Meta notes on reading the book:

• the first third sets out the principles

  • leverage advantage against an opportunity
  • kernel of strategy: diagnosis of the problem, guiding policy and coherent actions

• the middle third shows case studies of different types of advantage being used

  • towards the end it goes a bit off the rails

• the last third is a bit vague and waffly

• Good strategy: leveraging strength (advantage) against an opportunity. Coherence and viewpoint shifts can create strength.

• Maybe useful exercise: what are the leaders in your field doing / how did they become leaders?

• Some common principles

  • Focusing efforts on a narrow area (pressure)
  • Saying painful ‘no’s
  • Doing the ‘obvious’ thing

• Andy Marshall US military strategy: do things that were cheap for the US (better technology), expensive for the USSR, and didn’t give the USSR some offensive advantage. Or more abstractly: use your relative advantages to impose out-of-proportion costs on the opposition and complicate their problem of competing.

• Meta note: a lot of the book focuses on zero-sum strategy, or competitive strategy. Need to think about how to make it more widely applicable to altruistic strategy / field strategy.

• Bad strategy

  • Fluff

    A hallmark of true expertise and insight is making a complex subject understandable. A hallmark of mediocrity and bad strategy is unnecessary complexity—a flurry of fluff masking an absence of substance.

  • Fails to recognise or define challenge

    Underperformance is a result. The true challenges are the reasons for the underperformance.

  • Mistakes goals for strategy

  • Bad strategic objectives: fails to address challenge or impracticable

    • Should have one or few objectives

• Vision/mission/values statements often meaningless and are not strategy

  • And thinking about success does not manifest success
  • [He seems to go into a chapter-long rant about this, which probably should just be cut from the book imo]

• Good strategy

  • Diagnosis: educated guess as to what the situation is. Can be different valid guesses. Useful if they are action guiding / point to levers.

  • Guiding policy: what in broad strokes will you to do address the diagnosis. Should draw on advantage. Ideally reduces complexity of the situation, anticipates actions of others, focuses on few areas, and leads to sets of actions that are coherent.

    In nonprofit and public policy situations, good strategy creates advantage by magnifying the effects of resources and actions.

  • Coherent actions: what things will you need to do to get the guiding policy implemented? What would you do if you were forced to otherwise the organisation would collapse in 6 months?

    Strategy is visible as coordinated action imposed on a system. When I say strategy is “imposed,” I mean just that. 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.

    The idea of centralized direction may set off warning bells in a modern educated person. […] One of the great lessons of the twentieth century—the most dramatic controlled experiment in human history—was that centrally controlled economies are grossly inefficient. […] But decentralized decision making cannot do everything. In particular, it may fail when either the costs or benefits of actions are not borne by the decentralized actors. The split between the costs and benefits may occur across organizational units or between the present and the future. And decentralized coordination is difficult when benefits accrue only if decisions are properly coordinated. Of course, centrally designed policies can also fail if the decision makers are foolish, in the pay of special interest groups, or simply choose incorrectly.

• Sources of advantage

  • Leverage: focusing resources on few areas. How to prioritise those areas?
    • Anticipation: what do you expect to happen in future
    • Pivot point: given your future anticipations, where will there be imbalances you can exploit? (the book is quite vague here). What can you do that your competitors can’t (or won’t)?
    • Concentration: only work on a few objectives
  • Proximate objectives: creating objectives that are close enough to be feasible
    • Example: made up specification for moon landing.
    • Layer skills and company competencies: learn to walk before you run
  • Chain-link systems: identify weakest link in a chain, and strengthen it
    • Related to bottlenecks or constraints (see The Goal)
    • Can be hard to improve if all links roughly equal because of quality matching: improvements above the level don’t result in return so no incentive without coordination.
  • Design: intention about how to use resources cohesively
    • Easier with higher-quality resources, or unique resources (strategic resources)
  • Focus: target a narrow area in a way that gives you advantage
    • Example: Crown focusing on small-runs
  • Dynamics: exploit windows of opportunity to get on the high ground. Guideposts (ways to spot and navigate a transition):
    • Rising fixed costs
    • Changes in regulation, particularly deregulation (because competitors likely to be stuck in their ways and not forced out of them)
    • Predictable biases in forecasting (i.e. other people making wrong predictions/assumptions)
      • Expecting demand for durable products (e.g. TVs) will keep going up - but actually usually peaks and then goes down
      • Expecting future winners will look like current winners - but future winners will have different advantage, not just replicate current ones exactly
    • Incumbent response: figure out what they will do
    • Attractor states: where will industry eventually end up (e.g. IP everywhere, rather than different protocols)
      • • what will accelerate or slow progress to this (e.g. music sharing accelerated internet adoption, uncertain licensing slowed nuclear power)
  • Inertia (not changing) and entropy (increasing disorder)
    • Can exploit the inertia of rivals: gain advantage by being nimble
    • Inertia and entropy can be greatest threat to large organizations
    • Can break inertia by (with senior leader buy-in):
      • Hiring managers from firms using better methods
      • Acquiring a firm with better methods
      • Using consultants
      • Redesigning routines
    • How to fix culture:
      • Simplify: eliminate complex routines and processes, remove excess administration or nonessential operations.
      • Fragment: split apart units that can be separated - reduce politics, cross-subsidies, and unnecessary coordination
      • Triage and support remaining units: repair damage caused by the above steps
        • Replace dominant figures who set the culture in negative ways
        • Setting a challenging goal that the unit can achieve independently may also help break inertia
    • Careful: if slow incumbent suffering inertia adapts, you might be at risk if this is your only advantage. E.g. competitive local exchange carriers. Particularly as your customers might be more open to switching.
    • Entropy can lead to self-competition, e.g. General Motor’s set of cars
  • [Not mentioned explicitly] Knowledge
    • Expertise, technical know-how
    • Data on customers, suppliers, products etc.

• Adding value requires one of:

  • Deepening advantage (e.g. reduce costs, increase revenues)
  • Broadening advantage (e.g. expand to new markets)
  • Creating more demand for advantaged products (e.g. pomegrante health research)
  • Defending advantage, i.e. so competitors can’t replicate it (e.g. patents, copyright, brand names, data)

• Evaluate value of different offerings with a hump chart:

  • Rank products 1-N by profit
  • Identify cumulative +/- adding each one
  • More description: http://www.leadershipsolutions.co.za/diagnosing-the-internal-environment.html

• NVIDIA case study

  • Diagnosis: graphics hardware could be developed faster than semiconductors, and there was more demand for parallel computing than in CPUs
  • Guiding policy: deliver desktop 3D graphics capability every 6 months
  • Coherent actions:
    • 3 teams running on 18-month timescales (for a release every 6 months)
    • Advanced simulation to find design faults, to avoid delays / discovering hardware bugs late
    • Taking board driver development in-house, to reduce uncertainties about delivery dates
    • Emulation of boards with driver development, to advance when they could start working on a driver
    • (later) Moving board development to contractors who had to meet Nvidia’s standards, rather than the other way around

• Thinking about strategy

  • Hypothesis for how things might go / educated guess. If it was easy or obvious, it probably wouldn’t be competitive.
  • Make a list of the 10 most important things, then start doing the first one
  • Get a good understanding of the current situation, and what’s happening ‘on the ground’
  • Be able to fight your myopia, guide your attention, and question your judgement (including finding where your ideas fail to improve them)
  • Make and record judgements
    • Can do this with case studies, press releases, meetings
  • Write down all random insights, categorise by diagnosis / policy / action, and start filling in the blanks
    • Usually starting with diagnosis insight is best though

• Random trivia

  • Dark matter and dark energy, wow
  • Coffeehouses in London, where Newton and Adam Smith worked. Had newspapers, books, and debate. One turned into Lloyds of London and another into the London Stock Exchange.
    • Later turned into teahouses, as tea became more popular. US didn’t have this transition because often repeated interruptions to tea supplies (Boston Tea Party, Revolution, War of 1812), so stayed on coffee.