Using Leverage in Strategy
Concentrate effort on pivotal moments where focused action creates outsized impact
Strategic leverage means applying focused effort at the right time and place to produce disproportionate results. Rumelt identifies three components of leverage: anticipation (foreseeing where things are headed), pivot points (places where concentrated effort has disproportionate effect), and concentration (focusing resources at the critical point).
Like a physical lever, strategic leverage multiplies the effect of effort. The key is identifying where and when a small amount of focused action can produce a large effect. This requires both analytical skill to find pivot points and discipline to concentrate resources rather than spreading them thin.
Rumelt argues that leverage is what separates merely competent strategy from brilliant strategy. It's not enough to have a kernel with diagnosis, guiding policy, and coherent actions - the truly great strategies find and exploit points of leverage.
- Anticipation lets you position yourself before a pivotal moment arrives
- Pivot points are places where focused effort has disproportionate impact
- Concentration of resources at the critical point multiplies effectiveness
- Leverage requires both insight and discipline
- Develop AnticipationStudy trends and dynamics to foresee where things are heading. What changes are emerging that will create new opportunities?Pro tipPierre Wack at Shell pioneered scenario planning by studying fundamental driving forces rather than extrapolating trends.
- Identify Pivot PointsFind the places in your competitive landscape where focused effort would produce disproportionate results.Pro tipPivot points often exist where systems are stressed or changing - industry transitions, technological shifts, regulatory changes.
- Concentrate ResourcesFocus your energy, money, and talent on the identified pivot point. Resist the temptation to spread resources across many fronts.Pro tipConcentration requires saying no to many good opportunities to pursue the great one.WarningSpreading resources too thin eliminates the leverage effect entirely.
Toyota anticipated that quality would become a crucial competitive factor in automobiles before American manufacturers did. By concentrating resources on quality systems when competitors were focused on volume, Toyota achieved leverage that transformed the industry.
Williams concentrated the Getty Museum's enormous endowment on acquiring art during a period when other museums were cutting budgets. This concentration of resources at a pivot point transformed the Getty from a minor museum to a world-class institution.
Rumelt developed this concept by studying cases where relatively small organizations or forces achieved outsized results. He found that the common thread was the ability to identify and exploit leverage points where focused effort could create disproportionate impact.