Most leaders will agree that strategy is crucial for an organization’s success. Yet most organizations don’t have a good strategy…they confuse strategy with ambition, innovation, inspirational leadership, goal-setting, high-level decisions, determination or successful outcomes. So, what exactly is a good strategy vs bad strategy, why is bad strategy so prevalent, and is there a way to systemically craft good strategies? In this book, Richard Rumelt specifically answers those questions. In this free version of the Good Strategy Bad Strategy summary, we’ll briefly outline some of these powerful ideas.
A strategy should be a cohesive blend of ideas, analyses, policies and actions in response to an important, high-stakes challenge. It’s about uncovering the critical factors in a situation, then directing your energy and resources to addressing those factors through focused, coordinated action. Let’s break down the difference between good strategy and bad strategy, before taking a brief look at what’s involved in crafting good strategies. You can get the detailed tips, guidelines and examples in our complete Good Strategy Bad Strategy summary.
Good Strategy vs Bad Strategy
The Kernel of Good Strategy
Fundamentally, strategy is a way of dealing with an important challenge. A good strategy has 3 essential components which form its core or “kernel”: a diagnosis, a guiding policy, and coherent action.
- A diagnosis defines the challenge in clear, simple terms. Just like how a doctor must diagnose a disease before prescribing medication and therapies, businesses must first diagnose the situation and challenge(s) before deciding what to do. It determines where/how you focus your energy and resources. A good diagnosis distills a complex, often-overwhelming reality into a simpler story that people can act upon. You must identify the critical aspects of the situation—this provides a focal point to design/evaluate the strategy, and to adjust the strategy as circumstances change. To help people to understand a complex or unstructured problem, it also helps to use a metaphor, analogy, or an accepted framework. Once people clearly grasp the issue, it’s easier to craft and execute a coherent response.
- A guiding policy is the broad approach to addressing the obstacles you’ve identified. It points you in a certain direction without dictating exactly what to do. Guiding policies are not desired end-states, goals or visions—those merely express your ambitions without defining how to get there. Good guiding policies provide parameters that’ll help you to choose certain alternatives over others, e.g. you’d make decisions very differently if you choose to focus on “price-conscious students” vs “time-sensitive professionals”, on offering “value for money” vs “luxurious experiences”.
- Coherent actions are the ways to execute the guiding policy. These are a set of coordinated policies, resources, and maneuvers that are aligned with and support each other. The kernel needn’t define all the actions to be taken, but it must provide enough clarity to make the strategy actionable while ensuring your actions are coordinated and non-conflicting.
Beware of Bad Strategy
Bad strategy is not just the absence of good strategy. It comes from misconceptions that hinder sound strategy. In our complete book summary, we’ll elaborate on:
- The 4 hallmarks of bad strategies: fluff, failure to face the challenge, mistaking goals for strategy, and bad strategic objectives;
- Two common types of bad strategy: “dog’s dinner objectives” and “blue-sky objectives”; and
- The 3 key reasons why bad strategy is so prevalent.
How to develop Good Strategies
Harnessing Sources of Power
Having a coherent strategy in itself already gives you 2 natural sources of strength since (i) most organizations don’t have one and won’t expect you to have one, and (ii) you can always uncover hidden insights just by looking at things from a fresh perspective.
At the root, strategy is about applying your biggest strengths to your biggest opportunity. Good strategies amplify the impact of your strengths. A large section of the book is devoted to explaining various sources of power that you can harness to develop a great strategy. We won’t be going into details in this article, but feel free to check our full Good Strategy Bad Strategy summary where we’ll dive into each of these power sources including: (i) definitions, (ii) application tips/insights and (iii) short examples.
The sources of power are: strategic leverage, proximate objectives, focus, chain-link systems, growth, design, using advantages, dynamics, inertia and entropy.
Thinking like a Strategist
Although external ideas and feedback are useful, the most vital tool to a strategist could simply be to change your own way of thinking. To start thinking like a real strategist, you need to:
- Understand the Science of Strategy: Think of a good strategy as a well-formed hypothesis of what’ll work, learn to capture proprietary info and validate your hypotheses with logical and empirical tests.
- Use and keep your head: Check out a series of techniques to build 3 essential skills/habits needed for good strategic thinking (instead of falling prey to the impulses of bad strategy or herd instincts).
Feel free to get our complete Good Strategy Bad Strategy summary for more specific details.
Getting the Most from Good Strategy Bad Strategy
In this article, we’ve briefly outlined some of the key insights and strategies you can use to achieve desired change. For more examples, details, and actionable tips to apply these strategies, do get our complete book summary bundle which includes an infographic, 15-page text summary, and a 28-minute audio summary.
This book is packed with detailed examples and case studies across a wide range of industries, e.g. truck manufacturing, retail, F&B, military campaigns, schools, computing, automobiles, farming, TV and media. Each key message is reinforced by one or more example to illustrate the concepts at work. You can purchase the book here for the full details.
About the Author of Good Strategy Bad Strategy
Good Strategy Bad Strategy: The Difference and Why it Matters is written by Richard Rumelt–the Harry and Elsa Kunin Professor of Business & Society at UCLA Anderson, a graduate school of business and management. He earned his Bachelor’s and Master’s of Science degrees in Electrical Engineering from UC Berkeley, and received his doctorate from the Harvard Business School (HBS). Prior to UCLA, he worked as a systems design engineer, and taught at the HBS and Iran Center for Management Studies.
Good Strategy Bad Strategy Quotes
“Good strategy is not just ‘what’ you are trying to do. It is also ‘why’ and ‘how’ you are doing it.”
“Strategy is at least as much about what an organization does not do as it is about what it does.”
“Strategy is the craft of figuring out which purposes are both worth pursuing and capable of being accomplished.”
“A leader’s most important job is creating and constantly adjusting this strategic bridge between goals and objectives.”
“A good strategy is, in the end, a hypothesis about what will work. Not a wild theory, but an educated judgment.”
“If your reasoning cannot withstand a vigorous attack, your strategy cannot be expected to stand in the face of real competition.”