Good Strategy, Bad Strategy

by Richard Rumelt

Would have been a great blog post

This is a very long book, but of the category where the first chapter is enough. The author doesn’t give a concise definition of what good strategy is, but rather gives hundreds of examples of bad strategies, and says that they’re bad. Would have been a great blog post.

From the rest, I’ve tried to glean what I think the author says good strategy is.

Good strategy is a plan to overcome a challenge

Good strategy is framed in terms of overcoming some problem.

Good strategy begins with a good diagnosis

If you gave me an hour to think of a solution, I’d spend 55 minutes thinking about the problem.

We’ve identified the challenge. Now we need to diagnose why it’s happening.

“We’re being beaten by our competitors in the widgets business.”


Is it because they’re cheaper? Better quality? Better customer service? More convenient to buy?

Only once you know this can you go about fixing it.

Strategic Objectives are necessary but not sufficient

The author says many times that strategic objectives aren’t strategy. They do seem to be an essential component.

e.g. “In order to grow, we need to make cheaper printers”

e.g. “In order to grow we need to differentiate ourselves from our competitors”

That alone is not a strategy, it’s an objective. It gives no way of achieving it.

The Policy

The strategic policy outlines how the objectives will be achieved.

At the top level this might be “Make factories more efficient”, but should be coloured in with more specific changes. What steps will you take to make them more efficient?

Policy outcomes must be evidence-based

If your factories are already very efficient, it’s unlikely you’ll get much more out of them. Projecting a 20% increase in output is unlikely in that case.

Saying you’re moving in to some new market is only a valid policy if you have research showing the size of that market is sufficient to meet your objectives.

Strategy should contain a key hypothesis

At its core, your strategy needs a hypothesis, some insight or point of leverage, that will allow you to achieve what you haven’t before. In a competitive market, the point of leverage might be something you are uniquely placed to offer. For example, a change in the market, a proprietary technology, or brand positioning could help to multiply your efforts.

When Steve Jobs rejoined Apple in the late 90s, Apple was struggling to survive. They were making all kinds of consumer technology products: printers, scanners and various grades of laptop. A friend asked him which laptop was best, and he said he didn’t know how to answer that.

Jobs recognised that Apple had a key point of leverage: they made great high-end consumer computers, and they were admired for their simplicity & design. Jobs' strategy was to drop almost all products, except for the best laptop, and a desktop computer, and make use of this leverage to focus the company and raise profit margins.

The insight at Amazon, that their technology teams were repeatedly building & using the same kinds of technology infrastructure, was what drove their decision to build a cloud business. That insight was how Amazon timed it right. The same business at a different time may have been too early, and sunk. Their hypothesis was that if they were suffering this infra toil, so were others. Amazon was unique in coming to that insight at that time, and that’swhy AWS succeeded.

Motivation isn’t strategy

While motivation seems to act as a stand-in for leadership, motivation is not a strategy. Big words, or harder work, or lofty goals, are not strategy.

If mighty words and big goals were a strategy, everyone would succeed. As above, strategy needs to contain some core hypothesis.

Harder work might be a good tactic, but it is not a strategy. Even if you do outwork the competition hour by hour, if they have leverage that you don’t, their hours will simply count for more. I could work harder on my product than my competitor, but if they have targeted their product more carefully to consumer demand, they will beat me regardless.

Everything can’t be your strategy

Doing all things isn’t a strategy. Strategy requires picking the points where your leverage is highest and focusing there. Less but better. Moving a millimetre in a million directions is not growth. Hard choices and trade-offs need to be made.

Occasionally I send out an idea & ask for your thoughts.