Understanding Good Strategy Bad Strategy by Richard Rumelt Unpacking Key Concepts for Success

Strategy often feels like a buzzword tossed around in business and leadership circles, but Richard Rumelt’s book Good Strategy Bad Strategy cuts through the noise. It reveals what truly makes a strategy effective and why many so-called strategies fail. This post breaks down Rumelt’s key ideas, helping you spot good strategy, avoid bad strategy, and apply these lessons to your own challenges.

A notebook open with handwritten strategy notes and diagrams

What Makes a Strategy Good or Bad

Rumelt argues that many organizations confuse goals or visions with strategy. A good strategy is not just a lofty ambition or a list of objectives. Instead, it has three essential elements:

• Diagnosis: A clear understanding of the challenge or problem.

• Guiding Policy: An overall approach to overcome the challenge.

• Coherent Actions: Specific steps aligned with the guiding policy.

  
  

Bad strategy often lacks these elements. It may include fluff, wishful thinking, or vague goals without a clear plan. For example, a company saying “We want to be the best in the market” without explaining how is a bad strategy.

The Kernel of Good Strategy

Rumelt calls the combination of diagnosis, guiding policy, and coherent actions the kernel of good strategy. Each part plays a critical role:

• Diagnosis identifies the critical issues. It’s not about listing everything but focusing on what really matters.

• Guiding Policy sets the direction. It’s a general approach that addresses the diagnosis.

• Coherent Actions are the practical moves that support the guiding policy.

  
  

This kernel helps leaders avoid common traps like confusing goals with strategy or relying on slogans.

Why Bad Strategy Happens

Rumelt points out several reasons bad strategy is common:

• Failure to face the problem: Leaders avoid tough issues and instead focus on positive but irrelevant goals.

• Mistaking goals for strategy: Setting ambitious targets without a plan to reach them.

• Bad strategic objectives: Objectives that are impractical or disconnected from the real challenge.

• Fluff and buzzwords: Using fancy language to hide the lack of substance.

  
  

An example is a company that declares “innovation” as a strategy but does not specify how it will innovate or what problems it aims to solve.

Examples of Good Strategy in Action

One of the most famous examples Rumelt shares is Apple under Steve Jobs. When Apple faced declining sales in the late 1990s, Jobs diagnosed the problem: the company had too many products and lacked focus. His guiding policy was to simplify the product line and focus on a few key innovations. The coherent actions included cutting down the number of products and investing in design and user experience. This clear strategy helped Apple regain its position as a market leader.

Another example is the U.S. military strategy in World War II. The diagnosis was that the Axis powers had strong control over Europe and Asia. The guiding policy was to focus on defeating Germany first before turning full attention to Japan. Coherent actions included allocating resources and planning campaigns accordingly. This focused approach helped the Allies win the war.

Chessboard with strategic pieces arranged for a game

How to Develop a Good Strategy

Creating a good strategy requires discipline and clarity. Here are practical steps based on Rumelt’s framework:

• Identify the core problem: Look beyond symptoms to find the root cause.

• Develop a guiding policy: Choose a clear approach that addresses the problem.

• Design coherent actions: Plan specific steps that support the policy and work together.

• Avoid fluff: Use clear, simple language to describe your strategy.

• Be realistic: Set achievable objectives based on your diagnosis.

  
  

For example, a startup struggling with customer acquisition might diagnose that their product does not meet a specific market need. Their guiding policy could be to focus on a niche market segment. Coherent actions might include targeted marketing campaigns and product adjustments.

The Role of Focus and Leverage

Rumelt emphasizes that good strategy often involves focus and leverage. Instead of spreading resources thin, good strategy concentrates efforts where they can have the most impact. Leverage means using existing strengths or advantages to overcome challenges.

For instance, Netflix’s early strategy focused on DVD rentals by mail, leveraging the postal system and avoiding direct competition with brick-and-mortar stores. This focus allowed Netflix to build a strong customer base before moving into streaming.

Avoiding Common Mistakes

To avoid bad strategy, watch out for:

• Overambitious goals without plans: Ambition is good but must be backed by a plan.

• Ignoring constraints: Real-world limits like budget, competition, or technology must be considered.

• Confusing vision with strategy: Vision inspires, strategy guides action.

• Lack of prioritization: Trying to do everything leads to doing nothing well.

  
  

Good strategy requires saying no to some options to focus on what matters most.

Whiteboard with a clear strategic plan and flowcharts drawn

Applying Rumelt’s Ideas Beyond Business

While Rumelt’s examples often come from business or military contexts, his ideas apply broadly. Nonprofits, governments, and individuals can benefit from clear diagnosis, guiding policy, and coherent actions.

For example, a nonprofit aiming to reduce homelessness might diagnose that lack of affordable housing is the main issue. Their guiding policy could focus on partnerships with housing developers. Coherent actions might include advocacy, fundraising, and pilot housing projects.

Final Thoughts on Strategy

Good strategy is about clarity, focus, and action. It requires understanding the real problem, choosing a clear approach, and taking coordinated steps. Bad strategy often looks like a list of goals or buzzwords without a plan.