Book Summary
Published by Crown Business on July 19, 2011, Good Strategy Bad Strategy carries the subtitle The Difference and Why It Matters, and the difference is the whole book. Rumelt, a longtime strategy professor at UCLA Anderson, argues that most of what passes for strategy in business, government, and nonprofits is not strategy at all — it is a bundle of buzzwords, goals, and fluff that dresses up the absence of a plan. Real strategy, he says, is a specific and coherent response to an obstacle, and most organizations never get around to naming the obstacle.
At the center of the book is the kernel of good strategy: a diagnosis, a guiding policy, and coherent action. The diagnosis defines the nature of the challenge in simple terms; the guiding policy is an overall approach chosen to deal with it; the coherent actions are the coordinated steps that carry the policy out. A strategy that lacks any one of the three is not a strategy — a goal without a diagnosis is a wish, and a list of actions without a guiding policy is just motion.
The second half of the book sets out nine sources of power — leverage, proximate objectives, chain-linked systems, and others — the tools a strategist uses to build an advantage once the kernel is in place. The examples range across industries, from a truck manufacturer that found its edge in customization to military campaigns and school reform, and they all make the same point: good strategy almost always looks simple and obvious in hindsight, because it concentrates power where it will do the most good. Readers who want the classic statement of how great companies win their markets should also see {IL(U[‘good-to-great’], ‘Good to Great’)}, and for the question of how to create a market where none exists, {IL(U[‘blue-ocean’], ‘Blue Ocean Strategy’)}.
Buy Good Strategy Bad Strategy on Amazon
Who is Richard Rumelt?
Richard Rumelt is the Harry and Elsa Kunin Chair in Business and Society at the UCLA Anderson School of Management, and one of the most cited scholars in the strategy field. He earned his bachelor’s and master’s degrees in electrical engineering at UC Berkeley and his doctorate at Harvard Business School, and he spent four decades studying what companies, militaries, and governments actually do when they claim to be doing strategy. Before UCLA he taught at Harvard Business School, and he has consulted for companies ranging from small firms to giants like Shell International.
Rumelt’s reputation rests on rigor. His early research on diversification and performance is still cited today, and Good Strategy Bad Strategy is his attempt to bring that same empirical discipline to a word that had become almost meaningless in business. The book became the reference work for a generation of leaders trying to distinguish real strategy from its imitations — and it is the book other strategy books are now measured against.
Lessons From Good Strategy Bad Strategy
Bad strategy is easy to spot once you know the signs. Rumelt’s first lesson is a field guide to fluff: mistaking goals for strategy, refusing to face the problem, and dressing up a list of objectives as a plan. A document that says “we will be the best” and never names the obstacle in the way is not a strategy, however glossy the presentation. The test is simple — if you removed the buzzwords, would anything be left?
Good strategy starts with a diagnosis. The most important work in strategy is defining the challenge correctly, and Rumelt argues that a good diagnosis simplifies a complex situation into the one or two critical issues that matter most. Everything else follows from that choice: the guiding policy is chosen to address the diagnosis, and the actions are coordinated to carry it out. Get the diagnosis wrong and even brilliant execution solves the wrong problem.
Focus is power. A good strategy concentrates resources where they will do the most good, and it deliberately leaves other things undone. Rumelt’s sources of power all come back to this: leverage, where a small advantage is applied at the decisive point; proximate objectives, where a reachable goal is chosen instead of an impossible one; and coherence, where every action reinforces the others instead of pulling in different directions.
Strategy is about overcoming obstacles, not about setting goals. A goal is something you want; a strategy is how you get past what stands in the way. The book’s most useful discipline is to ask, for any plan, what obstacle it is designed to overcome — and if there is no obstacle, there is no strategy, only ambition. That question alone, applied honestly, would retire most of the strategy documents ever written.
Buy Good Strategy Bad Strategy on Amazon
Criticisms of the Book
The main weakness of Good Strategy Bad Strategy is that it is better at diagnosis than at prescription. Rumelt is superb at showing why a strategy is bad and what a good one looks like in hindsight, but a reader looking for a step-by-step method for building a strategy from scratch will find the book suggestive rather than systematic. The nine sources of power are a toolkit, not a recipe, and applying them to your own situation takes judgment the book can only partly teach. Readers who want a framework for choosing where to compete should pair it with Blue Ocean Strategy.
The book is also written for leaders, not for everyone. Its examples come from boardrooms, battlefields, and school systems, and an individual investor or small-business owner will need to translate the lessons down to their own scale. And some readers will find Rumelt’s tone bracing — he has little patience for the strategy profession as it is practiced. For the same ideas applied to building a new company from nothing, Zero to One is the sharper companion, and for how great companies sustain their edge over decades, Good to Great.
Who is This Book For?
This is the book for anyone who has to make strategy — a founder, a manager, an executive, or a board member — and has sat through one too many planning sessions that produced goals instead of decisions. It pairs naturally with Blue Ocean Strategy for the question of where to compete, and with Good to Great for how great companies sustain what strategy wins. Readers who enjoyed either will find this one the most bracing of the three — a book that makes you suspicious of your own plans, in a useful way.
It is less useful for readers who want a personal-finance or investing book. The lessons about focus, diagnosis, and coherent action travel well, but the book is written for people responsible for organizations, and an individual investor will find more directly applicable material in the investing books on this site.
Final Thoughts
Good Strategy Bad Strategy has lasted because it names a problem everyone has felt and few can describe: the strategy document that says nothing, the plan that is really a wish list, the meeting that ends with goals instead of decisions. Rumelt’s kernel — diagnosis, guiding policy, coherent action — is a test you can apply to any plan in five minutes, and once you have applied it, you cannot unsee the difference between good strategy and bad.
Read it before your next planning cycle, and read it again after you have written your own strategy — the second time through, the chapters on bad strategy read less like criticism and more like a description of your own last plan. As an introduction to what strategy actually is, it remains the clearest book on the subject.
