Strategy Has Three Parts
Larson borrows Rumelt’s kernel from Good Strategy, Bad Strategy. A strategy describes the problem and how to solve it:
- Diagnosis: a claim about what is actually going on. It names the one or two things that matter, discards the rest, and can be wrong.
- Guiding policy: the approach and its tradeoffs. A policy is a constraint that says what we will not do. No visible tradeoff means it’s an aspiration.
- Coherent actions: concrete steps that reinforce each other. Following from the policy individually isn’t enough.
His addition: write strategy bottom-up. Write down how you actually decided the last few similar cases, then extract the policy that was already operating.
Vision Dissolves Tradeoffs
A vision describes the future in which the strategy succeeded, specifically one where today’s tradeoffs are no longer mutually exclusive. A vision that doesn’t dissolve a real tradeoff is just optimism.
Its parts:
- Vision statement: one or two sentences, specific enough that someone could disagree
- Value proposition: the value the org creates for users and the company
- Capabilities: what the org will be able to do. The gap to today is the strategy backlog.
- Solved constraints: the limits binding us today that will be gone
- Future constraints: what becomes scarce next. Naming it keeps the vision honest.
- Reference material: the data the vision rests on
- Narrative: prose memorable enough that people repeat it without the document
Anatomy of a Goal
A goal has four components: a target (where we want to be), a baseline (where we are), a trend (current velocity), and a time frame.
Goals come in two types. Investments increase a metric, baselines keep one steady. Good goals pair them: push one number while holding a controlling one in check.
They also live at two altitudes. A directional goal sits above the actions and derives from diagnosis and policy. Missing it after doing the actions refutes the diagnosis. An execution goal sits below a single action and instruments it. Missing it refutes that action only, so you pick another one under the same policy.