The whole "getting bad to get good thing" only works if you luck into a franchise altering talent Sometimes there's no such talent in a draft and there's usually not more than 2 or 3 at most. The best course over the long haul is exactly what Danny did to enable him to bring in KG and Ray. Draft well, accumulate assets and structure cap space so that you can make a big deal when one presents itself.
Mike
this is what Daryl Morey has been doing with the Houston Rockets since '07. i really like daryl morey, but his ability as a talent evaluator actually works against him when he always gets a solid contributor picking in the late lottery / middle of the first round. he accumulates a lot of decent NBA players, but he never picks high enough to snag a real star, or even a really good trade piece. he's been trying like mad to turn that into a star for the past few seasons and he's come up short every time.
going with that strategy is honestly at least as bad a crapshoot as trying to reload by picking high in the draft. probably worse, because you get locked into more long term contracts which other teams aren't as likely to want to take on in a trade (a big reason that the LAL / NOLA / HOU trade fell through).
the whole CP3 situation was actually a great example. houston, the team that has been diligently getting the most out of its players and draft position for the past few years got beat out by the team that has been appallingly awful for years. why? cause the awful team had more young assets they got via the draft.
also, as far as danny's pre-Big 3 building plan, he wasn't able to turn that "accumulate assets" plan into a title contending core until the team tanked in '07 and got the #5 pick.