The Importance of Problem Diagnosis in Strategy
Setting goals has been a thing people do for millennia. We think of something we want to get and make that into a goal. Through this habit of goal setting, we create lists of goals and often call these lists strategies.
We also add a few things we think strategies should have in the modern world. We add a vision statement, a mission statement and some list of values we presume everyone else will think we possess.
This type of strategy doesn’t deserve the name strategy.
Why such a harsh critique? These documents have little to do with strategy and are useless in guiding our actions in almost all circumstances.
What is strategy?
First, let’s define what strategy is.
Strategy is a plan to solve a particular problem. Strategy can also be a plan to take advantage of an opportunity presented to us. That is it. Mission and vision statements aren’t part of the strategy. They might have a place in our world but are not part of the strategy. Values are also entirely useless. So are principles and commitments.
If the strategy is a plan to solve a problem or take advantage of an opportunity, then the first step of strategy should be defining that problem or opportunity.
This step in strategy formation is called the diagnosis. Richard Rumelt, often known as the strategist’s strategist, made this an essential part of his kernel of strategy ideas. Without diagnosing a problem, any goals set in the strategy are a pie-in-the-sky type of thinking. These goals often result in wasted time and resources, bringing little value.
What is the diagnosis?
Let’s take an example of a mechanic shop. When you bring in your car and say I hear a banging noise on the right side of the vehicle, the first thing the mechanic does is diagnose the problem. Then, he’ll look at the car, put it up on a lift, examine each wheel, and take it for a drive.
After the process, the mechanic will provide you with a problem statement. For example, the problem could be a loose bolt inside the vehicle frame. To address the problem, the mechanic would set an objective of taking the apart the part of the car where he thinks the loose bolt is. Then he’d tell you the steps he needs to take to achieve this objective. This would be a simple strategy in a nutshell.
The most important part of this strategy is the diagnosis.
But let’s imagine for a minute what would happen if the mechanic used a strategic process common today in business and academia.
You would bring it in the car. The mechanic would take provide you with a vision for your car. He would want to see your car as the most performant vehicle on the road. Then he’d offer a mission statement. The mission of your car would be to deliver you and your family from place to place to satisfy the goals you have set for yourself and your family. Finally, he’d list a set of goals or objectives or directives. These could be specific or vague, maybe even smart goals. Goals like fostering the cleanest windshield on the highway or developing an optimal speed process to ensure the most significant gas savings possible.
And, of course, don’t forget values. The values attributed to your car would be speedy, comfortable, energy-efficient, and smooth.
Would you be happy with this strategy? Probably not.
As you can see from this scenario, the most significant piece missing from strategies is diagnosing the problems.
Unfortunately, this scenario is a parody of what happens in the real world in many businesses. First, strategies get created based on arbitrary goals that bare little resemblance to reality. Then, the leadership presents them to their people with fanfare. But no one in the business buys into these collections of fluff. And the reason for this is simple, strategies that don’t diagnose the situation and identify problems and opportunities are useless.
