Good Strategy Bad Strategy: The Difference and Why It Matters

by Richard P. Rumelt

Good strategy almost always looks this simple and obvious and does not take a thick deck of PowerPoint slides to explain. It does not pop out of some “strategic management” tool, matrix, chart, triangle, or fill-in-the-blanks scheme. Instead, a talented leader 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.

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.

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A leader’s most important responsibility is identifying the biggest challenges to forward progress and devising a coherent approach to overcoming them. In contexts ranging from corporate direction to national security, strategy matters. Yet we have become so accustomed to strategy as exhortation that we hardly blink an eye when a leader spouts slogans and announces high-sounding goals, calling the mixture a “strategy.”

A good strategy recognizes the nature of the challenge and offers a way of surmounting it. Simply being ambitious is not a strategy.

Having just written the Army/Marine Corps Counterinsurgency Field Manual, General David Petraeus was sent to Iraq, along with five additional brigades of troops. But more than the extra soldiers, Petraeus was armed with an actual strategy. His idea was that one could combat an insurgency as long as the large preponderance of civilians supported a legitimate government. The trick was to shift the military’s focus from making patrols to protecting the populace. A populace that was not in fear of insurgent retaliation would provide the information necessary to isolate and combat the insurgent minority. This change, replacing amorphous goals with a true problem-solving strategy, made an enormous difference in the results achieved.

A good strategy does more than urge us forward toward a goal or vision. A good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them. And the greater the challenge, the more a good strategy focuses and coordinates efforts to achieve a powerful competitive punch or problem-solving effect.

Like a quarterback whose only advice to teammates is “Let’s win,” bad strategy covers up its failure to guide by embracing the language of broad goals, ambition, vision, and values. Each of these elements is, of course, an important part of human life. But, by themselves, they are not substitutes for the hard work of strategy.

The gap between good strategy and the jumble of things people label “strategy” has grown over the years. In 1966, when I first began to study business strategy, there were only three books on the subject and no articles. Today, my personal library shelves are fat with books about strategy.

Further confusion is created by equating strategy with success or with ambition. This was my problem with the Web-services CEO who claimed “Strategy is never quitting until you win.” This sort of mishmash of pop culture, motivational slogans, and business buzz speak is, unfortunately, increasingly common. It short-circuits real inventiveness and fails to distinguish among different senior-level management tasks and virtues. Strategy cannot be a useful concept if it is a synonym for success. Nor can it be a useful tool if it is confused with ambition, determination, inspirational leadership, and innovation. Ambition is drive and zeal to excel. Determination is commitment and grit. Innovation is the discovery and engineering of new ways to do things. Inspirational leadership motivates people to sacrifice for their own and the common good.1 And strategy, responsive to innovation and ambition, selects the path, identifying how, why, and where leadership and determination are to be applied.

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To begin the journey toward clarity, it is helpful to recognize that the words “strategy” and “strategic” are often sloppily used to mark decisions made by the highest-level officials.

Unlike a stand-alone decision or a goal, a strategy is a coherent set of analyses, concepts, policies, arguments, and actions that respond to a high-stakes challenge.

Many people assume that a strategy is a big-picture overall direction, divorced from any specific action. But defining strategy as broad concepts, thereby leaving out action, creates a wide chasm between “strategy” and “implementation.” If you accept this chasm, most strategy work becomes wheel spinning.

A good strategy includes a set of coherent actions. They are not “implementation” details; they are the punch in the strategy. A strategy that fails to define a variety of plausible and feasible immediate actions is missing a critical component.

Strategy is about how an organization will move forward. Doing strategy is figuring out how to advance the organization’s interests. Of course, a leader can set goals and delegate to others the job of figuring out what to do. But that is not strategy.

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 guiding policy specifies the approach to dealing with the obstacles called out in the diagnosis. It is like a signpost, marking the direction forward but not defining the details of the trip.

Coherent actions are feasible coordinated policies, resource commitments, and actions designed to ...

Once you gain a facility with the structure and fundamentals of a good strategy, you will develop the parallel ability to d...

The most basic idea of strategy is the application of strength against weakness. Or, if you prefer, strength applied to the most promising opportunity. The standard modern treatment of strategy has expanded this idea into a rich discussion of potential strengths, today called “advantages.” There are advantages due to being a first mover: scale, scope, network effects, reputation, patents, brands, and hundreds more. None of these are logically wrong, and each can be important. Yet this whole midlevel framework misses two huge, incredibly important natural sources of strength:

Having a coherent strategy—one that coordinates policies and actions. A good strategy doesn’t just draw on existing strength; it creates strength through the coherence of its design.

The creation of new strengths through subtle shifts in viewpoint. An insightful reframing of a competitive situation can create whole new patterns of advantage and weakness. The most powerful strategies arise from such game-changing insights.

The leader of an organization lacking a good strategy may simply believe that strategy is unnecessary. But more often the lack is due to the presence of bad strategy. Like weeds crowding out the grass, bad strategy crowds out good strategy. Leaders using bad strategies have not just chosen the wrong goals or made implementation errors. Rather, they have mistaken views about what strategy is and how it works.

The first natural advantage of good strategy arises because other organizations often don’t have one. And because they don’t expect you to have one, either. A good strategy has coherence, coordinating actions, policies, and resources so as to accomplish an important end.

What is remarkable about Jobs’s turnaround strategy for Apple is how much it was “Business 101” and yet how much of it was unanticipated.

The power of Jobs’s strategy came from directly tackling the fundamental problem with a focused and coordinated set of actions. He did not announce ambitious revenue or profit goals; he did not indulge in messianic visions of the future. And he did not just cut in a blind ax-wielding frenzy—he redesigned the whole business logic around a simplified product line sold through a limited set of outlets.

These executives, by and large, had no trouble describing the strategy of the leader in their sectors. The standard story was that some change in demand or technology had appeared—a “window of opportunity” had opened—and the current leader had been the first one to leap through that window and take advantage of it. Not necessarily the first mover, but the first to get it right. But when I asked about their own companies’ strategies, there was a very different kind of response. Instead of pointing to the next window of opportunity, or even mentioning its possibility, I heard a lot of look-busy doorknob polishing. They were making alliances, they were doing 360-degree feedback, they were looking for foreign markets, they were setting challenging strategic goals, they were moving software into firmware, they were enabling Internet updates of firmware, and so on. They had each told me the formula for success in the 1990s electronics industry—take a good position quickly when a new window of opportunity opens—but none said that was their focus or even mentioned it as part of their strategy.

Jobs did not enunciate some simple-minded growth or market share goal. He did not pretend that pushing on various levers would somehow magically restore Apple to market leadership in personal computers. Instead, he was actually focused on the sources of and barriers to success in his industry—recognizing the next window of opportunity, the next set of forces he could harness to his advantage, and then having the quickness and cleverness to pounce on it quickly like a perfect predator. There was no pretense that such windows opened every year or that one could force them open with incentives or management tricks. He knew how it worked. He had done it before with the Apple II and the Macintosh and then with Pixar. He had tried to force it with NeXT, and that had not gone well. It would be two years before he would make that leap again with the iPod and then online music. And, after that, with the iPhone. Steve Jobs’s answer that day—“to wait for the next big thing”—is not a general formula for success. But it was a wise approach to Apple’s situation at that moment, in that industry, with so many new technologies seemingly just around the corner.

Most complex organizations spread rather than concentrate resources, acting to placate and pay off internal and external interests. Thus, we are surprised when a complex organization, such as Apple or the U.S. Army, actually focuses its actions. Not because of secrecy, but because good strategy itself is unexpected.

Good strategy requires leaders who are willing and able 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.

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The second natural advantage of many good strategies comes from insight into new sources of strength and weakness. Looking at things from a different or fresh perspective can reveal new realms of advantage and opportunity as well as weakness and threat.

Then the listener realizes that David discarded the armor because it would only slow him down; had he come close enough to receive a blow from the giant, bronze armor would not have saved him. Finally, when the stone strikes Goliath’s forehead, the listener suddenly discovers a critical weakness—Goliath’s armor didn’t cover this vital area. David’s weapon delivered force with precision over a distance, neutering Goliath’s supposed advantages of size and strength. The story teaches us that our preconceived ideas of strength and weakness may be unsound. It is the victory of apparent weakness over apparent strength that gives this tale its bite. More than the deft wielding of power, the listener experiences the actual discovery of power in a situation—the creation or revelation of a decisive asymmetry. How someone can 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 of the corner of our minds. Not every good strategy draws on this kind of insight, but those that do generate the extra kick that separates “ordinary excellence” from the extraordinary.

use your relative advantages to impose out-of-proportion costs on the opposition and complicate his problem of competing with you.

Marshall and Roche’s strategy was one of them, and I believe it was, then it compels our attention. Their insight was framed in the language of business strategy: identify your strengths and weaknesses, assess the opportunities and risks (your opponent’s strengths and weaknesses), and build on your strengths. But the power of that strategy derived from their discovery of a different way of viewing competitive advantage—a shift from thinking about pure military capability to one of looking for ways to impose asymmetric costs on an opponent.

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Bad strategy is not simply the absence of good strategy. It grows out of specific misconceptions and leadership dysfunctions. Once you develop the ability to detect bad strategy, you will dramatically improve your effectiveness at judging, influencing, and creating strategy. To detect a bad strategy, look for one or more of its four major hallmarks:

Fluff. Fluff is a form of gibberish masquerading as strategic concepts or arguments. It uses “Sunday” words (words that are inflated and unnecessarily abstruse) and apparently esoteric concepts to create the illusion of high-level thinking.

Failure to face the challenge. Bad strategy fails to recognize or define the challenge. When you cannot define the challenge, you can...

Mistaking goals for strategy. Many bad strategies are just statements of desire rather than pla...

Bad strategic objectives. A strategic objective is set by a leader as a means to an end. Strategic objectives are “bad” when they fail to address criti...

A strategy would have to explain why regional conflicts, which have been a constant in human activity for millennia, are suddenly a major security problem. And it would have to explain which instruments of U.S. power and influence might be used to convince others to work with the United States on such crusades. It would also have to address the criteria for working with nations that violated the national security strategy’s other goals of “human dignity,” “free trade,” “democracy,” and “freedom.”

Bad strategy, I explained, is not the same thing as no strategy or strategy that fails rather than succeeds. Rather, it is an identifiable way of thinking and writing about strategy that has, unfortunately, been gaining ground. 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.

Markets do not necessarily evolve from “simple” to “complex”—it often goes the other way around. Yes, you need a basis to create futures and options, but a basis does not have to be a commodity or even a price.

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.

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.

He pulled a sheet of paper out of his briefcase and ran a finger under the highlighted text. “This is what Jack Welch says,” he told me. The text read: “We have found that by reaching for what appears to be the impossible, we often actually do the impossible.”

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The philosophy of the age, most fervently adopted by the French, was that willpower, spirit, morale, élan, and aggressiveness were the keys to success. For three years, generals flung highly motivated men at fortified machine-gun emplacements, only to see tens of thousands, then hundreds of thousands, shredded to mincemeat to gain a mile of useless ground. In 1917, around the village of Passchendaele in Flanders, British general Douglas Haig planned an assault. He wanted to break through the Germans’ fortified lines and open up a path to the sea, dividing the German army. He had been advised that shelling the German fortified positions would destroy the dikes and flood the below-sea-level fields. He shelled the German fortifications anyway. The shelling broke the dikes and churned the rich soil to sticky yellow clay, a quagmire that men sank into up to their knees and bellies. It drowned tanks, horses, and the wounded.

Here, for example, is H. Ross Perot: “Most people give up just when they’re about to achieve success. They quit on the one-yard line. They give up at the last minute of the game, one foot from a winning touchdown.” Hearing this, many Americans nod in agreement. Many Europeans, by contrast, hear the echo of the “one last push” at Passchendaele. There, the slaughtered troops did not suffer from a lack of motivation. They suffered from a lack of competent strategic leadership. Motivation is an essential part of life and success, and a leader may justly ask for “one last push,” but the leader’s job is more than that. The job of the leader is also to create the conditions that will make that push effective, to have a strategy worthy of the effort called upon.

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What I would advise is that you first work to discover the very most promising opportunities for the business. Those opportunities may be internal, fixing bottlenecks and constraints in the way people work, or external. To do this, you should probably pull together a small team of people and take a month to do a review of who your buyers are, who you compete with, and what opportunities exist. It’s normally a good idea to look very closely at what is changing in your business, where you might get a jump on the competition. You should open things up so there are as many useful bits of information on the table as possible.

If you continue down the road you are on you will be counting on motivation to move the company forward. I cannot honestly recommend that as a way forward because business competition is not just a battle of strength and wills; it is also a competition over insights and competencies. My judgment is that motivation, by itself, will not give this company enough of an edge to achieve your goals.

Business leaders know their organizations should have a strategy. Yet many express frustration with the whole process of strategic planning. The reason for this dissatisfaction is that most corporate strategic plans are simply three-year or five-year rolling budgets combined with market share projections. Calling a rolling budget of this type a “strategic plan” gives people false expectations that the exercise will somehow result in a coherent strategy.

To obtain higher performance, leaders must identify the critical obstacles to forward progress and then develop a coherent approach to overcoming them. This may require product innovation, or new approaches to distribution, or a change in organizational structure. Or it may exploit insights into the implications of changes in the environment—in technology, consumer tastes, laws, resource prices, or competitive behavior. The leader’s responsibility is to decide which of these pathways will be the most fruitful and design a way to marshal the organization’s knowledge, resources, and energy to that end.

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