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Book: Good Strategy/Bad Strategy: The Difference and Why it Matters

Author: Richard Rumelt

As a creative, brand strategist and entrepreneur, I’m interested in strategy, and in my travels across the web, this book, ‘Good strategy/Bad Strategy’ came up quite a few times as the one book to read if you wanted to learn more about strategy. I finally finished it last week, and it really delivered.

In the book, Richard Rumelt showcases the difference between good strategy and bad strategy. Bad strategy is nothing less than wishful thinking, and can be recognized by broad fluffy words, bad objectives and an unwillingness to face problems. Good strategy on the other hand digs in to the situation at hand, addresses the critical problems, prescribes a general guideline in tackling them and includes clear coherent set of actions to take to actually get there.

Good strategy/Bad strategy is a highly recommended reading if you are a leader, a consultant, an entrepreneur or just interested in strategy. The insights are profound and are widely applicable, from the board room to personal dealings.

Highlights from Good Strategy/Bad Strategy

Despite the roar of voices wanting to equate strategy with ambition, leadership, “vision”, planning, or the economic logic of competition, strategy is none of these. The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors.

A good strategy does more than urge us forward towards a goal or vision. A good strategy honestly acknowledges the challenges being faced and provides and approach to overcoming them.

A good strategy has an essential logical structure that I call the kernel. The kernel of a strategy contains three elements: a diagnosis, a guiding policy, and coherent 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.

How can someone see what others have not, or what they have ignored, and thereby discover a pivotal objective and create an advantage, lies at the very edge of our understanding, something glimpsed only out the corner of our minds.

Identify your strengths and weaknesses, assess the opportunities and risks (your opponent’s strengths and weaknesses), and build on your strengths.

If you fail to identify and analyze the obstacles, you don’t have a strategy. Instead, you have either a stretch goal, a budget, or a list of things you wish would happen.

Strategic objectives should address a specific process or accomplishment, such as halving the time it takes to respond to a customer, or getting work from several Fortune 500 corporations.

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.

Good strategy is not just “what’ you are trying to do. It is also “why” and “how” you are doing it.

A good guiding policy tackles the obstacles identified in the diagnosis by creating or drawing upon sources of advantage.

Returns to concentration arise when focusing efforts on fewer, or more limited, objectives generates larger payoffs.

…he invested where his resources would make a large and more visible difference.

One of a leader’s most powerful tools is the creation of a good proximate objective – one that is close enough at hand to be feasible.

…imagine that they were allowed to have only one objective. And that objective had to be feasible. What one single feasible objective, when accomplished, would make the biggest difference?

A master strategist is a designer.

But the truth is that many companies, especially large complex companies, don’t really have strategies. At the core, strategy is about focus, and most complex organizations don’t focus their resources.

Extending a competitive advantage requires looking away from products, buyers and competitors and looking instead at the special skills and resources that underlie a competitive advantage. In other words, “Build on your strengths”.

The other way to grab the high ground – the way that is my focus here – is to exploit a wave of change.

You exploit a wave of change by understanding the likely evolution of the landscape and then channeling resources and innovation toward positions that will become high ground – become valuable and defensible – as the dynamics play out.

A good strategy is, in the end, a hypothesis about what will work. Not a wild theory, but an educated judgement.

To guide your own thinking in strategy work, you must cultivate three essential skills or habits. First you must have a variety of tools for fighting your own myopia. Second, you must develop the ability to question your own judgement. If your reasoning cannot withstand a vigorous attack, your strategy cannot be expected to stand in the face of real competition. Third, you must cultivate the habit of making and recording judgements so that you can improve.