Richard Rumelt’s Good Strategy Bad Strategy outlines the essence of effective strategy and critiques common pitfalls that lead to ineffective strategies. Here are the main points:
1. Good Strategy vs. Bad Strategy
- Good Strategy: It involves a coherent action plan rooted in a deep understanding of the issue at hand. It addresses critical challenges with clear, actionable steps that leverage resources and strengths effectively.
- Bad Strategy: Often mistaken for ambitious goals, it lacks a clear diagnosis of the problem, is filled with vague objectives, and focuses on buzzwords rather than meaningful actions.
2. The Kernel of Good Strategy
Rumelt argues that good strategy consists of three essential components, which he calls “the kernel”:
- Diagnosis: Identifying and defining the core challenge accurately. This is the foundation of strategy and involves understanding the problem deeply rather than superficially.
- Guiding Policy: A general approach for overcoming the obstacles identified. This policy should provide a clear direction but avoid overly specific tactics, offering flexibility for varying circumstances.
- Coherent Actions: Concrete steps aligned with the guiding policy, ensuring that resources and efforts are coordinated and directed toward the intended outcome.
3. Common Characteristics of Bad Strategy
Rumelt identifies traits that signal poor strategy:
- Fluff: Jargon-filled statements that lack substance. They create an illusion of strategy but provide no actionable direction.
- Failure to Face Challenges: Avoiding difficult issues results in strategies that don’t address core problems and lack a path to real improvement.
- Misguided Goals and Templates: Setting high-level goals without clear paths to achievement or relying on formulaic templates and one-size-fits-all solutions that don’t consider the unique aspects of the situation.
4. The Power of Focus
- Effective strategy requires focus. Good strategy is about prioritization, knowing where to apply resources, and acknowledging trade-offs. By concentrating on pivotal objectives, organizations can maximize impact rather than spreading resources thin across too many goals.
5. The Importance of Proximate Objectives
- Rumelt emphasizes that good strategy often focuses on achievable, “proximate” goals that move the organization closer to larger, long-term objectives. Proximate goals provide momentum and show visible progress.
6. Leveraging Leverage
- Good strategies use “leverage” to maximize impact. By understanding the leverage points in a situation, organizations can amplify their strengths and exert influence with less effort. This is often achieved by addressing root causes rather than symptoms.
7. Creating Advantage through Strategy
- Rumelt discusses the importance of creating competitive advantage by focusing on strengths, anticipating competitor moves, and understanding the landscape deeply. Strategy should give the organization a unique position that others cannot easily replicate.
Rumelt’s Good Strategy Bad Strategy highlights that effective strategy is about diagnosing the core challenge, setting a clear policy to tackle it, and executing coherent actions aligned with that policy. His insights guide leaders to replace vague goals with practical, thoughtful plans tailored to their unique challenges.
At CloudNINE, we have helped dozens of organizations in almost every industry to avoid the trap of bad strategy and develop great strategies that sustain momentum over time. Not only that, we help them implement the strategy, and walk alongside them as the dream comes to life. How can we help you develop a great strategy?
-Chris Cloud and the CloudNINE Team
