A review of Richard Rumelt’s business strategy book The Crux.

I picked up The Crux (2022) because Richard Rumelt’s previous book, Good Strategy Bad Strategy, is one of the best books out there on strategy. I wondered initially if his publisher had encouraged him to write it to build on the success of the earlier book.

Reading it, I’d say it is a ‘legacy’ book. Rumelt is towards the end of his career now, and I think, just from the text, that he wanted to complete the work he had started in Good Strategy, Bad Strategy. But it has taken me a while to review it, and I only realised as I wrote this why I had delayed.

(Image: Andrew Curry, CC BY-NC-SA 4.0)

The nub of the problem

‘The crux’ is a metaphor taken from rock climbing: the the boulder that is the toughest part of a difficult climb, the part that needs to be solved if you are going to succeed. The crux, similarly, when applied to business is the nub of the problem, the part that needs to be understood and resolved if a strategy is to succeed. And it’s worth sharing his definition of strategy here”

a strategy is a mix of policy and action designed to surmount a crucial challenge” (p.110).

A review quote from the Financial Times on the front of my copy of The Crux calls the book a bracingly direct guide, but that wasn’t my experience of it. Part of the reason for this is the way he explains the crux: a deep insight that cuts through the heart of a knot of “gnarly problem”. For non-native English speakers, “gnarly” is “difficult to deal with because of being very complicated.”

Gnarly situations

He describes the characteristics of a gnarly situation reasonably early on (p.38), after we’ve done the rock climbing bit:

They are:

  • “There may be no no clear definition of the problem itself. Studying various concepts of ‘the problem’ and working to identify or choose the crux issue can be a large part of the work of identifying a strategy.”
  • Most of the time you do not have a single goal but a bundle of ambitions.” (Emphasis in original). These “may conflict with one another and… cannot normally be all satisfied at once.”
  • “Alternatives may not be given but must be searched for or imagined.”
  • “The connections between potential actions and actual outcomes are unclear… There are multiple interpretations of the facts and only weak connections between desired results and specific actions to be taken.”

Messy problems

In other words, we’re dealing with messy situations. This list, I think, conveys two of Rumelt’s general convictions about strategy making. The first is that it is difficult work; the second is that it is always contextual to a specific problem, a specific place, and a specific place. From time to time he takes a sideswipe at the business school “case study” method. Cases, in his view, don’t translate.

Of course, and perhaps I am being a bit snarky here, this also correlates handily with a bit of a mystique about strategy, which is useful if you are a management academic with a sideline in consulting.

Anyway, in this reading “the strategist recognises an embedded solvable problem—not the whole gnarly challenge but one with kinship to its key elements.” Also, importantly: “it is a problem we are capable of addressing.” There’s an acronym for this later on: ASC, or ‘addressable strategic challenge’.

Fuzzy edges

The process he describes for all of this sounds similar to the kind of thing you might do to solve messy problems in general. First you collect, identifying the landscape of problems, issues and opportunities. Then you cluster, placing problems and opportunities into groups—typically, he says, around 20 of these. These have fuzzy boundaries, but the point is to explore the nature of the different challenges. Are they harder, or easier? Are they internal or external? Are they immediate or can they be deferred?

The final stage is filtering, which involves sequencing the challenges and addressing their importance and their addressability. This is where you start to get to “the crux”: something that is important but also hard to address.

Framing is also important here, distilling the issue—which is often a point of tension—into a few lines:

No one solves a problem they cannot comprehend and hold in their head (p.42).

The last three chapters (pp287-329) spell out this process in just about enough detail for you to try it at home — which is one of reasons I concluded it was a legacy book. But the examples don’t always seem to get to this rigorously difficult framing.

Not going bust

When you get into Rumelt’s examples, it’s sometimes hard to work out why the example is a crux and not just an important business issue. The first version of Ryanair, which took advantage of deregulation to compete with British Airways and Aer Lingus between Dublin and Heathrow, went out of business as BA, in particular, adjusted its prices to compete.

So “the crux” here was how to fly passengers between Ireland and Britain without going out of business. The answer, it turned out, was to copy South Western Airlines, unbundling prices and flying to second-tier airports around London, and later rolling out the same approach across Europe. Rumelt doesn’t mention it, but the key to reducing prices was to increase the intensity of the flight schedules, accelerating turnround times at airports and therefore increasingly the likelihood of delays and disruption. So perhaps the crux here is actually the insight, or discovery, that customers will tolerate quite a lot of inconvenience for a modest reduction in the end-to-end cost of travel if some of those costs are disguised. 

(Ryanair interior. Photo Marco Verch, CC BY 2.0)

Sometimes this is more straightforward. Rumelt talks about the dilemma that Amazon had when it developed its MarketPlace service. It needed other companies to join to create scale and therefore traffic. But it didn’t want to give a leg up to competitors. The crux was to provide logistics services to those competitors, tying them in to Amazon. Of course, if you read the Federal Trade Commission’s case against Amazon, this quickly turned into alleged anti-competitive behaviour.

Financialisation

The extent to which the book is “bracingly direct” comes down to two things. The first is that he is scathing about the financialisation of the modern corporation, which, he says, has nothing to do with strategy. He tells an entertaining story from class:

”This term”, he tells his students, “I will forecast your performance in this course based on your past grades in other courses. Then, I will grade you on the degree to which you beat, or fall below, those forecasts.” (p.86)

When the students complain, he points out that this is how the stock market appraises CEOs.

But growth itself is also largely unpredictable:

Whenever I look at growth rate data across numerous firms, I am always impressed at how truly random it is. (p.85)

The execution of power

The second is his view of strategy as being about the execution of power within the organisation. He believes that someone has to choose. He tells a story about meeting a group of Swedish management academic colleagues who suggest to him an ecological or network-based model of how businesses and organisations work. He gives them short shrift.

I had heard all this before… A strategy is a design and direction imposed by leadership on an organization. Strategy began when people realized that telling warriors to ‘go out and fight the invaders didn’t work… In a modern business, a strategy is the exercise of power to make parts of the system do things they would not do, if left to themselves” (p.110)

Waves of change

There’s an interesting section (for a futurist) on understanding long waves of change in thinking about innovation. He does regard this as a necessary part of the strategist’s knowledge base. He is also old enough to have attended one of Hermann Kahn’s workshops in the late 1960s looking out to the year 2007.

He wasn’t impressed. It seemed to produce a wish-list: curing cancer, colonies on Mars, hyper-sonic travel on Earth.

One lesson is that the strategist needs to know the nature of the long wave being considered. Some advance greatly over time, while others, like ship propulsion, seem to reach natural limits… The somewhat predictable technological future seems to be about five to seven years off (p.206).

Shorter waves, he suggests, tend to appear when the costs become low enough to permit commercialisation, and there’s an initial customer base which is reasonably price insensitive. Sometimes this produces sub-optimal outcomes, locked in around the type of system. The early adopters of mobile phones in the US were drugs dealers who needed hyper-local coverage. They were served well enough by the analogue AMPS system, while Europe pushed on with digital standards.

Goals or strategies

There were times when I wished that he was applying these tools and his intellect to more substantive problems, and sometimes with a broader eye. It’s easy enough to point out the difficulties with the 17 SDGs, for example (pp128-130), which are goals, not strategies, and ignore the other forms of political lifting that they are doing.

It is pretty clear that the core audience for this book is American business execs (and wannabees), and their international counterparts, but that means that quite a lot of the language is about “winning”—as in, strategic leaders have created “a call to attack and conquer” a part “of reality” where “we can actually win” (p38).

The “we” is doing some interesting work there, and it reminded me of tedious meetings when I worked for a commercial consultancy where clients would tell me that they needed to know where they needed to play, and how they could win. But so much of strategy ought to be about building, not competing.

“Winning”

My more significant reservation here is that this is all a very particular language framed within a very particular discourse. The whole analogy of “the crux” is based on the individual trying to overcome their environment. In the business environment this translates to individuals using strategy to exert power so the organisation can “win”. I probably don’t need to spell this out further, other than to say that it implies a very specific, and quite narrow, view of the relationships between executives, companies and markets.

In my own experience it is possible to use tools that help people have honest generative conversations about their environment, their goals, and their critical difficulties. And in such a way that their crux issues emerge from the conversation, and therefore are identified together by the group. I’m not sure that Rumelt would recognise this experience, though.

If you are interested in strategy, and haven’t read Good Strategy Bad Strategy, I’d definitely start there. Your decision to move on the The Crux after that probably depends on how interested you are in business strategy. With that in mind, two sections here have real value. The first is the sequence of chapters on ‘Diagnosis’, which includes an analytical critique of consulting frameworks. Secondly, his description of The Foundry process in the final chapters is worth understanding, even if it needs a critical reading.

—-

A version of this article is also published on my Just Two Things Newsletter.