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

by Richard P. Rumelt

Where does scientific knowledge come from? You know the process. A good scientist pushes to the edge of knowledge and then reaches beyond, forming a conjecture—a hypothesis—about how things work in that unknown territory. If the scientist avoids the edge, working with what is already well known and established, life will be comfortable, but there will be neither fame nor honor. In the same way, a good business strategy deals with the edge between the known and the unknown. Again, it is competition with others that pushes us to edges of knowledge. Only there are found the opportunities to keep ahead of rivals. There is no avoiding it. That uneasy sense of ambiguity you feel is real. It is the scent of opportunity. In science, you first test a new conjecture against known laws and experience. Is the new hypothesis contradicted by basic principles or by the results of past experiments? If the hypothesis survives that test, the scientist has to devise a real-world test—an experiment—to see how well the hypothesis stands up. Similarly, we test a new strategic insight against well-established principles and against our accumulated knowledge about the business. If it passes those hurdles, we are faced with trying it out and seeing what happens. Given that we are working on the edge, asking for a strategy that is guaranteed to work is like asking a scientist for a hypothesis that is guaranteed to be true—it is a dumb request. The problem of coming up with a good strategy has the s...