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Good Strategy/Bad Strategy: The difference and why it matters

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Developing and implementing a strategy is the central task of a leader, whether the CEO at a Fortune 100 company, an entrepreneur, a church pastor, the head of a school, or a government official. Richard Rumelt argues that the heart of a good strategy is insight - into the true nature of the situation, into the hidden power in a situation, and into an appropriate response. He shows you how insight can be cultivated with a wide variety of tools for guiding your own thinking.

Good Strategy/Bad Strategy integrates fascinating examples from business, nonprofit, and military affairs to bring its original ideas to life: From Apple to General Motors, from the two Iraq wars to Afghanistan, from a small local market to Wal-Mart, from the Getty Trust to the Los Angeles Unified School District, from Global Crossing to the 2007-08 financial crisis, and many more. The abundance of business-ready insights offered by Rumelt stem from his decades of digging beyond the superficial to address hard questions with honesty and integrity.

322 pages, Paperback

First published January 1, 2011

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About the author

Richard P. Rumelt

13 books173 followers
Rumelt’s research has centered on corporate diversification strategy and the sources of sustainable advantage to individual business strategies. His current research interests center on the dynamics of industry transitions with a focus on the patterns and forces shaping the evolution of complex industries.

Rumelt received his doctorate from the Harvard Business School in 1972. He joined the UCLA faculty in 1976. He was President of the Strategic Management Society in 1995-98. He received the Irwin Prize for his book Strategy, Structure, and Economic Performance. In 1997, he was appointed Telecom Italia Strategy Fellow, a position he held until April 2000. He has won teaching awards at UCLA and received a “best paper prize” in 1997 from the Strategic Management Journal.

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Displaying 1 - 30 of 868 reviews
Profile Image for Cindy Brandt.
15 reviews4 followers
May 28, 2012
Felt the book could've been summed up in one chapter.
Profile Image for Andrew Garvin.
135 reviews217 followers
June 13, 2016
Rumelt is surly and arrogant. The barbs he slings at 'bad' strategists are hilarious. 'It is embarrassing for an intelligent adult to be associated with this sort of bloviating' is one of many (this one being targeted at Cornell's benign mission statement). Chad Logan, a random prospective small business client of Rumelt's, must be icing down from the sick burns. Rumelt puts Chad Logan on blast - unwittingly providing comic relief, because what did this dude do to inspire so much ire?

Good Strategy Bad Strategy is a treatise on clear thinking. Rumelt does not abide vapid fluff. He defines the thesis in a section that criticizes The Power of Positive Thinking. Results do not materialize from desire, they require forethought, planning, and strategy. Rumelt's refrain is that goal-setting and strategy are often conflated. Examples of 'Bad Strategy' fail at this level, where mission statements masquerade as strategy.

The value of the book comes from Rumelt's break-down of business school cases. The section on Nvidia is strong. There is a great breakdown of the bottling industry. I liked the insider take on the agricultural firm that makes Pom. Rumelt guides the reader like he does his students, in a way akin to uncovering a mystery. This style is appealing and cuts against the author's otherwise haughty tone.
Profile Image for C.
1,080 reviews1,052 followers
September 10, 2021
An insightful but long-winded exploration of effective strategy. The examples and advice are mostly related to business (usually large corporations), but they also deal with nonprofits and government. I like how it shows that much of what passes for strategy (goal-setting, vision) actually isn’t, and walks through how to form good strategy.

Its points could have been condensed into a book one-third the length. Part 3 (Thinking Like a Strategist) seemed disconnected from the rest. I suggest skipping it.

I read this book because it was recommended by web designer Paul Boag in his podcast episode 10 books every web professional should read.

Good strategy
• Diagnosis: understanding the challenge
• A guiding policy: the reasons that you’ll take action to address the challenge
• A set of coherent actions: a concrete, consistent action plan

Bad strategy
• Fluff: empty slogans and buzzwords
• Failure to face the challenge: focusing on things that are not the root problem
• Mistaking goals for strategy: a wish-list of objectives without a plan of action
• Bad strategic goals: goals that aren’t feasible for the organization

Good strategy versus bad strategy
Strategy “identifies the one or two critical issues in the situation—the pivot points that can multiply the effectiveness of effort—and then focuses and concentrates action and resources on them.”

Strategy is not “ambition, leadership, ‘vision,’ planning, or the economic logic of competition”

“A leader's most important responsibility is identifying the biggest challenges to forward progress and devising a coherent approach to overcoming them.”

Strategy is a “a cohesive response to an important challenge”; “a coherent set of analyses, concepts, policies, arguments and actions that respond to a high stakes challenge.”

Strategy isn't a “big-picture overall direction, divorced from any specific action.”

Good strategy isn’t goal-setting. Bad strategy is long on goals and short on policy and action.

Ambition and motivation aren't strategy.

To have a strategy is to choose one path and eschew others.

Good strategy isn't just what you are trying to do; it's also why and how you are doing it.

A leader's job is to distill information and provide a proximate objective (a feasible one, achievable with today’s technology and resources. Example: JFK’s challenge to land on the moon).
Profile Image for JJ Khodadadi.
376 reviews87 followers
February 15, 2022
همونطور که از اسم کتاب مشخص هست درباره تفاوت های استراتژی خوب و بد صحبت شده. بعضی مثال ها قدیمی هست اما کلیت کتاب عالیه
نکته جالب اینجاست که با هر مثالی رو با تصمیمات مملکتمون مقایسه کردم همه در قسمت استراتژی بد بودن!!
Profile Image for Daniel Clausen.
Author 9 books455 followers
October 15, 2014
This review first appeared on "Defense Innovator" (http://defenseinnovator.com/index.php...)

Lately, there seems no end to the number of books, articles, and op-ed pieces calling for a new grand strategy for the United States. These articles alternatively argue that the US needs to embrace complexity, focus on the homefront, rebalance to face rising peer competitors, brace for multiple challenges, to focus on a handful of known challenges, or to focus on domestic issues before starting on new foreign policy crusades.[1] At a time when strategy seems to be such a hot-button issue, it’s worth taking a moment to examine what exactly strategy is and what qualifies as good strategy.

As Richard Rumelt argues in his timely book: goals, vision statements, and motivational speeches have come to substitute for genuine strategy. This book presents us with a challenge: it first exposes the reader to the vast amounts of rhetoric and management-speak that are disguised as strategy. Usually, this comes to us in the form of jargon, esoteric concepts, endless lists of goals, or motivational speeches and injunctions to try harder. For Rumelt this is “bad strategy” (what Rumelt really means is that they are other things disguised as strategy, but Rumelt sticks with the dichotomy set up by his book’s title). Many of these forms of bad strategy do nothing more than avoid the hard choices that come from living in a world of constraints.

Good strategy is different. It is simple in its generic components, yet infinitely complex and challenging when formulated in a world of constraints and competition. Instead of a template, Rumelt presents us with the unassuming “kernel.” The kernel of strategy is this: a diagnosis of what is going on, a guiding policy (similar to a theory or hypothesis), and coherent action based on that guiding policy. The process itself sounds simple, but as Rumelt demonstrates from his many examples, strategy is also difficult because its aim is to formulate a unique view of the operating environment that will allow an organization to act effectively to meet its goals. Just as good science takes place on the boundaries of what is known, good strategy must also do the same by systematically testing its assumptions and interrogating its operating environment to come up with its guiding principles. There is no substitute for analytical rigor; thus, at the core of Rumelt’s book is a commitment to demonstrating the importance of rigorous analysis, both inductive and deductive.

The book eschews a formula and template approach to strategy and instead uses stories and lessons to make its points. The approach of the book is important because a key insight is that strategy is an analytical process that is as much about induction as it is about deduction. Though the central themes dominate the chapters, the reader is allowed to examine the stories and come up with their own ideas. Some of the themes will be well recognized by students of strategy: using the “kernel” to come up with strategy; using competitive advantages; using leverage and focus to make the most dramatic impacts; forming proximate goals that are achievable and linking these proximate goals to the organization’s ultimate objective. Others are less obvious and are drawn from Rumelt’s background in systems engineering. These include the importance of links in an organization’s chain, how inertia and entropy can impact an organization, and the importance of coherent design in formulating plans.

For students of strategy in a number of fields, much of the lessons will reiterate tried and true best practices. What will be more surprising, however, is the vast amount of examples Rumelt presents us with where organizations failed to take the challenge of strategy seriously—instead opting for the bad strategy alternative.

These examples beg a different question (one that is outside the scope of this book but nevertheless interesting), which is: Why has so much bad strategy proliferated in the world (much of the examples come from U.S. business, military, and educational policy)? Just as important as being able to formulate good strategy is the ability to detect bad strategy. Here I believe the book could have delved deeper. There is something deeply cultural that explains the proliferation of bad strategy. Rumelt does not miss this point so much as that he prefers to explain it in terms of common analytical errors—these analytical errors will be well known to anyone who has read about cognitive bias in analysis (Richard Heuer’s free book, The Psychology of Intelligence Analysis is must read in this regard: http://www.scip.org/files/Resources/H...). One could argue that there are cultural biases also working against Rumelt’s notion of good strategy: one of them is the cult of leadership as can-do spirit. The American public—including many of its top business and policy officials—tend to gravitate toward confident and inspiring goal-setters rather than to leaders with analytical depth. Rumelt’s many examples suggest that this bias is filtering down into the many ranks of the business world.

The book’s greatest weakness is also its strength, and Rumelt seems to be fully cognizant of it. He refuses to reduce the main themes of the book to an easy-to-use template. In short, it is very hard to spot-read this book as one would read a series of bullet points, an undergraduate textbook, or a book written for the busy executive. In short, he forces us to read the details of his stories in the same way a true strategist would grapple with the details of his or her situation. Though Rumelt offers his insights and leads us to different conclusions, the stories in the book are interesting enough that they can be reread over again and rethought with one’s own intentions in mind. Readers will interact with the material in different ways. The book works best if one is in the process of reevaluating his or her organization’s own strategy while reading the book.

Though Rumelt comes from a business background and many of his case studies draw from the world of business, I have no doubt that this book will soon become a must-read in military colleges and strategic studies courses everywhere. The central themes of the book were already present before its publication in Andrew Krepinevich and Barry Watts’ monograph on US strategy, Regaining Strategic Competence: Strategy for the Long Haul, published by the Center for Strategic and Budgetary Assessment (downloadable here: http://www.csbaonline.org/publication...)

Rumelt’s book on strategy is a timely, enjoyable, and comprehensive look at strategy in its many forms. For those students, analysts, and policymakers trying to better understand the challenge of strategy, this book is indispensable.

For those interested in previewing the central themes of the book, a preview of the book can be found here: http://goodbadstrategy.com/wp-content... and a short article here: http://www.mckinsey.com/insights/stra...

Notes

1.Though these articles and books vary in quality, many of them are well argued and worth reading. A small sample of of the most recent books and articles include: William Martel, “America needs a new grand strategy,” The Diplomat, 2012 (thediplomat.com/2012/06/18/why-americ... Patrick Doherty, “A New U.S. Grand Strategy, Foreign Affairs, 2013 (www.foreignpolicy.com/articles/2013/0... see also, http://newamerica.net/node/77134); Richard Haass, “Bringing our Foreign Policy Home,” Council for Foreign Relations, 2011 (http://www.cfr.org/world/bringing-our... also see, Richard Haass, Foreign Policy Begins at Home: The Case for Putting America’s House in Order, 2013. An older volume, Melvyn P. Leffler and Jeffrey W. Legro’s edited volume, To Lead the World: American Strategy after the Bush Doctrine, 2008, is also a very good (and still timely) read.

Profile Image for Andrew Stotz.
Author 7 books24 followers
June 5, 2017
Good Strategy Bad Strategy: The Difference and Why It Matters
I loved this book. I loved it so much that I did a video (https://youtu.be/NBJ-UZzzeSc) about it.
But if you don't feel like watching the video, what I said about it is below.

What is Good Strategy?
Sources: ASIR, Good Strategy Bad Strategy. The Difference and Why it Matters, Richard P. Rumelt, 2013, Profile Books

Rumelt says…

What was so great about this book?
 Small book, can read over a few hours
 Clear and simple
 Real world
 Honest

This book frees you from the ‘cascading’ ‘avalanche’ of
 Values
 Mission
 Vision
 Strategies
 Objectives
 Goals
 KPIs

Good strategy is rare
 Most companies just have performance goals, no strategy to achieve them
 Or they have fluffy aspirations

Signs of bad strategy
 Avoids identifying the company’s core problem
 Makes no hard choices, pushes those onto others
 Has no focus, company ends up with conflicting goals
 Is a list of outcomes (even big, hairy, audacious ones)
 Does not build on the competence and cumulative learning of the organization
 A ‘cascading’ ‘avalanche’ of fluffy Values, Mission, Vision, Strategy, Objectives, and Goals

What is good strategy?
 “It comes from top management identifying the problem and setting a path to addressing it.”

What is good strategy?
 “A coherent strategy can become a source of competitive advantage.”

What is good strategy?
 “The application of the scientific method.”

What is good strategy?
 “Presses where you have an advantage.”

What is good strategy?
 “Strength applied to the most promising opportunity.”

What is good strategy?
 “Good strategy has an objective that is close enough to be feasible.”

Three Components of Good Strategy
 Diagnosis
 Choice
 Action

Three Components of Good Strategy
 Diagnosis – Identifies the core challenge the company is facing
 Choice – Decides the direction the company will take and what direction it will stop moving in
 Action – Determines big picture actions to move in that direction, keeping the company focused

More Thoughts on Strategy
 Strength – Takes advantage of an existing strength, but reorganizes or redirects it in a coherent direction
 Choice – Makes a choice to focus energy and resources in that direction, to the determent of other choices
 Losers – Since good strategy must make a choice, a sign of good strategy is that there will be losers in an organization, areas where the company will retreat and pull back resources
 Beware of a “No losers” “strategy”, it is not

More Thoughts on Strategy
 Strategy is about testing and refining your hypothesis
 Based on scientific method of developing a hypothesis, running your test, honestly interpreting your results, re-testing with modifications
 Another author, Dr. W. Edwards Deming, called this the PDSA cycle
 Plan, Do, Study, Act

More Thoughts on Strategy
 The objective should make a big difference and will likely address a limiting factor
 It should be able to help a company lay out, step-by-step what actions to take, what goals to shoot for
 Think outside of your organization from the customer and the competitor's position
 Good strategy often simple, but takes time

Competitive success and wealth creation
 The joint outcome of the quality of an organization’s accumulated resources and its coordinated action
 By strengthening a competitive advantage or by increasing the demand for the scarce resources supporting it

To wrap up, the parts to Good Strategy
 Diagnosis
 Choice (Author calls this guiding principles)
 Action (Author calls this coherent action)

https://www.amazon.com/Good-Strategy-...
Profile Image for Doc Norton.
Author 1 book20 followers
June 25, 2014
This book seems a lot longer than necessary. It is full of examples where the author looks back on events and determines that he was right at the very beginning and that his strategy was (or would have been) best for the client. Meh. Other stories presume a certain strategy existed because success was achieved by some measure. Again - meh.

Overall, I felt like I got some good nuggets from the book. Ways to think about problems, what else to consider, etc.
Profile Image for Brook Dixon.
20 reviews
November 10, 2018
Probably should have been called Memoirs, Musings and Mysteries of a Genius Strategist, being a book which aims to secure Rumelt’s legacy, rather than convey deep practical and theoretical knowledge about strategy.

No doubt Rumelt is an expert in this field, but selective hindsight makes all strategy appear genius. The credibility of the book suffers accordingly.

Some excellent insights early in the book, before it degenerates into storytelling and myth making. The very last section, dealing with the boom bust cycle of asset markets, is grossly irrelevant, only harming the impact and value for Rumelt’s audience.
72 reviews4 followers
April 30, 2016
Every once in a while a book comes along that changes how you perform one aspect of your life. This is one of those books; a book that will force you to change the way you approach business strategy. Good Strategy Bad Strategy flips strategy on its head, cuts out the fluff and digs beneath the success of companies across the ages and teaches us to replicate it by following the kernel (basic skeleton) of strategy.

Incredible book and a must read.
Profile Image for Michal.
Author 1 book444 followers
January 29, 2022
asi najlepsia biznis kniha aku som cital za posledne obdobie.

ziaden bullshit a velmi dobre insighty o strategii.
Profile Image for Andy.
1,320 reviews455 followers
May 4, 2022
"Good Strategy/Bad Strategy" is superior to most business books out there because it dares to call bull---- on what commonly passes for "strategic planning" in most organizations. Nevertheless, this book is the pot calling the kettle black in terms of what the author calls "fluff." It is pretty good as a catalogue of "bad strategy." But it is not a profound explanation of the problem; nor is it a practical guide for what to do about it. For something that might help you as a manager to deal with the issues raised in the book, I would recommend "The Four Disciplines of Execution."
The 4 Disciplines of Execution: Achieving Your Wildly Important Goals
The 4 Disciplines of Execution Achieving Your Wildly Important Goals by Chris McChesney

Nerd addendum:
Let's consider the book in terms of Rumelt's own 3-step approach. The problem to be fixed is "bad strategy."

1. Diagnosis: Why is there so much bad strategy? It's not clear. He gives all kinds of different examples of bad strategy that have little in common. For the most part, he is criticizing people more for lack of strategy than for bad strategy. The common theme seems to be that bosses are confused about what strategy is and are doing silly stuff like writing mission statements. But this is just an elaboration of what the problem is, not a reason for why it is happening. And it is to some degree just word games, because a good mission statement is functionally the same thing as what he calls a "guiding policy."

2. Guiding policy for a solution: "There is no formula" for good strategy. Thanks! The impossibility of a formula is due in part to the fluid definition of "good strategy." When Sam Walton creates an entire new A-Z system in his industry starting from scratch in the middle of nowhere, that is good strategy. When Steve Jobs "waits for the next big thing" that is good strategy. When Admiral Nelson just relies on his captains' superior experience in a chaotic situation, that is good strategy. It is meaningless in retrospect to define successes as good strategies and failures as bad strategies; that's just circular reasoning.

3. Coherent action: See Step 2 above. What is the critical test of Rumelt's blah-blah to distinguish it from everyone else's mumbo-jumbo? Has he been objectively verified to predict/generate 5-year or 10-year successes of businesses, non-profits, government programs, etc.? This is a fair question because he invokes Galileo and the scientific method to back up what he does. He should apply the scientific method to himself.

Until these management gurus prove themselves with results, I'll call bull---- on them too.
Profile Image for Nate Huston.
111 reviews6 followers
April 22, 2013
Fairly standard corporate strategy fare. Well put together, though, and pithy. A good primer for strategy. His central thesis is that good strategy has good structure, a "kernel" consisting of a diagnosis, a guiding policy, and a coherent action." (77) Has some good thoughts regarding why bad strategy is so pervasive (normally a result of an unwillingness to make hard choices, templating, or a belief in the power of positive attitude as sufficient for good strategy. (58). About half the book discusses sources of power: leverage, proximate objectives, chain-link systems, etc.

None of the information is earth-shattering ("strategy is not a set of slogans" (70)), but the fact that "bad strategy" is so common (not the least of which is often seen in the form of goals as strategy, without the "how do you get there") makes this a good read for anyone interested in the subject. For the novice, it provides a good introduction. For someone a bit more steeped, it's a good review of the basics.
Profile Image for Alper Çuğun.
Author 1 book82 followers
February 12, 2018
Maybe this is advanced as far as strategy books go but it struck me as a really good introduction to strategy somewhat halfway to decisions theory.

The cases are pretty good. California Sunday just did a profile on the nut farmer just as I was reading this. The NVIDIA case is oddly prescient given the current crypto boom. And kicking down at the financial crisis is nothing but good measure.

A lot of damage and confusion could be prevented if everybody was forced to read this book before they ever use the term ‘strategy’. Is that too much to ask for?
Profile Image for Kacper Cebo.
35 reviews4 followers
March 29, 2020
An exceptional book. One of these you not only read but you actually study it. At least, you should, since it provides literally tens of deep, insightful thoughts on (surprise, surprise) strategy work. Must-read for any leader or executive.
Profile Image for Sarah.
118 reviews
May 1, 2022
What is bad strategy? Bad strategy has four major hallmarks:
1) Fluff masking an absence of substance- e.g., vague language like "never quit until you win"
2) Failure to face the challenge- skips over addressing problems
3) Mistaking goals for strategy- long on goals and short on policy/action; assumes that goals are all you need
4) Bad strategic objectives- a long list of "things to do" is not a strategy. It is just a list of things to do
There are three pathways to bad strategy: A) Unwilling/unable to make choices among competing values and parties; B) Template-style strategy: filling in the blanks with a one-size-fits-all approach; C) The belief that all you need to succeed is a positive mental attitude

What is good strategy? Good strategy has an essential logical structure called the kernel, which contains a diagnosis, a guiding policy, and coherent action. The diagnosis for the situation should replace the overwhelming complexity of reality with a simpler story that calls attention to its crucial aspects. It requires leaders who are willing to say no to a wide variety of actions and interests. Strategy is at least as much about what an organization does not do as it is about what it does.

How can you build good strategy?
1) Use leverage to focus minds, energy, and action onto a pivotal object at the right moment
2) Focus on proximate objectives, those that are close enough at hand to be feasible
3) Identify limiting factors that can be fixed (like paint color) rather than factors that cannot be fixed (like highway noise)
4) Use design thinking, which involves premeditation, anticipating others’ behavior, and purposefully designing coordinated action
5) Sustain competitive advantage through an isolating mechanism (e.g., a patent, your reputation, relationships, network effects, dramatic economies of scale, tacit knowledge gained through experience)
6) Exploit a wave of change: if you can peer into the fog of change and see 10 percent more clearly than others, then you may gain an edge
7) Understand the inertia of rivals
8) Undo entropy: clean up the debris and weeds that grow in every organizational garden
9) Put aside the comfort and security of pure deduction and launch into the murkier waters of induction, analogy, judgment, and insight
10) Exercise judgment iteratively: fight your own myopia, question your own judgment, make a habit of recording judgments so you can improve
11) Avoid social herding (doing what others are doing when you don't know what to do) and inside views (thinking of yourself as the exception and ignoring pertinent data)
Profile Image for Zora.
70 reviews3 followers
August 20, 2018
This is such a great book, but I debated rating it 4 stars because I felt some of the examples dragged on a little, becoming slightly monotonous.

I really liked how the author details mistakes companies make when setting their strategies, such as confusing ‘fluffy’ vision statements with strategy, or actually implementing bad strategies.

The author is considered an international expert in strategy. Throughout the book, he includes examples extracted from his experience consulting with various companies, as well as strategy-identifying scenarios used with his MBA students (which explains why this book was included as ‘recommended reading’ for my final MBA unit - strategy and international business competitiveness).
Profile Image for Michael Dubakov.
203 reviews123 followers
November 13, 2018
Quite good book. In a nutshell, Richard summarizes good strategy in 3 steps:

1. Analyze context (deeply) and make diagnosis
2. Create guiding policy to frame your actions
3. Create set of coherent actions that align with guiding policy

Surprisingly, many companies do not use these three basic steps.

Richard shows what bad strategy means. This is important to distinguish good from bad. People like to set ambitious goals without any deep analysis, and try to enforce this goal using "motivation". This is bad strategy.

There are many examples in this book, but the root of these three steps. As usual for business books, this one could be cut in half. Thus 4/5. Still a good read.
Profile Image for Szymon.
14 reviews7 followers
February 10, 2016
One fundamental idea presented in an understandable manner.
Profile Image for Tõnu Vahtra.
527 reviews72 followers
December 30, 2018
This is the best book I have read on the topic of strategy this year, it made me think in a different way about strategy and came timely just before the planning cycle for the upcoming year. Strategy is not just about goals or getting things done but it should be very much concerned with establishing or strengthening a competitive advantage. Also strategy is not just goals or guiding policies, strategy is about action, about doing something. The book helps you to differentiate bad strategy (or what is not strategy at all) and manage your own thinking around strategy ("what would Steve Jobs think about my idea"). Also when somebody contacts you for advice or appraisal on some strategy matter then do not rush into it (the reason why I don't like most consultants) but first try to uncover what is the underlying problem the requester is struggling with. I also liked the chapter and the idea about working around one's cognitive limitations by writing things down and organizing them to see the bigger picture and understand what is truly important and what is actionable (my strongest weapon against overwhelming amounts of information and complexity). The examples in the book were also interesting (like the Nvidia or Starbucks example or how Hannibal beat the Romans consistently), in general there was a lot of new information and the main thing that resonated multiple times from my previous reads were the cognitive fallacies from Kahneman (seems hard to write a book without them these days... ).

Good strategy is rare
*Most companies just have performance goals, no strategy to achieve them
*Or they have fluffy aspirations

Bad Strategy
#Avoids identifying the company’s core problem
#Makes no hard choices, pushes those onto others
#Has no focus, company ends up with conflicting goals
#Is a list of outcomes (even big, hairy, audacious ones)
#Does not build on the competence and cumulative learning of the organization
#A ‘cascading’ ‘avalanche’ of fluffy Values, Mission, Vision, Strategy, Objectives, and Goals

Characteristics of a good strategy:
#Good strategy comes from top management identifying the problem and setting a path to addressing it.
#A coherent strategy can become a source of competitive advantage.
#The application of the scientific method.
#Presses where you have an advantage.
#Strength applied to the most promising opportunity.
#Good strategy has an objective that is close enough to be feasible.

Three key components of a good strategy:
#Diagnosis – Identifies the core challenge the company is facing
#Guiding principles (Choice) – Decides the direction the company will take and what direction it will stop moving in
#Coherent action – Determines big picture actions to move in that direction, keeping the company focused

More characteristics
*Strength – Takes advantage of an existing strength, but reorganizes or redirects it in a coherent direction
*Choice – Makes a choice to focus energy and resources in that direction, to the determent of other choices
*Losers – Since good strategy must make a choice, a sign of good strategy is that there will be losers in an organization, areas where the company will retreat and pull back resources
*Beware of a “No losers” “strategy”, it is not a good strategy

*Strategy is about testing and refining your hypothesis
*Based on scientific method of developing a hypothesis, running your test, honestly interpreting your results, re-testing with modifications
Also known as the PDSA cycle (Dr. W. Edwards Deming):
Plan, Do, Study, Act
*The objective should make a big difference and will likely address a limiting factor
*It should be able to help a company lay out, step-by-step what actions to take, what goals to shoot for
*Think outside of your organization from the customer and the competitor's position
*Good strategy is often simple, but takes time to implement

Competitive success and wealth creation happens as:
*The joint outcome of the quality of an organization’s accumulated resources and its coordinated action
*By strengthening a competitive advantage or by increasing the demand for the scarce resources supporting it

“A leader’s most important job is creating and constantly adjusting this strategic bridge between goals and objectives.”
“A strategy coordinates action to address a specific challenge.”
“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.”

“Given that background, I was interested in what Steve Jobs might say about the future of Apple. His survival strategy for Apple, for all its skill and drama, was not going to propel Apple into the future. At that moment in time, Apple had less than 4 percent of the personal computer market. The de facto standard was Windows-Intel and there seemed to be no way for Apple to do more than just hang on to a tiny niche. In the summer of 1998, I got an opportunity to talk with Jobs again. I said, “Steve, this turnaround at Apple has been impressive. But everything we know about the PC business says that Apple cannot really push beyond a small niche position. The network effects are just too strong to upset the Wintel standard. So what are you trying to do in the longer term? What is the strategy?” He did not attack my argument. He didn’t agree with it, either. He just smiled and said, “I am going to wait for the next big thing.”

“Bad strategy is long on goals and short on policy or action. It assumes that goals are all you need. It puts forward strategic objectives that are incoherent and, sometimes, totally impracticable. It uses high-sounding words and phrases to hide these failings.”

“Strategies focus resources, energy, and attention on some objectives rather than others. Unless collective ruin is imminent, a change in strategy will make some people worse off. Hence, there will be powerful forces opposed to almost any change in strategy. This is the fate of many strategy initiatives in large organizations.”

“A hallmark of true expertise and insight is making a complex subject understandable. A hallmark of mediocrity and bad strategy is unnecessary complexity—a flurry of fluff masking an absence of substance.”

“Many people call the guiding policy “the strategy” and stop there. This is a mistake. Strategy is about action, about doing something. The kernel of a strategy must contain 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.”

“Bad strategy may actively avoid analyzing obstacles because a leader believes that negative thoughts get in the way. Leaders may create bad strategy by mistakenly treating strategy work as an exercise in goal setting rather than problem solving. Or they may avoid hard choices because they do not wish to offend anyone—generating a bad strategy that tries to cover all the bases rather than focus resources and actions.”

Leadership VS strategy. “Whatever you think about this definition of leadership, a problem arises when it is confused with strategy. Leadership and strategy may be joined in the same person, but they are not the same thing. Leadership inspires and motivates self-sacrifice. Change, for example, requires painful adjustments, and good leadership helps people feel more positively about making those adjustments. Strategy is the craft of figuring out which purposes are both worth pursuing and capable of being accomplished.”

“Not miscalculation, bad strategy is the active avoidance of the hard work of crafting a good strategy. One common reason for choosing avoidance is the pain or difficulty of choice. When leaders are unwilling or unable to make choices among competing values and parties, bad strategy is the consequence. A second pathway to bad strategy is the siren song of template-style strategy—filling in the blanks with vision, mission, values, and strategies. This path offers a one-size-fits-all substitute for the hard work of analysis and coordinated action. A third pathway to bad strategy is New Thought—the belief that all you need to succeed is a positive mental attitude. There are other pathways to bad strategy, but these three are the most common. Understanding how and why they are taken should help you guide your footsteps elsewhere."

“A strategy is a way through a difficulty, an approach to overcoming an obstacle, a response to a challenge. If the challenge is not defined, it is difficult or impossible to assess the quality of the strategy. And if you cannot assess a strategy’s quality, you cannot reject a bad strategy or improve a good one.”

“At the core, strategy is about focus, and most complex organizations don’t focus their resources. Instead, they pursue multiple goals at once, not concentrating enough resources to achieve a breakthrough in any of them.”












Profile Image for Chanh Nguyen.
130 reviews17 followers
February 15, 2018
Good strategy isn't just what you are trying to do; it's also why and how you are doing it.

Good strategy
• Diagnosis: understanding the challenge
• A guiding policy: the reasons that you’ll take action to address the challenge
• A set of coherent actions: a concrete, consistent action plan

Bad strategy
• Fluff: empty slogans and buzzwords
• Failure to face the challenge: focusing on things that are not the root problem
• Mistaking goals for strategy: a wish-list of objectives without a plan of action
• Bad strategic goals: goals that aren’t feasible for the organization

Good strategy versus bad strategy
Strategy “identifies the one or two critical issues in the situation—the pivot points that can multiply the effectiveness of effort—and then focuses and concentrates action and resources on them.”

Strategy is not “ambition, leadership, ‘vision,’ planning, or the economic logic of competition”

“A leader's most important responsibility is identifying the biggest challenges to forward progress and devising a coherent approach to overcoming them.”

Strategy is a “a cohesive response to an important challenge”; “a coherent set of analyses, concepts, policies, arguments and actions that respond to a high stakes challenge.”

Strategy isn't a “big-picture overall direction, divorced from any specific action.”

Good strategy isn’t goal-setting. Bad strategy is long on goals and short on policy and action.

Ambition and motivation aren't strategy.

To have a strategy is to choose one path and eschew others.

Good strategy isn't just what you are trying to do; it's also why and how you are doing it.

A leader's job is to distill information and provide a proximate objective (a feasible one, achievable with today’s technology and resources. Example: JFK’s challenge to land on the moon).

from: Chad Warner
Profile Image for Stefan Kanev.
125 reviews206 followers
June 16, 2019
I somehow ended buying this book in four separate formats – Kindle, Audible, Apple Books and hardcover. This is how good it is.

The Art of Action helped me understand the importance of strategy and this one helped me understand how to approach creating one. It's clear and insightful.

It's comprised of two types of information.

First, a set of tools to reason about designing a strategy. There are a few things, but I found "the kernel" to be the most useful. In his words, a strategy can be built around a kernel, and a kernel defines contains three elements: (1) a diagnosis of the challenge, (2) a guiding policy for dealing with it and (3) a set of coherent actions designed to to carry the policy out. In contrast, a bad "strategy" would be a list of things you want to accomplish – increase revenue by X or gain Y new users. I found this filter incredibly helpful to structure my thinking. And that was the first few chapters.

Second, it contains analyses and stories of a lot of well-known companies like Apple, IKEA, Nvidia, Global Crossing, Intel and so on. They help put the principle in context and leave you with a vivid way to remember the knowledge. The author thoughts about those companies alone make the book worth reading.

In short, it really got me thinking. I will definitely be coming back to it soon.
Profile Image for Maria Lasprilla.
63 reviews13 followers
December 13, 2019
This book is my top one for 2019.
Rumelt is an extremely sensible individual, giving you a very clear and applicable definition of strategy, but also breaking down the typical mistakes made when doing bad strategy. He offers an ample collection of examples of what works and what doesn’t, from a variety of sectors, industries and sizes.

When going through bad strategies, the way he criticizes New Thought is very entertaining and eye-opening. I mean, I totally love everything about personal development, and working on growing your emotional and mental maturity and strength, but it is a very different thing to believe that because I am, as my friend calls me, a hopeless optimist, I can change the course of a company or a community unless I apply some discipline and rigour to the problem at hand. Just check out this quote to see what I mean:

“The amazing thing about New Thought is that it is always presented as if it were new! And no matter how many times the same ideas are repeated, they are received by many listeners with fresh nods of affirmation. These ritual recitations obviously tap into a deep human capacity to believe that intensely focused desire is magically rewarded.

I do not know whether meditation and other inward journeys perfect the human soul. But I do know that believing that rays come out of your head and change the physical world, and that by thinking only of success you can become a success, are forms of psychosis and cannot be recommended as approaches to management or strategy”.

***

On the topic of good strategy, he breaks down his definition of a good one very clearly, and dedicates most of the book (the second part) to describing the specific sources of power to harness from when developing a good strategy.

I summarize the essence of his definition of strategy in this blog post, together with that of other authors: https://marialasprilla.wordpress.com/...

***
Finally, I love that he also focuses his last part of the book on how strategists think, and he does not hide the fact that it is a very difficult thing to achieve. There is no template, or step by step guide, but you get a very good idea of what it requires.

I absolutely love it how Rumelt does not skimp on blaming world natural and financial disasters on specific human judgment and behaviours. From how he breaks the crisis of 2008, and even the impact of the storm Katrina in New Orleans. He specifically breaks down the biases we are all victims to, emphasizing on “social herding” (thinking that everything is or is not OK because everyone else is saying so, and on “inside view” (thinking that we are different and that the lessons from other times and eras do not apply to us). He also suggests that the way around these is paying attention to real-world data.

All in all, a highly recommended book for leaders, business owners, and anyone else making a decision on a system where the different parts have to work together to perform well.
Profile Image for Bryan Rollins.
118 reviews
October 7, 2021
I think it took me a year to finish this on audiobook, because I wanted to listen to it and not be distracted.

In general I really dislike business books. I find that they make their point in the first chapter and then beat it to death for the next 12-30 follow on chapters.

Since I try and help companies build out or improve their strategy, and had heard good things, I was curious to see what was held within.

I think this book does a great job of explaining what a strategy is NOT. It's not the templates of mission, vision, metrics, etc that have become so popular (and which I think are still very useful). It's not growing 100% year over year. It's not "listen to our customers". It's not "be the leading global provider of personal lubricants." (my examples not the authors).

And it does tell some good stories about good strategies - but I don't think it really helps people craft their own strategies - but it does give you the building blocks of having to have:
1) a deep understanding of your customers, market, economics
2) a unique set of what he calls policies (and what I call "investment decisions" or pillars) that have a logical path to advantage over competitors

The book also gives some good examples of bad strategies and why they were bad, and good strategies and why they were good - but he is honest that it's not like engineering. You can't just check a bunch of equations and see if the bridge can hold the weight. But it's also not just art, there is some science,

Overall I think Seven Powers is better (though overly mathematical) at providing some categories of where the policies could come from. But if you read this first, then Seven Powers, that's probably a decent combination.

Worth a read for anyone who works in strategy land. Which is right next to Candy Land. But if you get to Land of the Lost, you've gone too far.
Profile Image for Unnawut Leepaisalsuwanna.
21 reviews18 followers
January 5, 2021
A good primer on strategy. The most useful aspect of this book is how the author clearly illustrates what bad strategies are like, which other books tend to avoid. On the other hand, his guidelines on good strategies are quite generic and typical.

Reading this book as an introductory to strategy, then on to more tangible resources like Business Model Generation and such, in this particular order, is recommended.
Profile Image for Sandro Mancuso.
Author 2 books277 followers
May 1, 2021
The book could be summarised in one or two chapters. The examples of different companies are interesting but make the book unnecessarily long. The book grabbed my attention in the first chapters but I caught myself struggling to keep going after one third. Ended up finishing it but had to jump a few pages here and there.
Profile Image for Bartosz Majewski.
278 reviews216 followers
December 9, 2018
Bardzo dobra książka na temat strategii. Zrobiłem mnóstwo notatek i bardzo uporządkowałem sobie wiedzę w tym obszarze. Jeśli aspirujesz do zarządzania ludźmi, podejmowania decyzji i przewodzenia swojemu otoczeniu - przeczytanie jej będzie dobrym pomysłem.
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