Strategy Rules: Five Timeless Lessons from Bill Gates, Andy Grove, and Steve Jobs. By David B. Yoffie and Michael A. Cusumano
The authors have been teaching strategy at Harvard and MIT for almost thirty years.
The value they bring to the field of strategy is their focus on the strategist rather than the strategy; and the lessons that can be learned from some of the world’s most successful businessmen - Bill Gates, Andy Grove and Steve Jobs. There is a great deal to be learned because these were strategists who operated on an enormous scale.
No one is born a strategist
Perhaps the most important starting point, for executives of businesses of any size, is that being a great strategist is not innate.
No one is born a strategist - not Gates, Grove or Jobs. Jobs almost drove Apple to bankruptcy during his first period there. Grove’s first book on how to run a business, was nothing more than a guide for an operations-oriented middle manager. When Gates dropped out of Harvard, his knowledge of management and business strategy could best be described as unimpressive.
The authors pose this important question: "What would you rather have—a great strategy that is poorly executed or a bad strategy that is executed perfectly?" The answer is clearly: neither is desirable, because strategy and execution are inextricably linked, as Gates, Grove and Jobs demonstrated.
"Successful executives learn over time how to think more strategically and how to execute more effectively, at the tactical and organisational levels," the authors assert.
Change is guaranteed
In almost every business I engage with, (not only tech businesses), change is rapid and life cycles are short. These dynamics require that executives make extremely complex decisions quickly, and against a background of uncertainty about the future.
The authors detected a five-part framework of "rules" and skill sets that all three men exhibited, despite their differences in personality and style. This framework has been the result of having studied and worked with these three leaders and their companies for more than 25 years.
These rules have served their various companies well. Intel’s sales more than doubled, from $25bn to $53bn in the sixteen years after Grove stepped down. Microsoft’s revenues more than tripled, from $23bn to $79bn, in the thirteen years following Gates’ resignation. Apple’s annual sales grew nearly 60% in the two years following Jobs’ departure, from $108bn to $171bn.
These rules are:
1. Look Forward, Reason Back
2. Make Big Bets, Without Betting the Company
3. Build Platforms and Ecosystems—Not Just Products
4. Exploit Leverage and Power—Play Judo and Sumo
5. Shape the Organisation Around Your Personal Anchor
I will focus on only two of the five rules: ‘Look Forward, Reason Back’ and ‘Build Platforms and Ecosystems—Not Just Products’.
Strategy is fundamentally forward-looking. It is little wonder that even great strategists’ predictions about the future often turn out to be wrong.
Gates, Grove, and Jobs’ certainly did. However, the best don’t stick to their predictions: they constantly update their forecasts as new information becomes available, or as competitors reveal their intentions.
This implies that strategists should be opportunists as well as visionaries, grabbing opportunities as they present themselves. But the great strategists grasp opportunities that are deep and subtle, and that are often noticed but overlooked by others. Or not fully understood until someone else exploits them.
Gates quickly realised that IBM was offering the tiny Microsoft what was in fact the opportunity to control the platform for all PC software applications.
Grove understood that the computer industry would not be a solid whole producing a computer from beginning to end. Rather it would be layered, giving the microprocessor a significant role, that Intel could exploit.
Jobs grasped the potential of the graphic user interface to make computers accessible to ordinary people, with revolutionary potential.
- BOOK REVIEW: How to make better decisions with less information
The ability to see the future does not alone make a great strategist. Rather it is the ability to work out how to get from where the company is now, to where it has to be to derive the benefit.
This benefit will be based on the anticipation of both the customer’s needs and the competitor’s moves, and then to build barriers to entry or at least speed bumps, and lock in customers.
Critical to this rule is the strength of character to commit to changes that are required, and then stay the course.
From good to great
The third rule is to ‘Build Platforms and Ecosystems—Not Just Products’.
Great products rise, then inevitably decline and then are replaced by others. Along the way their margins reduce to the point where they are certainly not as attractive as they first were.
True masters of strategy need to think much more expansively – how do we become the platform on which product makers depend? How do we create an ecosystem about us that enhances and ensures our centrality?
Microsoft, Intel, and Apple all established industry platforms that bring together users and companies creating complementary products and services. These platforms are attractive because other companies create the hundreds of thousands of complementary products and services that require the platform.
This doesn’t preclude developing products, it simply implies not being limited to them. Microsoft started with MS-DOS and then Windows, but also the Office suite of products. But other companies developed the plethora of products and services that rely on the Windows platform.
Platforms and ecosystems are not new: the railroad is a platform on which entire industries are built and depend, as is a shopping mall or a billboard.
Strategy is not a role an executive can outsource. It is a prerequisite skill that every executive should hone. It can and should be enhanced by reading about strategy and great strategists. All that can be outsourced is the technical aspects of research, facilitation and the compilation of the strategy.
Of the tens of books on strategy I have read, this one is unique because of its focus on the strategist more than the strategy. Therein lies its enormous value.
Readability Light ---+- Serious
Insights High +---- Low
Practical High -+--- Low