What makes the difference between a successful strategy and one that falls flat? How can you turn your biggest challenges into opportunities for growth?
According to Richard Rumelt, a powerful strategy starts with identifying your core problem and then building a focused approach around it. By understanding the key elements of effective strategy-making, you can transform obstacles into stepping stones for success.
Keep reading to discover how to create a problem-solving strategy that addresses your challenges head-on.
Formulating a Problem-Solving 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. A core problem tells you what challenge to focus on, but a problem-solving 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 problem-solving 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.
(Shortform note: Rumelt goes into greater detail about what constitutes a powerful strategy in Good Strategy Bad Strategy. He explains that just having a strategy is a strategy in itself, because it keeps you from getting swept up in focusing only on day-to-day issues with only a vague idea of what you want from the future, as most organizations do. However, you shouldn’t rely on one strategy to fix every problem—in The 33 Strategies of War, Robert Greene warns that there isn’t a formula for success and that you should adapt your strategy to your situation.)
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 problem-solving 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.
| The History of Problem-Focused Management Philosophies Rumelt’s focus on solving problems rather than achieving predetermined goals represents a significant evolution in management philosophies. Historically, management approaches like Management by Objectives (MBO), popularized by Peter Drucker in the 1950s, emphasized setting clear, measurable goals. This approach became more structured with the adoption of the SMART criteria in the 1980s. However, companies soon recognized that rigid goal-setting might overlook fundamental problems in organizations. Methodologies focused on problem-solving began to gain prominence with the development of Total Quality Management in the 1950s and Six Sigma in the 1980s, both of which emphasized data-driven problem-solving. These methodologies advocated continuous improvement and addressing root causes rather than just meeting targets. Contemporary frameworks, such as Agile and Design Thinking, emphasize flexibility and understanding customer needs, reflecting a shift toward solving underlying issues. They advocate iterative processes and receptiveness to change, which better align with dynamic business environments. Rumelt’s approach aligns with this historical trend, reflecting a growing recognition in the business world that addressing fundamental problems often leads to more effective and sustainable outcomes than pursuing predefined objectives. |
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.
(Shortform note: To establish your near-term objectives and measure your progress, you could use the Objectives and Key Results (or OKR) management system. In Measure What Matters, John Doerr explains that the OKR system involves identifying the objectives your company should prioritize and establishing key results, or the steps you need to take to achieve those objectives. Doerr suggests selecting three to five objectives, with three to five key results each. He also advises focusing on the immediate future, using objectives you want to accomplish in the next three to 12 months. Then, use your key results to measure progress toward your objectives, which will help you track progress toward solving your core problem.)
Use Your Organization’s Advantages
As you formulate your problem-solving 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.
(Shortform note: Smaller companies with fewer resources may struggle to incorporate their strengths into their strategies, particularly when they’re going up against larger, more resource-rich competitors. Business professors Gary Hamel and C.K. Prahalad suggest that smaller companies are better gaining additional layers of advantage—for example, by expanding their operations—rather than focusing solely on their existing strengths. Hamel and Prahalad also recommend competitive collaboration, or working together with competitors to strengthen your company—for example, by learning about their operations and applying a competitor’s practices in your own organization.)
Strategic Coherence
According to Rumelt, a problem-solving 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.
(Shortform note: Some experts suggest a reverse approach to achieving strategic coherence. They argue that the first step is to identify and develop your organization’s capabilities, and then assess the market opportunities you want to take advantage of (in other words, the actions you can or will take). From there, you develop the policy aspect of your strategy. This method may help you better align your strategy with your company’s abilities and opportunities rather than just your goals.)
