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28.08.07

Richard Rumelt on strategic thinking

In an inteview (registration required) with Dan Lovallo and Lenny Mendonca (McKinsey), Richard Rumelt speaks about the difference of strategic work and activities that mainly focus on resource allocation (such as property acquistion, construction, training etc). However, many organisations take these “long-term resource plans” (as Rumelt terms them) for strategic plans, what is not the case. He proposes to keep both activities separate from each other. This corresponds well with my experience, especially since also the timing is different. Budget/resource-planning is mostly annual and analytical, whereas strategic work should be nonannual, dialogue-based, and hypothesis-driven.

The quote from Rumelt’s encounter with Steve Jobs describes this well:

Then in 1998 I had the chance to talk with Steve Jobs after he’d come back and turned Apple around. I was there to help Telecom Italia try to do a deal with Apple, but after that business was completed I couldn’t help asking a question. “Steve,” I said, “this turnaround at Apple has been impressive. But everything we know about the personal-computer business says that Apple will always have a small niche position. The network externalities are just too strong to upset the de facto “Wintel”3 standard. So what are you trying to do? What’s the longer-term strategy?”

He didn’t agree or disagree with my assessment of the market. He just smiled and said, “I am going to wait for the next big thing.”

Jobs didn’t give me a doorknob-polishing answer. He didn’t say, “We’re cutting costs and we’re making alliances.” He was waiting until the right moment for that predatory leap, which for him was Pixar and then, in an even bigger way, the iPod. That very predatory approach of leaping through the window of opportunity and staying focused on those big wins—not on maintenance activities—is what distinguishes a real entrepreneurial strategy.

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