The Crux: How Leaders Become Strategists
Richard P. Rumelt
Public Affairs (May 2022)
Two sources of power: a challenge’s crux and a challenge-based strategy
To what does the title of this book refer? According to Richard Rumelt, a crux is “the one challenge that both is critical and appears to be solvable. This narrowing down [process to identify the crux] is the source of much of the strategist’s power, as focus remains the cornerstone of strategy.”
As you may already know, Joseph Luft and Harrington Ingham introduced a concept in 1955 that they aptly characterized as “the unknown unknowns.” That is, ignorance of one’s ignorance. That is, ignorance of one’s ignorance. This is is probably what Mark Twain had in mind when observing, ” It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Yes, it is very important to recognize what our specific knowledge needs are, relevant to the given situation.
It is even more important to recognize that we may think we know — but in fact do not know — what needs to be known when a serious question must be answered or a serious problem must be solved. This is especially true when attempting to identify and then understand the nature of the given challenge. “Don’t start with goals — start understanding the challenge and finding its crux…You build trust in your company’s longer-term results by having a story — a strategy, a narrative — about how your actions today fit into a plan to create a better future.” The first step is to separate facts from opinions. The next step is to verify the facts. Only then can we formulate an enlightened decision based on those facts.
What is Rumelt’s approach? “I explore four themes in the pages that follow. First, the best way to deal with strategic issues is by squarely facing the challenge…Second, understand the sources of power and leverage that are relevant to our situation…Third, avoid the bright, shiny distractions that abound…Fourth, there are multiple pitfalls when executives work in a group or workshop, to formulate strategy.”
Some of the most serious mistakes in business are the result of conscious or unconscious biases that corrupt decision-making. For example, here is what Rumelt has to say about a familiar troublemaker: Optimism bias “means that people tend to overestimate benefits and underestimate the costs of a plan or set of actions. This seems to be the inevitable outcome of basic ‘animal spirits.’ I recall asking then futurist Herman Kahn about how to get unbiased forecasts. He advised: ‘Hire forecasters who are clinically depressed.'” (295)
In or near the central business district of most large cities, there is a Farmer’s Market at which merchants (at least pre-pandemics) offer slices of fresh fruit as samples of their wares. In that same spirit, I now include a few other excerpts that also suggest the thrust and flavor of Rumelt’s thinking:
o Gnarly problems have these characteristics: “There may be no clear definition of the problem itself; most of the time you do not have a single goal but a [begin italics] bundle of ambitions [end italics] such as a group of desires, goals, interests, values, fears, and ambitions that may conflict with one another and that cannot normally be all satisfied at once; alternatbi8ves may not be given but just be searched for or imagined; and the connections between potential actions and actual outcomes are unclear.” (Pages 37-38)
o “Strategies are usually what I call ‘corner solutions.’ The phrase comes from linear programming, where the solution to a problem is normally a set of actions defined by the intersection of various constraints — geometrically, a corner of intersecting lines or planes. When the constraints are so strong that no solution is possible, I call the strategy a ‘null set.’ (There is no solution without relaxing at least one of the constraints.” (70-71)
“Strategy is a form of problem solving, and you cannot solve a problem you have not understood. Deepening your understanding of the challenges being faced( is the process of diagnosis. In diagnosis, the strategist seeks to understand why certain challenges have become salient, about the forces at work, and why the challenge seems difficult. In this work, we use the tools of analogy, reframing, comparison, and analysis in order to understand what is happening and what is critical.” 137)
“Successful innovations typically enjoy a time in the sun when competition is somewhat muted and growth is rapid. Still, that very success whets the appetites of larger and older firms, each looking to maintain their vitality by ingesting younger upstarts. The crux problem for the younger innovator is to use its agility and lack of bureaucracy to outmaneuver the competition.” (213)
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Digression: Rumelt’s brilliant discussion of innovation in Chapter 12, reminds me of an incident years ago when GE’s then chairman and CEO, Jack Welch, was asked at an annual meeting about the reasons for his high regard for small companies. Here’s his reply:
“For one, they communicate better. Without the din and prattle of bureaucracy, people listen as well as talk; and since there are fewer of them they generally know and understand each other. Second, small companies move faster. They know the penalties for hesitation in the marketplace. Third, in small companies, with fewer layers and less camouflage, the leaders show up very clearly on the screen. Their performance and its impact are clear to everyone. And, finally, smaller companies waste less. They spend less time in endless reviews and approvals and politics and paper drills. They have fewer people; therefore they can only do the important things. Their people are free to direct their energy and attention toward the marketplace rather than fighting bureaucracy.”
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“A Strategy Foundry is a methodology designed to help a leadership team break away from treating strategy as goal setting. It is designed to identify the key challenges facing the organization, diagnose their structures, identify the crux, and work out how it can be addressed. The result is clarity on what is critical and an outline of the action steps for dealing with it. Final attention is paid to the public face of the actions chosen.” (313)
Obviously, no brief commentary such as mine can do full justice to the quality of information, insights, and counsel that RichardRumelt provides but I hope I have at least succeeded in suggesting why I think so highly of him and his work. At all levels and in all areas of the given enterprise, every organization needs leaders who understand how and why a challenge-based strategy — best viewed as a methodology rather than as a set of actions and initiatives — achieves specific objectives. Only then can the key challenges be identified, appropriate diagnoses applied, the crux remains in sharp focus, and all key issues are addressed.
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To learn more about Richard Rumelt and his unique and abundant contributions to thought leadership, please click here.
Here is a direct link to my interview of him.
Here is a direct link to my review of his earlier classic, Good Strategy/Bad Strategy.