situation.
For example, a university with declining enrollment might compare its recruitment strategies to those of tech companies attracting top talent, inspiring new approaches to student outreach and program design.
Consider the following comparisons you could make:
- Compare your current situation to your organization’s history. How have you dealt with broad issues in the past? What tactics did you take with those broad issues? If they succeeded, why? If they failed, why?
- Compare your situation to a similar situation faced by a competitor. Someone in your field may have already faced similar broad issues; consider how they approached those issues and how successful they were in overcoming them.
- Compare your situation to an analogous situation faced by an organization in another industry. Comparisons with other industries can reveal practices or approaches that could be adapted to solve problems in your industry.
- Compare your situation to an analogous historical situation. Analogies to historical situations can provide insights into how similar issues have been addressed in the past and what outcomes resulted.
Step 2: Group the Information
Rumelt says that once you have all this information, you should group your identified challenges into related categories. For example, you may have one group of challenges related to product design, one group related to customer satisfaction, and one group related to increasing revenue. These groupings will help you identify the differences in your identified challenges, including which aspects of the organization they relate to, how important they are, and how easy they’ll be to solve. This will then give you a better understanding of the overall broad issue and prepare you for the next step: distilling.
Step 3: Distill the Information
At this stage, you’ll likely find that the list of challenges you’ve identified is far too long for you to address all of them. That’s why you’ll need to narrow your list to find the core problem. Your core problem will be impactful and difficult (but not impossible) to solve. In addition, Rumelt says, your core problem will also be urgent—something that you need to address right away.
Check each item on your list to see if they’re impactful and difficult to solve, and rank them according to urgency. If an item is missing one of the three criteria, eliminate it. This will lead you to your core problem.
How to Use Your Core Problem to Formulate Your Strategy
Once you’ve correctly identified the core problem of the broad issue you’re facing, you can begin working toward a solution for that issue. Rumelt explains that the way to overcome issues is through a powerful strategy—a combination of policy and actions geared toward problem-solving. The core problem tells you what challenge to focus on, but the strategy tells you how to approach it.
After identifying the core problem, create a strategy that will guide your actions in addressing this critical challenge. This strategy should 1) be based on solving a problem, not achieving a goal, 2) include near-term objectives, 3) utilize your organization’s unique advantages, and 4) be strategically coherent. We’ll discuss each of these characteristics in detail next.
Focus on Solving, Not Achieving
A powerful strategy is focused on solving a problem, not achieving a goal, explains Rumelt. A goal establishes what the organization is striving for, but if it’s not grounded in an understanding of the problem you’re trying to solve, it will be arbitrary and unproductive. When you examine your core problem, determine what specific obstacles comprise that problem, as well as what you’ll need to solve them and what you’ll gain from solving them. Then, prioritize these obstacles based on their relevance to your core problem and whether you can solve them with your current resources and capabilities.
Many leaders make the mistake of devising their strategy according to the organization’s pre-existing goals, but since those goals aren’t designed to solve the core problem, this approach can distract from the core problem and lead you to focus your energy on the wrong objective. This doesn’t mean you shouldn’t establish goals; rather, you should formulate your strategy based on your broad issue, and then set your goals according to that strategy.
For example, a startup might find that their phone app is receiving low user engagement; they identify poor functionality as their core problem. Instead of setting an arbitrary, achievement-focused goal to “double revenue,” they form a strategy to enhance the app’s functionality and set a goal based on that, such as “increase user engagement by 50%.” This goal is more clearly linked to solving their problem and will help them determine where to direct their resources and energy.
Near-Term Objectives
Strategy isn’t just about ideas: It’s a combination of both policy and actions. Rumelt explains that, once you have your core problem, you’ll establish near-term, achievable goals that make progress toward addressing the problem. He suggests focusing on what you can accomplish in one to three years rather than thinking about what you want to see in 10 years. This is because the prospect of achieving an important goal in the near future is more motivating than a long-term vision and allows leaders to quickly set successive, similarly motivating goals to keep the team engaged. It also makes it easier for teams to put certain goals on hold, knowing they’ll still be able to pursue them in a year or two.
For example, a software company might determine that the core problem they’re facing is customer turnover. Based on the strategy they’ve devised, the company sets a one-year objective to reduce customer churn by 20% through improved onboarding and customer support processes. After achieving this goal within the allotted year, the company is energized and ready to tackle their next challenge. On the other hand, if they set a longer-term goal not based on their strategy, such as increasing sales by 50% within five years, they may feel like they’re on an endless trek toward a nebulous goal many years in the future.
Use Your Organization’s Advantages
As you formulate your strategy, explains Rumelt, you should incorporate ideas and actions that play into your organization’s strengths and current advantages. This will help you create a strategy that keeps you profitable against competitors. Such advantages may include specialized information or knowledge, better placement in the market, superior efficiency, or superior management. For example, if you know your organization produces a higher quality of products at the same price as your competitors, you should capitalize on this strength as part of your strategy.
Strategic Coherence
According to Rumelt, a powerful strategy must also be coherent. This means that every action you take in pursuing your strategy must align with the policy you’ve set forward. If you’re acting in opposition to your policy, you’ll slow your progress toward overcoming your broad issue because your actions won’t be focused on your core problem.
For example, if a fashion brand’s strategy centers around environmental sustainability, all of its actions—from sourcing materials to manufacturing operations to marketing campaigns—must consistently align with its eco-friendly policy. If they begin using materials from non-renewable sources, their strategy will lose coherence.
Implementing Your Strategy
Once you’ve identified your core problem and used it to devise a powerful strategy, it’s time to put that strategy into action. Rumelt says this requires you to overcome resistance within your organization and authoritatively make decisions that may not always be popular.
Overcoming Organizational Resistance
Rumelt explains that the biggest roadblocks in effective strategy implementation often come from the organization itself. This is particularly true of larger, more successful organizations. Such establishments are strong in that they’ve figured out how to run on a large scale, but this success can lead to organizational inertia: They become complacent, and they’re resistant to changing traditions and established systems due to bureaucracy, a lack of clear guidelines, and a culture that values conformity over creativity.
For example, a long-established bank may have found that during their inception, their personal interactions with customers gave them an edge over their competitors. However, as technology in the industry advances, the company struggles to adopt digital banking solutions due to outdated IT systems and resistance from employees accustomed to traditional banking methods.
To overcome organizational resistance, you must get commitment from leadership and cut out distractions.
Commitment From Leadership
It’s difficult to break out of traditions and routines, so you need a committed leadership team who is consistently working to implement the strategy and monitor progress. For example, an established university might be working on a comprehensive curriculum overhaul. The leadership, such as the university president and board, can champion the project by engaging with faculty, students, and alumni to build support and address concerns.
Cutting Out Distractions
You can also overcome resistance by refining your organization’s focus and cutting out distractions, Rumelt explains. Cut down on activities that don’t serve your strategy, either by delegating them to third parties or eliminating them altogether. Additionally, narrow your company’s focus by discontinuing products and services that impede progress or interfere with your strategy.
For example, a software company might discontinue support for legacy products, allowing it to reallocate resources to developing new, more competitive offerings. Or a restaurant chain may simplify its menu, eliminating low-margin items to focus on signature dishes, thus improving kitchen efficiency and food quality.
Making Unpopular Decisions
In addition to overcoming organizational inertia, implementing your strategy requires you to make, communicate, and enforce strong leadership decisions—some of which may be unpopular. Rumelt explains that you’ll have to prioritize certain projects over others, devoting more time, resources, and personnel to the actions that align with your strategy. This may be challenging for a leader who isn’t comfortable telling people what to do and frustrating for team members who feel committed to those lower-priority projects. However, if you can’t make and enforce these difficult decisions, your strategy won’t succeed.
When You Lack the Authority to Lead
Sometimes, you may discover that you lack sufficient authority in your organization to make and implement decisions in pursuit of your strategy. This is often the case in large bureaucracies or with temporary leadership positions. In such situations, you’ll be unable to implement your strategy unless you can first effect some structural change that grants you more authority. This may not always be possible, but if you’re committed to making it happen, Rumelt recommends that you formulate your strategy for gaining more authority using the same methods described above.
