Good Strategy Bad Strategy: The Difference and Why It Matters

by Richard P. Rumelt

Developing and implementing a strategy is the central task of a leader, whether the CEO at a Fortune 100 company, an entrepreneur, a church pastor, the head of a school, or a government official. Richard Rumelt argues that the heart of a good strategy is insight - into the true nature of the situation, into the hidden power in a situation, and into an appropriate response. He shows you how insight can be cultivated with a wide variety of tools for guiding your own thinking.

Good Strategy/Bad Strategy integrates fascinating examples from business, nonprofit, and military affairs to bring its original ideas to life: From Apple to General Motors, from the two Iraq wars to Afghanistan, from a small local market to Wal-Mart, from the Getty Trust to the Los Angeles Unified School District, from Global Crossing to the 2007-08 financial crisis, and many more. The abundance of business-ready insights offered by Rumelt stem from his decades of digging beyond the superficial to address hard questions with honesty and integrity.

Genres: Business, Nonfiction, Leadership, Management, Buisness, Business Strategy, Entrepreneurship

Audible Audio

First published January 1, 2011

About the author

Rumelt’s research has centered on corporate diversification strategy and the sources of sustainable advantage to individual business strategies. His current research interests center on the dynamics of industry transitions with a focus on the patterns and forces shaping the evolution of complex industries.

Rumelt received his doctorate from the Harvard Business School in 1972. He joined the UCLA faculty in 1976. He was President of the Strategic Management Society in 1995-98. He received the Irwin Prize for his book Strategy, Structure, and Economic Performance. In 1997, he was appointed Telecom Italia Strategy Fellow, a position he held until April 2000. He has won teaching awards at UCLA and received a “best paper prize” in 1997 from the Strategic Management Journal.

Reviews

[Cindy Brandt · Rating 2 out of 5]

Felt the book could've been summed up in one chapter.

[Andrew Garvin · Rating 4 out of 5]

Rumelt is surly and arrogant. The barbs he slings at 'bad' strategists are hilarious. 'It is embarrassing for an intelligent adult to be associated with this sort of bloviating' is one of many (this one being targeted at Cornell's benign mission statement). Chad Logan, a random prospective small business client of Rumelt's, must be icing down from the sick burns. Rumelt puts Chad Logan on blast - unwittingly providing comic relief, because what did this dude do to inspire so much ire?

Good Strategy Bad Strategy is a treatise on clear thinking. Rumelt does not abide vapid fluff. He defines the thesis in a section that criticizes The Power of Positive Thinking. Results do not materialize from desire, they require forethought, planning, and strategy. Rumelt's refrain is that goal-setting and strategy are often conflated. Examples of 'Bad Strategy' fail at this level, where mission statements masquerade as strategy.

The value of the book comes from Rumelt's break-down of business school cases. The section on Nvidia is strong. There is a great breakdown of the bottling industry. I liked the insider take on the agricultural firm that makes Pom. Rumelt guides the reader like he does his students, in a way akin to uncovering a mystery. This style is appealing and cuts against the author's otherwise haughty tone.

[Chad · Rating 3 out of 5]

An insightful but long-winded exploration of effective strategy. The examples and advice are mostly related to business (usually large corporations), but they also deal with nonprofits and government. I like how it shows that much of what passes for strategy (goal-setting, vision) actually isn’t, and walks through how to form good strategy.

Its points could have been condensed into a book one-third the length. Part 3 (Thinking Like a Strategist) seemed disconnected from the rest. I suggest skipping it.

I read this book because it was recommended by web designer Paul Boag in his podcast episode 10 books every web professional should read.

Good strategy
• Diagnosis: understanding the challenge
• A guiding policy: the reasons that you’ll take action to address the challenge
• A set of coherent actions: a concrete, consistent action plan

Bad strategy
• Fluff: empty slogans and buzzwords
• Failure to face the challenge: focusing on things that are not the root problem
• Mistaking goals for strategy: a wish-list of objectives without a plan of action
• Bad strategic goals: goals that aren’t feasible for the organization

Good strategy versus bad strategy
Strategy “identifies the one or two critical issues in the situation—the pivot points that can multiply the effectiveness of effort—and then focuses and concentrates action and resources on them.”

Strategy is not “ambition, leadership, ‘vision,’ planning, or the economic logic of competition”

“A leader's most important responsibility is identifying the biggest challenges to forward progress and devising a coherent approach to overcoming them.”

Strategy is a “a cohesive response to an important challenge”; “a coherent set of analyses, concepts, policies, arguments and actions that respond to a high stakes challenge.”

Strategy isn't a “big-picture overall direction, divorced from any specific action.”

Good strategy isn’t goal-setting. Bad strategy is long on goals and short on policy and action.

Ambition and motivation aren't strategy.

To have a strategy is to choose one path and eschew others.

Good strategy isn't just what you are trying to do; it's also why and how you are doing it.

A leader's job is to distill information and provide a proximate objective (a feasible one, achievable with today’s technology and resources. Example: JFK’s challenge to land on the moon).

[Brook Dixon · Rating 2 out of 5]

Probably should have been called Memoirs, Musings and Mysteries of a Genius Strategist, being a book which aims to secure Rumelt’s legacy, rather than convey deep practical and theoretical knowledge about strategy.

No doubt Rumelt is an expert in this field, but selective hindsight makes all strategy appear genius. The credibility of the book suffers accordingly.

Some excellent insights early in the book, before it degenerates into storytelling and myth making. The very last section, dealing with the boom bust cycle of asset markets, is grossly irrelevant, only harming the impact and value for Rumelt’s audience.

[Andrew Stotz · Rating 5 out of 5]

Good Strategy Bad Strategy: The Difference and Why It Matters
I loved this book. I loved it so much that I did a video (https://youtu.be/NBJ-UZzzeSc) about it.
But if you don't feel like watching the video, what I said about it is below.

What is Good Strategy?
Sources: ASIR, Good Strategy Bad Strategy. The Difference and Why it Matters, Richard P. Rumelt, 2013, Profile Books

Rumelt says…

What was so great about this book?
 Small book, can read over a few hours
 Clear and simple
 Real world
 Honest

This book frees you from the ‘cascading’ ‘avalanche’ of
 Values
 Mission
 Vision
 Strategies
 Objectives
 Goals
 KPIs

Good strategy is rare
 Most companies just have performance goals, no strategy to achieve them
 Or they have fluffy aspirations

Signs of bad strategy
 Avoids identifying the company’s core problem
 Makes no hard choices, pushes those onto others
 Has no focus, company ends up with conflicting goals
 Is a list of outcomes (even big, hairy, audacious ones)
 Does not build on the competence and cumulative learning of the organization
 A ‘cascading’ ‘avalanche’ of fluffy Values, Mission, Vision, Strategy, Objectives, and Goals

What is good strategy?
 “It comes from top management identifying the problem and setting a path to addressing it.”

What is good strategy?
 “A coherent strategy can become a source of competitive advantage.”

What is good strategy?
 “The application of the scientific method.”

What is good strategy?
 “Presses where you have an advantage.”

What is good strategy?
 “Strength applied to the most promising opportunity.”

What is good strategy?
 “Good strategy has an objective that is close enough to be feasible.”

Three Components of Good Strategy
 Diagnosis
 Choice
 Action

Three Components of Good Strategy
 Diagnosis – Identifies the core challenge the company is facing
 Choice – Decides the direction the company will take and what direction it will stop moving in
 Action – Determines big picture actions to move in that direction, keeping the company focused

More Thoughts on Strategy
 Strength – Takes advantage of an existing strength, but reorganizes or redirects it in a coherent direction
 Choice – Makes a choice to focus energy and resources in that direction, to the determent of other choices
 Losers – Since good strategy must make a choice, a sign of good strategy is that there will be losers in an organization, areas where the company will retreat and pull back resources
 Beware of a “No losers” “strategy”, it is not

More Thoughts on Strategy
 Strategy is about testing and refining your hypothesis
 Based on scientific method of developing a hypothesis, running your test, honestly interpreting your results, re-testing with modifications
 Another author, Dr. W. Edwards Deming, called this the PDSA cycle
 Plan, Do, Study, Act

More Thoughts on Strategy
 The objective should make a big difference and will likely address a limiting factor
 It should be able to help a company lay out, step-by-step what actions to take, what goals to shoot for
 Think outside of your organization from the customer and the competitor's position
 Good strategy often simple, but takes time

Competitive success and wealth creation
 The joint outcome of the quality of an organization’s accumulated resources and its coordinated action
 By strengthening a competitive advantage or by increasing the demand for the scarce resources supporting it

To wrap up, the parts to Good Strategy
 Diagnosis
 Choice (Author calls this guiding principles)
 Action (Author calls this coherent action)

https://www.amazon.com/Good-Strategy-...

[JJ Khodadadi · Rating 4 out of 5]

همونطور که از اسم کتاب مشخص هست درباره تفاوت های استراتژی خوب و بد صحبت شده. بعضی مثال ها قدیمی هست اما کلیت کتاب عالیه
نکته جالب اینجاست که با هر مثالی رو با تصمیمات مملکتمون مقایسه کردم همه در قسمت استراتژی بد بودن!!

[Daniel Clausen · Rating 5 out of 5]

This review first appeared on "Defense Innovator" (http://defenseinnovator.com/index.php...)

Lately, there seems no end to the number of books, articles, and op-ed pieces calling for a new grand strategy for the United States. These articles alternatively argue that the US needs to embrace complexity, focus on the homefront, rebalance to face rising peer competitors, brace for multiple challenges, to focus on a handful of known challenges, or to focus on domestic issues before starting on new foreign policy crusades.[1] At a time when strategy seems to be such a hot-button issue, it’s worth taking a moment to examine what exactly strategy is and what qualifies as good strategy.

As Richard Rumelt argues in his timely book: goals, vision statements, and motivational speeches have come to substitute for genuine strategy. This book presents us with a challenge: it first exposes the reader to the vast amounts of rhetoric and management-speak that are disguised as strategy. Usually, this comes to us in the form of jargon, esoteric concepts, endless lists of goals, or motivational speeches and injunctions to try harder. For Rumelt this is “bad strategy” (what Rumelt really means is that they are other things disguised as strategy, but Rumelt sticks with the dichotomy set up by his book’s title). Many of these forms of bad strategy do nothing more than avoid the hard choices that come from living in a world of constraints.

Good strategy is different. It is simple in its generic components, yet infinitely complex and challenging when formulated in a world of constraints and competition. Instead of a template, Rumelt presents us with the unassuming “kernel.” The kernel of strategy is this: a diagnosis of what is going on, a guiding policy (similar to a theory or hypothesis), and coherent action based on that guiding policy. The process itself sounds simple, but as Rumelt demonstrates from his many examples, strategy is also difficult because its aim is to formulate a unique view of the operating environment that will allow an organization to act effectively to meet its goals. Just as good science takes place on the boundaries of what is known, good strategy must also do the same by systematically testing its assumptions and interrogating its operating environment to come up with its guiding principles. There is no substitute for analytical rigor; thus, at the core of Rumelt’s book is a commitment to demonstrating the importance of rigorous analysis, both inductive and deductive.

The book eschews a formula and template approach to strategy and instead uses stories and lessons to make its points. The approach of the book is important because a key insight is that strategy is an analytical process that is as much about induction as it is about deduction. Though the central themes dominate the chapters, the reader is allowed to examine the stories and come up with their own ideas. Some of the themes will be well recognized by students of strategy: using the “kernel” to come up with strategy; using competitive advantages; using leverage and focus to make the most dramatic impacts; forming proximate goals that are achievable and linking these proximate goals to the organization’s ultimate objective. Others are less obvious and are drawn from Rumelt’s background in systems engineering. These include the importance of links in an organization’s chain, how inertia and entropy can impact an organization, and the importance of coherent design in formulating plans.

For students of strategy in a number of fields, much of the lessons will reiterate tried and true best practices. What will be more surprising, however, is the vast amount of examples Rumelt presents us with where organizations failed to take the challenge of strategy seriously—instead opting for the bad strategy alternative.

These examples beg a different question (one that is outside the scope of this book but nevertheless interesting), which is: Why has so much bad strategy proliferated in the world (much of the examples come from U.S. business, military, and educational policy)? Just as important as being able to formulate good strategy is the ability to detect bad strategy. Here I believe the book could have delved deeper. There is something deeply cultural that explains the proliferation of bad strategy. Rumelt does not miss this point so much as that he prefers to explain it in terms of common analytical errors—these analytical errors will be well known to anyone who has read about cognitive bias in analysis (Richard Heuer’s free book, The Psychology of Intelligence Analysis is must read in this regard: http://www.scip.org/files/Resources/H...). One could argue that there are cultural biases also working against Rumelt’s notion of good strategy: one of them is the cult of leadership as can-do spirit. The American public—including many of its top business and policy officials—tend to gravitate toward confident and inspiring goal-setters rather than to leaders with analytical depth. Rumelt’s many examples suggest that this bias is filtering down into the many ranks of the business world.

The book’s greatest weakness is also its strength, and Rumelt seems to be fully cognizant of it. He refuses to reduce the main themes of the book to an easy-to-use template. In short, it is very hard to spot-read this book as one would read a series of bullet points, an undergraduate textbook, or a book written for the busy executive. In short, he forces us to read the details of his stories in the same way a true strategist would grapple with the details of his or her situation. Though Rumelt offers his insights and leads us to different conclusions, the stories in the book are interesting enough that they can be reread over again and rethought with one’s own intentions in mind. Readers will interact with the material in different ways. The book works best if one is in the process of reevaluating his or her organization’s own strategy while reading the book.

Though Rumelt comes from a business background and many of his case studies draw from the world of business, I have no doubt that this book will soon become a must-read in military colleges and strategic studies courses everywhere. The central themes of the book were already present before its publication in Andrew Krepinevich and Barry Watts’ monograph on US strategy, Regaining Strategic Competence: Strategy for the Long Haul, published by the Center for Strategic and Budgetary Assessment (downloadable here: http://www.csbaonline.org/publication...)

Rumelt’s book on strategy is a timely, enjoyable, and comprehensive look at strategy in its many forms. For those students, analysts, and policymakers trying to better understand the challenge of strategy, this book is indispensable.

For those interested in previewing the central themes of the book, a preview of the book can be found here: http://goodbadstrategy.com/wp-content... and a short article here: http://www.mckinsey.com/insights/stra...

Notes

1.Though these articles and books vary in quality, many of them are well argued and worth reading. A small sample of of the most recent books and articles include: William Martel, “America needs a new grand strategy,” The Diplomat, 2012 (thediplomat.com/2012/06/18/why-americ... Patrick Doherty, “A New U.S. Grand Strategy, Foreign Affairs, 2013 (www.foreignpolicy.com/articles/2013/0... see also, http://newamerica.net/node/77134); Richard Haass, “Bringing our Foreign Policy Home,” Council for Foreign Relations, 2011 (http://www.cfr.org/world/bringing-our... also see, Richard Haass, Foreign Policy Begins at Home: The Case for Putting America’s House in Order, 2013. An older volume, Melvyn P. Leffler and Jeffrey W. Legro’s edited volume, To Lead the World: American Strategy after the Bush Doctrine, 2008, is also a very good (and still timely) read.

[Sebastian Gebski · Rating 5 out of 5]

Probably the briefest (while still - the most to the point) description of what strategy is and what isn't. Based on a very simple yet totally sufficient mental model ("the kernel") that everyone should get familiar with.

Why do I recommend this book? Because:
- it speaks in simple words about things that are typically sunk in tons of fluff
- the majority of examples brought up are very good (but I admit - sometimes the author drifts slightly too far, I had 2 such moments of "hold your horses" realization)
- examples come from very different disciplines, yet they are sufficiently described and credible (e.g., I like the one about NVidia & 3dfx)

In the end, it's probably the best book on (general) strategy I've ever read. Perfect to fine-tune your optics and build more models upon. 4.7 stars.

P.S. The book was written >10 ago and sometimes it's funny how certain facts made certain perspectives outdated ... Yet, nothing like that invalidates the content of the book.

[Doc Norton · Rating 3 out of 5]

This book seems a lot longer than necessary. It is full of examples where the author looks back on events and determines that he was right at the very beginning and that his strategy was (or would have been) best for the client. Meh. Other stories presume a certain strategy existed because success was achieved by some measure. Again - meh.

Overall, I felt like I got some good nuggets from the book. Ways to think about problems, what else to consider, etc.

[Andy · Rating 3 out of 5]

"Good Strategy/Bad Strategy" is superior to most business books out there because it dares to call bull---- on what commonly passes for "strategic planning" in most organizations. Nevertheless, this book is the pot calling the kettle black in terms of what the author calls "fluff." It is pretty good as a catalogue of "bad strategy." But it is not a profound explanation of the problem; nor is it a practical guide for what to do about it. For something that might help you as a manager to deal with the issues raised in the book, I would recommend "The Four Disciplines of Execution."
The 4 Disciplines of Execution: Achieving Your Wildly Important Goals


Nerd addendum:
Let's consider the book in terms of Rumelt's own 3-step approach. The problem to be fixed is "bad strategy."

1. Diagnosis: Why is there so much bad strategy? It's not clear. He gives all kinds of different examples of bad strategy that have little in common. For the most part, he is criticizing people more for lack of strategy than for bad strategy. The common theme seems to be that bosses are confused about what strategy is and are doing silly stuff like writing mission statements. But this is just an elaboration of what the problem is, not a reason for why it is happening. And it is to some degree just word games, because a good mission statement is functionally the same thing as what he calls a "guiding policy."

2. Guiding policy for a solution: "There is no formula" for good strategy. Thanks! The impossibility of a formula is due in part to the fluid definition of "good strategy." When Sam Walton creates an entire new A-Z system in his industry starting from scratch in the middle of nowhere, that is good strategy. When Steve Jobs "waits for the next big thing" that is good strategy. When Admiral Nelson just relies on his captains' superior experience in a chaotic situation, that is good strategy. It is meaningless in retrospect to define successes as good strategies and failures as bad strategies; that's just circular reasoning.

3. Coherent action: See Step 2 above. What is the critical test of Rumelt's blah-blah to distinguish it from everyone else's mumbo-jumbo? Has he been objectively verified to predict/generate 5-year or 10-year successes of businesses, non-profits, government programs, etc.? This is a fair question because he invokes Galileo and the scientific method to back up what he does. He should apply the scientific method to himself.

Until these management gurus prove themselves with results, I'll call bull---- on them too.

[Kashif · Rating 5 out of 5]

Every once in a while a book comes along that changes how you perform one aspect of your life. This is one of those books; a book that will force you to change the way you approach business strategy. Good Strategy Bad Strategy flips strategy on its head, cuts out the fluff and digs beneath the success of companies across the ages and teaches us to replicate it by following the kernel (basic skeleton) of strategy.

Incredible book and a must read.

[Jurgen Appelo · Rating 5 out of 5]

Great insights and an incredible list of cases and examples.

[Michal · Rating 5 out of 5]

asi najlepsia biznis kniha aku som cital za posledne obdobie.

ziaden bullshit a velmi dobre insighty o strategii.

[Sarah · Rating 4 out of 5]

What is bad strategy? Bad strategy has four major hallmarks:
1) Fluff masking an absence of substance- e.g., vague language like "never quit until you win"
2) Failure to face the challenge- skips over addressing problems
3) Mistaking goals for strategy- long on goals and short on policy/action; assumes that goals are all you need
4) Bad strategic objectives- a long list of "things to do" is not a strategy. It is just a list of things to do
There are three pathways to bad strategy: A) Unwilling/unable to make choices among competing values and parties; B) Template-style strategy: filling in the blanks with a one-size-fits-all approach; C) The belief that all you need to succeed is a positive mental attitude

What is good strategy? Good strategy has an essential logical structure called the kernel, which contains a diagnosis, a guiding policy, and coherent action. The diagnosis for the situation should replace the overwhelming complexity of reality with a simpler story that calls attention to its crucial aspects. It requires leaders who are willing to say no to a wide variety of actions and interests. Strategy is at least as much about what an organization does not do as it is about what it does.

How can you build good strategy?
1) Use leverage to focus minds, energy, and action onto a pivotal object at the right moment
2) Focus on proximate objectives, those that are close enough at hand to be feasible
3) Identify limiting factors that can be fixed (like paint color) rather than factors that cannot be fixed (like highway noise)
4) Use design thinking, which involves premeditation, anticipating others’ behavior, and purposefully designing coordinated action
5) Sustain competitive advantage through an isolating mechanism (e.g., a patent, your reputation, relationships, network effects, dramatic economies of scale, tacit knowledge gained through experience)
6) Exploit a wave of change: if you can peer into the fog of change and see 10 percent more clearly than others, then you may gain an edge
7) Understand the inertia of rivals
8) Undo entropy: clean up the debris and weeds that grow in every organizational garden
9) Put aside the comfort and security of pure deduction and launch into the murkier waters of induction, analogy, judgment, and insight
10) Exercise judgment iteratively: fight your own myopia, question your own judgment, make a habit of recording judgments so you can improve
11) Avoid social herding (doing what others are doing when you don't know what to do) and inside views (thinking of yourself as the exception and ignoring pertinent data)

[bahar shahraki · Rating 4 out of 5]

خب این هم کتابی بود که فکر میکنم باید دوباره با دقت بیشتری بخونم.

[Alper Çuğun · Rating 4 out of 5]

Maybe this is advanced as far as strategy books go but it struck me as a really good introduction to strategy somewhat halfway to decisions theory.

The cases are pretty good. California Sunday just did a profile on the nut farmer just as I was reading this. The NVIDIA case is oddly prescient given the current crypto boom. And kicking down at the financial crisis is nothing but good measure.

A lot of damage and confusion could be prevented if everybody was forced to read this book before they ever use the term ‘strategy’. Is that too much to ask for?

[Nate Huston · Rating 3 out of 5]

Fairly standard corporate strategy fare. Well put together, though, and pithy. A good primer for strategy. His central thesis is that good strategy has good structure, a "kernel" consisting of a diagnosis, a guiding policy, and a coherent action." (77) Has some good thoughts regarding why bad strategy is so pervasive (normally a result of an unwillingness to make hard choices, templating, or a belief in the power of positive attitude as sufficient for good strategy. (58). About half the book discusses sources of power: leverage, proximate objectives, chain-link systems, etc.

None of the information is earth-shattering ("strategy is not a set of slogans" (70)), but the fact that "bad strategy" is so common (not the least of which is often seen in the form of goals as strategy, without the "how do you get there") makes this a good read for anyone interested in the subject. For the novice, it provides a good introduction. For someone a bit more steeped, it's a good review of the basics.

[Michael Dubakov · Rating 4 out of 5]

Quite good book. In a nutshell, Richard summarizes good strategy in 3 steps:

1. Analyze context (deeply) and make diagnosis
2. Create guiding policy to frame your actions
3. Create set of coherent actions that align with guiding policy

Surprisingly, many companies do not use these three basic steps.

Richard shows what bad strategy means. This is important to distinguish good from bad. People like to set ambitious goals without any deep analysis, and try to enforce this goal using "motivation". This is bad strategy.

There are many examples in this book, but the root of these three steps. As usual for business books, this one could be cut in half. Thus 4/5. Still a good read.

[Kacper Cebo · Rating 5 out of 5]

An exceptional book. One of these you not only read but you actually study it. At least, you should, since it provides literally tens of deep, insightful thoughts on (surprise, surprise) strategy work. Must-read for any leader or executive.

[Szymon · Rating 4 out of 5]

One fundamental idea presented in an understandable manner.

[Javier Recuenco · Rating 5 out of 5]

Best.fucking.strategy.book.ever.All.hail.Richard.Rumelt.

[Tõnu Vahtra · Rating 5 out of 5]

This is the best book I have read on the topic of strategy this year, it made me think in a different way about strategy and came timely just before the planning cycle for the upcoming year. Strategy is not just about goals or getting things done but it should be very much concerned with establishing or strengthening a competitive advantage. Also strategy is not just goals or guiding policies, strategy is about action, about doing something. The book helps you to differentiate bad strategy (or what is not strategy at all) and manage your own thinking around strategy ("what would Steve Jobs think about my idea"). Also when somebody contacts you for advice or appraisal on some strategy matter then do not rush into it (the reason why I don't like most consultants) but first try to uncover what is the underlying problem the requester is struggling with. I also liked the chapter and the idea about working around one's cognitive limitations by writing things down and organizing them to see the bigger picture and understand what is truly important and what is actionable (my strongest weapon against overwhelming amounts of information and complexity). The examples in the book were also interesting (like the Nvidia or Starbucks example or how Hannibal beat the Romans consistently), in general there was a lot of new information and the main thing that resonated multiple times from my previous reads were the cognitive fallacies from Kahneman (seems hard to write a book without them these days... ).

Good strategy is rare
*Most companies just have performance goals, no strategy to achieve them
*Or they have fluffy aspirations

Bad Strategy
#Avoids identifying the company’s core problem
#Makes no hard choices, pushes those onto others
#Has no focus, company ends up with conflicting goals
#Is a list of outcomes (even big, hairy, audacious ones)
#Does not build on the competence and cumulative learning of the organization
#A ‘cascading’ ‘avalanche’ of fluffy Values, Mission, Vision, Strategy, Objectives, and Goals

Characteristics of a good strategy:
#Good strategy comes from top management identifying the problem and setting a path to addressing it.
#A coherent strategy can become a source of competitive advantage.
#The application of the scientific method.
#Presses where you have an advantage.
#Strength applied to the most promising opportunity.
#Good strategy has an objective that is close enough to be feasible.

Three key components of a good strategy:
#Diagnosis – Identifies the core challenge the company is facing
#Guiding principles (Choice) – Decides the direction the company will take and what direction it will stop moving in
#Coherent action – Determines big picture actions to move in that direction, keeping the company focused

More characteristics
*Strength – Takes advantage of an existing strength, but reorganizes or redirects it in a coherent direction
*Choice – Makes a choice to focus energy and resources in that direction, to the determent of other choices
*Losers – Since good strategy must make a choice, a sign of good strategy is that there will be losers in an organization, areas where the company will retreat and pull back resources
*Beware of a “No losers” “strategy”, it is not a good strategy

*Strategy is about testing and refining your hypothesis
*Based on scientific method of developing a hypothesis, running your test, honestly interpreting your results, re-testing with modifications
Also known as the PDSA cycle (Dr. W. Edwards Deming):
Plan, Do, Study, Act
*The objective should make a big difference and will likely address a limiting factor
*It should be able to help a company lay out, step-by-step what actions to take, what goals to shoot for
*Think outside of your organization from the customer and the competitor's position
*Good strategy is often simple, but takes time to implement

Competitive success and wealth creation happens as:
*The joint outcome of the quality of an organization’s accumulated resources and its coordinated action
*By strengthening a competitive advantage or by increasing the demand for the scarce resources supporting it

“A leader’s most important job is creating and constantly adjusting this strategic bridge between goals and objectives.”
“A strategy coordinates action to address a specific challenge.”
“Good strategy works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes.”

“Given that background, I was interested in what Steve Jobs might say about the future of Apple. His survival strategy for Apple, for all its skill and drama, was not going to propel Apple into the future. At that moment in time, Apple had less than 4 percent of the personal computer market. The de facto standard was Windows-Intel and there seemed to be no way for Apple to do more than just hang on to a tiny niche. In the summer of 1998, I got an opportunity to talk with Jobs again. I said, “Steve, this turnaround at Apple has been impressive. But everything we know about the PC business says that Apple cannot really push beyond a small niche position. The network effects are just too strong to upset the Wintel standard. So what are you trying to do in the longer term? What is the strategy?” He did not attack my argument. He didn’t agree with it, either. He just smiled and said, “I am going to wait for the next big thing.”

“Bad strategy is long on goals and short on policy or action. It assumes that goals are all you need. It puts forward strategic objectives that are incoherent and, sometimes, totally impracticable. It uses high-sounding words and phrases to hide these failings.”

“Strategies focus resources, energy, and attention on some objectives rather than others. Unless collective ruin is imminent, a change in strategy will make some people worse off. Hence, there will be powerful forces opposed to almost any change in strategy. This is the fate of many strategy initiatives in large organizations.”

“A hallmark of true expertise and insight is making a complex subject understandable. A hallmark of mediocrity and bad strategy is unnecessary complexity—a flurry of fluff masking an absence of substance.”

“Many people call the guiding policy “the strategy” and stop there. This is a mistake. Strategy is about action, about doing something. The kernel of a strategy must contain action.”

“The most basic idea of strategy is the application of strength against weakness. Or, if you prefer, strength applied to the most promising opportunity.”

“Bad strategy may actively avoid analyzing obstacles because a leader believes that negative thoughts get in the way. Leaders may create bad strategy by mistakenly treating strategy work as an exercise in goal setting rather than problem solving. Or they may avoid hard choices because they do not wish to offend anyone—generating a bad strategy that tries to cover all the bases rather than focus resources and actions.”

Leadership VS strategy. “Whatever you think about this definition of leadership, a problem arises when it is confused with strategy. Leadership and strategy may be joined in the same person, but they are not the same thing. Leadership inspires and motivates self-sacrifice. Change, for example, requires painful adjustments, and good leadership helps people feel more positively about making those adjustments. Strategy is the craft of figuring out which purposes are both worth pursuing and capable of being accomplished.”

“Not miscalculation, bad strategy is the active avoidance of the hard work of crafting a good strategy. One common reason for choosing avoidance is the pain or difficulty of choice. When leaders are unwilling or unable to make choices among competing values and parties, bad strategy is the consequence. A second pathway to bad strategy is the siren song of template-style strategy—filling in the blanks with vision, mission, values, and strategies. This path offers a one-size-fits-all substitute for the hard work of analysis and coordinated action. A third pathway to bad strategy is New Thought—the belief that all you need to succeed is a positive mental attitude. There are other pathways to bad strategy, but these three are the most common. Understanding how and why they are taken should help you guide your footsteps elsewhere."

“A strategy is a way through a difficulty, an approach to overcoming an obstacle, a response to a challenge. If the challenge is not defined, it is difficult or impossible to assess the quality of the strategy. And if you cannot assess a strategy’s quality, you cannot reject a bad strategy or improve a good one.”

“At the core, strategy is about focus, and most complex organizations don’t focus their resources. Instead, they pursue multiple goals at once, not concentrating enough resources to achieve a breakthrough in any of them.”

EDIT: Reread the book twice in autumn 2025, it does provide a good framework for thinking about and evaluating what is claimed to be strategy. I especially like the statements that strategy is a framework of deciding what to do and what not to do, or even more simply the strategy of choosing what not to do. Also strategy is about identifying the core problem that prevents you for realizing your competitive advantage and then focusing your efforts on that challenge/problem. Thirdly it was a nice refresh on the two approahes for competitive advantage: aming to be a cost leader VS a differentiator. Another quote that I picked up "A bad strategy generates the feeling of dull annoyance" (when listening to it).

[Zora · Rating 5 out of 5]

This is such a great book, but I debated rating it 4 stars because I felt some of the examples dragged on a little, becoming slightly monotonous.

I really liked how the author details mistakes companies make when setting their strategies, such as confusing ‘fluffy’ vision statements with strategy, or actually implementing bad strategies.

The author is considered an international expert in strategy. Throughout the book, he includes examples extracted from his experience consulting with various companies, as well as strategy-identifying scenarios used with his MBA students (which explains why this book was included as ‘recommended reading’ for my final MBA unit - strategy and international business competitiveness).

[Harry Wilde · Rating 3 out of 5]

Finally finished after a 3 month slog.

I really enjoyed the first 1/3 where the author lays out his idea of a good strategy and why so many businesses have misunderstood what strategy is. The “kernel” was a particularly helpful approach to thinking about strategic problems.

If I’m honest the next 2/3 were just our man Richard explaining unbelievably complex scenarios with very little in the way of actionable learning for the reader. I know more about telecommunications strategic challenges in the 1980s than I ever wanted to know.

Felt like this could have easily been a 90-page book ending with some useful frameworks and applications. Instead, what I got was 50 pages of genuinely useful insight and 250 pages of fluff. Intricate, complex fluff. But fluff nonetheless.

[Luke · Rating 2 out of 5]

Good ideas, for a paper.

[Chanh Nguyen · Rating 3 out of 5]

Good strategy isn't just what you are trying to do; it's also why and how you are doing it.

Good strategy
• Diagnosis: understanding the challenge
• A guiding policy: the reasons that you’ll take action to address the challenge
• A set of coherent actions: a concrete, consistent action plan

Bad strategy
• Fluff: empty slogans and buzzwords
• Failure to face the challenge: focusing on things that are not the root problem
• Mistaking goals for strategy: a wish-list of objectives without a plan of action
• Bad strategic goals: goals that aren’t feasible for the organization

Good strategy versus bad strategy
Strategy “identifies the one or two critical issues in the situation—the pivot points that can multiply the effectiveness of effort—and then focuses and concentrates action and resources on them.”

Strategy is not “ambition, leadership, ‘vision,’ planning, or the economic logic of competition”

“A leader's most important responsibility is identifying the biggest challenges to forward progress and devising a coherent approach to overcoming them.”

Strategy is a “a cohesive response to an important challenge”; “a coherent set of analyses, concepts, policies, arguments and actions that respond to a high stakes challenge.”

Strategy isn't a “big-picture overall direction, divorced from any specific action.”

Good strategy isn’t goal-setting. Bad strategy is long on goals and short on policy and action.

Ambition and motivation aren't strategy.

To have a strategy is to choose one path and eschew others.

Good strategy isn't just what you are trying to do; it's also why and how you are doing it.

A leader's job is to distill information and provide a proximate objective (a feasible one, achievable with today’s technology and resources. Example: JFK’s challenge to land on the moon).

from: Chad Warner

[Pavel Annenkov · Rating 5 out of 5]

Если вы хотите прочитать только 1 книгу о том, как создавать стратегию вашей компании, то читайте Ричарда Румельта — «Хорошая стратегия, плохая стратегия».

The «Economist» включил Румельта в 20-ку современников, оказавших наибольшее влияние на развитие методов управления. И не зря. Книга фундаментальная. Думаю, буду возвращаться к ней не раз.

Румельт чётко и порой даже жёстко показывает нам предпринимателям, что мы часто подменяем стратегию какими-то наборами наших хотелок и желаний.

Несколько ключевых мыслей книги:

✔ Главная обязанность каждого лидера — определить наиболее серьезные проблемы, мешающие движению организации вперед, и выработать согласованный подход к их решению.

✔ Если вы не в состоянии выявить и проанализировать свои проблемы, значит, у вас нет стратегии. У вас есть лишь неясная цель, бюджет или перечень желаемых результатов.

✔ Любая хорошая стратегия обязательно имеет базовую логическую структуру, которую я называю «ядро». Состоит оно из 3 элементов: постановка диагноза, направляющая политика и согласованные действия.

✔ Компания совершает серьезный рывок либо за счет ключевого преимущества, либо благодаря изменениям в отрасли, открывшим перед вами принципиально новые возможности (окно возможностей).

✔ Копирование каких-то элементов стратегии другой компании вряд ли принесет вам существенную пользу. Чтобы добиться успеха, нам надо полностью перенять всю модель, а не отдельно взятые ее части.

✔ Стратегия — это и долгий путь преодоления трудностей, и способ борьбы с ними, и решение сложной задачи, и определенная реакция на проблему. Поэтому крайне сложно, а порой и невозможно оценить качество стратегии, если не обозначена проблема.

[Stefan Kanev · Rating 5 out of 5]

I somehow ended buying this book in four separate formats – Kindle, Audible, Apple Books and hardcover. This is how good it is.

The Art of Action helped me understand the importance of strategy and this one helped me understand how to approach creating one. It's clear and insightful.

It's comprised of two types of information.

First, a set of tools to reason about designing a strategy. There are a few things, but I found "the kernel" to be the most useful. In his words, a strategy can be built around a kernel, and a kernel defines contains three elements: (1) a diagnosis of the challenge, (2) a guiding policy for dealing with it and (3) a set of coherent actions designed to to carry the policy out. In contrast, a bad "strategy" would be a list of things you want to accomplish – increase revenue by X or gain Y new users. I found this filter incredibly helpful to structure my thinking. And that was the first few chapters.

Second, it contains analyses and stories of a lot of well-known companies like Apple, IKEA, Nvidia, Global Crossing, Intel and so on. They help put the principle in context and leave you with a vivid way to remember the knowledge. The author thoughts about those companies alone make the book worth reading.

In short, it really got me thinking. I will definitely be coming back to it soon.

[Fellow · Rating 5 out of 5]

Bardzo dobra książka na temat strategii. Zrobiłem mnóstwo notatek i bardzo uporządkowałem sobie wiedzę w tym obszarze. Jeśli aspirujesz do zarządzania ludźmi, podejmowania decyzji i przewodzenia swojemu otoczeniu - przeczytanie jej będzie dobrym pomysłem.

[Graeme · Rating 5 out of 5]

The definitive book on strategy. A real masterpiece that is as easy and compelling to read as it is authoritative.