Probably not what you think
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McKinsey Classics | February 2019
What is strategy?
What is strategy?
The eminent strategy expert Richard Rumelt argues that most so-called strategic plans are actually rolling resource budgets and market-share projections. These are certainly important—a rapidly growing retail chain, for example, must guide its acquisition and development of property—but they won’t transform a company’s performance. That, Professor Rumelt suggests, happens mostly when an organization finds and exploits a change in the business and technology environments and rides it with speed, skill, and determination.
In the mid-1990s, while Rumelt was developing these ideas, he interviewed executives in the global electronics industry about their corporate strategies. Most said that successful ones involved spotting opportunities early in the game and exploiting them successfully before other companies did. Yet when he asked these executives to discuss their own strategies, they talked about 360-degree feedback, outsourcing, alliances, cutting costs, and the like. Not one mentioned moving ruthlessly to have the right resources when an industry was about to change.
Then, in 1998, Rumelt met with Steve Jobs soon after he returned to Apple from his exile at NeXT Computer. When the professor asked him about his longer-term strategy, he smiled and said, “I am going to wait for the next big thing”—which turned out to be the iPod portable music player. Jobs didn’t make a leap of imagination into the distant future. At the turn of the present century, many people knew a lot about MP3s, streaming audio, and similar looming changes in the music industry. Others were authorities on computer hardware and software and still others on the web. But the minds of these people were trapped within their own fields of expertise. The crucial role of Steve Jobs was to combine three distinct pools of knowledge and resources quickly and skillfully. To learn more about how to exploit a change whose time has come, read our 2007 classic “Strategy’s strategist: An interview with Richard Rumelt.”
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