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The Three Disciplines of Advanced

Rich Horwath
John Wiley & Sons, Inc. 2014
192 pages


Leadership & Management
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IT, Production & Logistics
Career & Self-Development
Small Business
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Global Business
Concepts & Trends

Strategy is the astute allocation of resources time, talent and capital in planned
activities to serve customers better than your competitors do.
Successful businesses are strategic. The right strategy is the best predictor of
profitability. Businesses fail because of bad strategy.
Many firms treat strategy as perfunctory and occasional, instead of as crucial
and ongoing.
Leaders often have no time to think, cant prioritize and end up putting out fires instead
of strategizing long term. Stop and give strategy the time it warrants.
Sound strategy calls for a big-picture, elevated understanding of your business.
Strategic thinking has three elements: acumen for developing valuable insights,
allocation for using resources wisely, and action for executing strategic plans.
Differentiation, not price-cutting, is the best route to business success.
Strategy takes three disciplines: First, coalesce your best insights.
Second, compete by making the right trade-offs. Third, champion your strategy.
A great strategy may fail if your employees dont understand or dont rally behind it.
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What You Will Learn
In this summary, you will learn:r1) Why strategy matters, 2) Why many companies fail at strategy, 3) What
components make up a good strategy and 4) How to strategize.
A 25-year study of 750 bankruptcies identified bad strategy as the primary reason businesses fail. Strategy is crucial,
but most firms give it neither the respect nor the attention it merits. Strategy expert Rich Horwath explains that
successful companies are, by definition, strategic, as is his book, which conveys valuable, concrete information
succinctly. He explains the links between strategy and success, and guides executives on how to think strategically.
getAbstract recommends Horwaths authoritative lessons on making strategy an ongoing aspect of your business to
CEOs, executives, entrepreneurs and investors analyzing corporate strategies.
How do you come up
with a business model
that differentiates you
and that creates value
for your customers and,
by doing that, puts you
in a unique position in
your industry?
We argue and debate
like crazy about what
were not going to do
because we know that
we can only do a few
things great. (Apple
CEO Tim Cook)
Elevate Your Thinking
In business, you cant see the big picture until you gain elevation. Seek an encompassing
overview so that you can understand what makes your businesses tick, how the parts work
together, how to differentiate it from its competitors, and how to provide value and service
to your customers. Leaders must think strategically so they can make the right decisions
and the best trade-offs choices that lead to success.
This elevated view demands mental agility and the ability to sift through floods of
information. Failure to think strategically can be disastrous. The Conference Board reports
that 70% of the public companies that suffer a revenue stall will see their market
capitalization drop by more than 50%. Poor strategic decisions account for most revenue
stalls. When a firms business falters due to inferior performance, that pattern is likely to
continue for at least 10 years. Many times, this leads to complete collapse.
What Is Strategy?
Strategy is defined as the intelligent allocation of limited resources through a unique
system of activities to outperform the competition in serving customers. Resources include
time, talent and capital. The GOST framework can help you maintain a separate focus on:
Goals What are you pursuing? A goal is a general target.
Objectives What do you specifically want to do? An objective is a specific target.
Strategy A strategy sets the path for how you will reach your goals and objectives.
Tactics A tactic provides the specific answer to how you will proceed.
When you plan ways to mete out resources, your strategy becomes your general allocation
schematic and your tactics are its specifics. Identify the trade-offs you must make among
time, talent and budget to meet your goals.
The Top 10 Strategy Challenges
Most executives recognize the need for smart strategic thinking, yet few know how to
develop a strategy. Research with 500 managers identified the top 10 strategic challenges:
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If strategy is how
to achieve the goals
and objectives, its
impossible to gain
full engagement and
proper commitment
from employees [when]
rolling out the strategy
if they dont know what
it is.
Time, talent and
budget spent on fighting
urgent but unimportant
fires are resources
that cant be properly
invested elsewhere
to support...your
A good idea
unsupported by a
financial formula
for success remains
nothing more than a
good idea.
The next time you
hear [people] blaming
the economy or
headwinds for their
poor performance,
smile and hand them a
1. Time Managers suffer excess responsibilities, endless to-do lists, and pressure to
deal with immediate tasks and problems. Most lack the time to think strategically.
2. Commitment Employees dont know what a companys strategic plan is, so they
cant get behind it. The Harvard Business School reports that 95% of employees dont
know about or dont understand their organizations strategies.
3. Lack of priorities Dont give every concern the same weight. Make trade-offs.
4. Status quo Strategy implementation usually requires change. Some employees
will get more resources, some fewer, and some will lose the resources they have. Those
who lose resources will dislike the strategic changes.
5. Not understanding what strategy is Many people mistake strategy for mission,
vision, goals, objectives and even tactics.
6. Lack of training [or] tools for thinking strategically Many managers lack
experience or education in planning or setting strategy.
7. Lack of alignment Large firms have many different constituencies which often
dont operate in sync and sometimes conflict. This hinders executing a unified strategy.
8. Firefighting Executives cant think and act strategically if they spend all their time
putting out fires. They must adopt a reflective lets think about that style.
9. Lack of quality [or] timely data and information Strategy requires astute
interpretation and application of data. It calls for developing quality insights about
creating value for customers. Information is the core of strategic thinking. Executives
who lack access to timely data operate at a strategic disadvantage.
10. Unclear company direction The people at the top must set clear directions.
But some executives dont want to reveal their plans because they fear providing
information to competitors. However, leaving everyone in the dark makes planning
nearly impossible.
The Three Strategic Disciplines
When you find yourself too busy to think, reorient yourself to the following three strategic
priorities by asking, Am I working on an activity that is important to the execution of the
strategy, or is it an urgent but unimportant issue thats taken me off plan?:
1. Acumen You have the ability to develop valuable business insights.
2. Allocation You utilize your available resources wisely.
3. Action You execute your strategic plans to achieve your goals.
Strategic thinking also requires practicing three disciplines:
1. Coalesce
The first discipline is bringing together in a unified way the ideas and data your business
needs to compete. Strategic thinking demands developing quality insights, and that often
demands pattern recognition seeing the context in which a problem recurs.
Work through the six levers or basic issues on the Strategy Spectrum to identify the
data you must pull together: 1) What products or services do you offer? 2) Who are your
potential target customers? 3) Why do they need what you sell? 4) Where can they access
your offerings? 5) When can they gain access? and 6) What activities will you undertake
to bring them in?
The Value Mining Matrix helps you focus on your current and potential customers and
the steps you take to deliver value to them. Plan your value creation, value delivery and
value capture strategy on three different time horizons: the first 12 months of activity,
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While checking
lots of tasks off a to-
do list each week
may foster a sense
of accomplishment,
activity doesnt always
equal achievement.
If you cant read the
business landscape,
you risk leading your
organization in the
wrong direction.
The inability to
elevate thinking in
order to set strategic
direction can have
devastating long-
term effects on an
Having a high-
performance car
(tactic) doesnt help you
reach the other side of
the river if there isnt
a bridge (strategy) to
cross it.
the second and third years, and after the first 36 months, by which time you may need to
refresh your business model.
Strategys single goal is to increase profits. Pursue these actions to achieve the earnings
you want:
Differentiation Develop a special product or service.
Neutralization Eliminate the gaps between you and a rival product or performance.
Productivity Make your processes more efficient so you can cut costs.
Waste Avoid any effort that does not provide new value.
All of these steps require innovation, but differentiation may be the most pivotal
strategic need. In a study, more than 4,000 executives agreed that attaining competitive
differentiation is their number-one business challenge. A survey of more than 25,000
firms showed that those with the best return on assets succeeded through differentiation,
not through lowering prices.
2. Compete
This discipline requires assembling a strategic system that gives your firm a competitive
advantage. You must know where your company stands in relation to its rivals. As former
Harvard Business School professor Theodore Levitt said, Everything is differentiable.
Determine if your organization is a leader on top and focused on protecting what you
have while working to expand wherever it can; a challenger looking to increasing brand
awareness and build the business; or a spectator a reactive, me-too operator stuck
on the fringes?
Analyze your competitors to assess your advantages. Consider how you compare in market
position, expertise, capacity, resources [and] activities, clientele, the marketplace need
you meet, value delivery, consumer advantages, and value proposition or message.
Institute the necessary competitive balances among your efforts to provide quality,
convenience, cost, service and selection to your targeted customers. Never try to be all
things to all customers.
3. Champion
An effective strategy doesnt help unless you can implement it, so the third discipline
calls for leading your team to think and act strategically. Champion your strategy. Fight
for, protect, defend and support it. Communicate your strategy to your employees and
make sure they support it. Offer social proof that is, demonstrate senior managements
commitment to the ideas you want employees to rally behind. Use the compelling power
of story to present your strategy to your workforce. Secure the commitment of everyone
who is part of its implementation.
Kodak, an iconic American company, demonstrated the dangers of failing to get everyone
behind a new strategy. The common perception is that the photographic digital revolution
swamped Kodak, a leader in film. In fact, Kodaks senior executives saw the handwriting
on the wall and redesigned its strategy so that it could become a digital photography
leader instead. But Kodaks middle managers didnt support or implement the new
strategy. They remained stuck in the past and clung to Kodaks success with film. Their
recalcitrance caused Kodak to lose its leadership position in the photographic industry, and
it never recovered.
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Great strategy...comes
from managers who can
think strategically.
Any business today
that embraces the
status quo as an
operating principle is
going to be on a death
march. (Starbucks
CEO Howard Schultz)
Too many
organizational leaders
say they have a strategy
when they do not...A
long list of things to
do, often mislabeled as
strategies or objectives,
is not a strategy. It is
just a list of things to
do. (Professor Richard
When Is It Time for a New Strategy?
Double-check your strategy when:
You reach or adjust your goals New goals need new paths.
Your consumers needs change Stay alert to what your customers want.
An innovation disrupts your marketplace Know who is delivering enhanced value
to your customers and how your firm could compete or do better.
Rivals create a new value Now, theyve changed the rules of the game. Catch up.
You gain or lose capability Either way, your firm will need a new strategy, to capitalize
on your new opportunities or to deal with your diminished situation.
The Strategy Scaffold
To gain the elevation you need for a strategic overview, stand on a scaffold built of three
planks: your companys purpose, your business model and your strategic direction.
Strategic thinking requires elevation, but dont think about reaching for a metaphoric
30,000-foot view to see the big picture. Like everything else, you can overdo elevation.
At 30,000 feet, all youd see are clouds and broad terrain. For a better view, consider an
elevation of 1,000 feet, where you can see buildings, homes, bridges and roads. Use this
perspective to develop your companys strategy.
With a new strategic initiative, conduct a Before Strategy Launch Review. Identify your
goal. Determine your approach; determine its main challenges and how youll handle
them. Continually monitor its results. Ask, What went right? and What areas need
improvement? When you complete, adapt or discard a strategy, conduct an After Strategy
Launch Review. Ask, What happened? How or why? And, What did we learn?
Smart strategy requires smart tactics. Dont spend time and money on activities that dont
move you closer to your goals. Sort your tactics within a four-box Tactical Evaluation
Matrix with efficacy with customers on the horizontal axis and differentiation on the
vertical axis. List your tactics and position them within the matrix in one of four quadrants:
1. Antes: tactics effective but similar These tactics, like the ante that starts a poker
game, are routine, but they work.
2. Drivers: tactics effective and differentiated These tactics are your best bet. They
differentiate you from your competitors, and theyre efficacious and profitable.
3. Waste: tactics ineffective and undifferentiated Dont bother. These tactics dont
work and theyre ordinary.
4. Fools gold: tactics differentiated but ineffective These tactics make your firm
stand out, but they dont earn profits.
Strategy should not be a perfunctory, fill-in-the-blanks annual activity. Make it a regular
component of your daily operations. Have your managers engage in regular strategy
conversations. These discussions rely on candor, openness and willingness to listen to
others opinions with an open mind. Put in the time to give strategy the priority it deserves.
About the Author
Former chief strategy officer and professor of strategy Rich Horwath is CEO of the Strategic Thinking Institute. A
frequent lecturer on strategic thinking, he is the author of six books.
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