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In his book “The Crux,” UCLA Management Professor Emeritus Richard Rumelt argues that most firms don’t understand strategy. Firms typically look at strategy as performance goals, planning, or mission and vision statements. Rumelt recommends first deeply identifying and understanding what issues are most important, judging how difficult those issues are, and directing resources to solve the most critical, solvable problems.
Don’t attack cruxes you don’t yet have the skills to handle. Leaders also need to determine what sources of power and leverage they can use to solve the crux.
The crux is a rock-climbing term for the most demanding section or toughest sequence of moves in a climb. What might be a challenging section for one climber might not be for another, and a challenging section at the end of the climb might be much more difficult than if that section were at the beginning.
Elon Musk wants to populate Mars. He has determined that the most critical problem is that the rockets cost too much, given they are not reusable. He has determined that the crux of the problem is to make reusable rockets, and the crux of making rockets reusable is figuring out how to prevent the rocket from burning up or being damaged in reentry. Because fuel is cheaper than the rocket, the key is carrying extra fuel to slow the rocket down in reentry.
When Amazon officials invited other firms to sell on their site, they were concerned that other firms would start on Amazon and then sell the products on their own sites. The solution to this crux was for Amazon to develop a world-class distribution network, making it cheaper for the firms to sell on Amazon. When Google officials wanted to monetize their search engine results, they didn’t want to clutter the page. The solution was to put the paid search ads on the side.
Rumelt argues that people create poor strategies because they are distracted by thinking management tools are strategy tools. Management tools are methods to execute tasks, while strategy tools help diagnose and solve the organization’s most critical challenges.
Don’t get distracted by goals, mission statements and quarterly earnings. Also, don’t focus too quickly on action plans. Start with the challenge and take your time to define the crux and design actions to overcome it. Strategy is made of policies and actions to overcome a high-value challenge. Strategy is not a goal or vision.•
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Bohanon and Horowitz are professors of economics at Ball State University. Send comments to ibjedit@ibj.com.
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