Good Strategy Bad Strategy

Introduction

Good Strategy Bad Strategy by Richard Rumelt dives into what constitutes effective strategy and the common pitfalls that lead to ineffective ones. Rumelt defines strategy as the application of strength to the most promising opportunities or critical challenges. The book illustrates the difference between good and bad strategy using vivid examples from business, politics, and history, while offering actionable frameworks for crafting better strategies.

Part I: The Core of Good and Bad Strategy

Good strategy is unexpected

Rumelt begins by highlighting that good strategy often surprises because most organisations fail to articulate one. Good strategy focuses on identifying critical challenges and creating a coordinated approach to address them. He recounts how Steve Jobs rescued Apple in the 1990s by simplifying its product line and focusing on the "next big thing."

The kernel of good strategy

Rumelt introduces the "kernel," the core of any good strategy, consisting of three parts:

1. Diagnosis: Accurately identifying the challenge.
2. Guiding Policy: A general approach to address the challenge.
3. Coherent Actions: Specific steps coordinated to execute the policy.

By tying actions to an overarching policy rooted in a clear diagnosis, good strategy generates leverage and focus.

Bad strategy

Bad strategy often disguises itself as lofty goals, vision statements, or a collection of unrelated initiatives. Rumelt identifies hallmarks of bad strategy:

• Fluff: Buzzwords that lack substance.
• Failure to identify the challenge: Goals without actionable plans.
• Mistaking goals for strategy: Aspirational but vague objectives.
• Unrealistic strategic objectives: Impractical or unachievable plans.

Part II: The Sources of Power

Leverage

Good strategy identifies "pivot points" where focused effort can have an outsized impact. Rumelt cites Toyota's anticipation of the oil crisis, allowing it to dominate the market with fuel-efficient cars. Effective strategy leverages critical strengths to address challenges or seize opportunities.

Proximate objectives

A good strategy often includes a "proximate objective"—a target within immediate reach that moves the organisation toward its broader goal. Rumelt highlights John F. Kennedy's moonshot goal as a proximate objective designed to inspire focus and action.

Chain-link systems

Rumelt discusses how some systems, like manufacturing or education, are only as strong as their weakest link. Good strategy identifies and addresses these weak links to ensure the system functions effectively.

Part III: Thinking Like a Strategist

Discovering power through reframing

Rumelt describes how viewing challenges from a different perspective can uncover new opportunities. For example, Sam Walton's decision to prioritise rural markets allowed Walmart to bypass urban competition and grow into a retail giant.

Focus and coherence

Good strategy requires focus and coherence. By concentrating resources on the most impactful areas, leaders can generate extraordinary results. Rumelt contrasts this with organisations that spread themselves too thin, diluting their effectiveness.

The role of design

Good strategy involves the deliberate design of actions that work together to achieve a goal. Rumelt likens it to architecture, where each element must serve the whole structure. He uses the U.S. military’s Gulf War strategy as an example of coherence and planning.

Conclusion: The Science and Art of Strategy

The difference between strategy and ambition

Rumelt concludes that strategy is not synonymous with ambition or leadership. It is a process of diagnosing challenges, creating a guiding policy, and executing coherent actions. This disciplined approach sets successful organisations apart.

Key Takeaways

1. Focus on the challenge: Start with a clear diagnosis of the critical issue.
2. Leverage strengths: Use pivot points to maximise impact.
3. Create coherence: Align actions with a guiding policy to generate results.
4. Avoid fluff: Replace vague aspirations with clear, actionable strategies.
5. Think differently: Reframe problems to discover hidden opportunities.

Good Strategy Bad Strategy is an essential guide for leaders and professionals seeking to craft meaningful, impactful strategies.