Strategy as Design
Craft strategy like an engineer designs a product: tight integration under constraints
Rumelt draws an analogy between good strategy and good engineering design. Just as a great product like a BMW achieves its performance through the tight integration of many components, a great strategy achieves its power through the coordinated design of multiple elements.
A design-type strategy involves premeditated coordination of actions in time and space, each element chosen to work with and reinforce the others. Unlike strategies that emerge organically, design-type strategies are deliberately crafted to exploit specific advantages and create synergies between different elements.
The trade-off inherent in design-type strategy is between tight configuration (which creates power) and resources (which provide flexibility). The more tightly configured a strategy, the more powerful it is - but the more vulnerable it becomes to changes that break the configuration.
- Strategy power comes from the tight integration of multiple elements
- Design-type strategies impose order on chaos through deliberate coordination
- There is a trade-off between tight configuration and flexibility
- Success can lead to resource abundance, which in turn leads to laxity and decline
- Identify Your Design SpaceDefine the key elements of your strategy that can be coordinated: product design, distribution, pricing, marketing, operations, talent.
- Design for Mutual ReinforcementConfigure each element so it strengthens the others. Like Hannibal at Cannae, position each force to amplify the effect of the others.Pro tipThe best designs make it so that removing any one element would weaken all the others.
- Accept the Trade-offsRecognize that tight design means reduced flexibility. You're trading adaptability for power.Pro tipTight design is most appropriate when you have high confidence in your diagnosis of the situation.WarningIf the environment changes significantly, tightly designed strategies can become liabilities.
- Guard Against Success-Induced LaxityWhen design-type strategies succeed, they generate resources. Those resources can lead to complacency and loss of tight integration.Pro tipThe most dangerous moment for a designed strategy is right after a period of great success.
Hannibal's victory over the Roman army in 216 BC was a masterpiece of strategic design. Infantry, cavalry, and terrain were coordinated in time and space to create a double envelopment. Each element was designed to work with and amplify the others.
Paccar designed its heavy-truck business with tight integration: premium positioning, dealer network quality, residual value management, and customer service all reinforce each other. This design creates a coherent competitive position that's hard to replicate.
Rumelt saw parallels between his analysis of business strategy and how engineers design complex systems. The best strategies, like the best engineered products, achieved their power not from any single component but from the tight integration of many components designed to work together.