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 Good Strategy Bad Strategy summary, we’ll briefly outline some of these powerful ideas. For the full details, examples and tips, do get a copy of the book, or get a detailed overview with our complete book summary bundle.
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 (click here for full 15-page 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.
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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 (get the 15-page summary here) where we’ll dive into each of these power sources including: (i) definitions, (ii) application tips/insights and (iii) short examples.
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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).
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Other Details in “Good Strategy Bad Strategy”
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. In our complete summary bundle, you can get a detailed overview of all of these key insights with short examples. Or, get a copy of the book for the full details.
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