Good Strategy Bad Strategy

Summary Written by Jon Mertz
"Strategy is the craft of figuring out which purposes are both worth pursuing and capable of being accomplished."

- Good Strategy Bad Strategy, page 66

The Big Idea

Good Strategy Needs a Kernel

"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."- Good Strategy Bad Strategy, page 7

The concept of a kernel is important, as it serves as the core of any good strategy. Although the quote makes it sound easy, it is very challenging to develop a good strategy with a kernel at the center, containing the three elements of a diagnosis, guiding policy, and coherent action. It is essential, however.

Diagnosis. Situations can be viewed and analyzed in different ways by different people. It is an unavoidable fact. A good diagnosis tells a story of the critical elements and frames actions to be taken. If a diagnosis is just a complex analysis or an explanation of the challenges, it has failed in its worth. It needs to lead to an approach of how the situation can be addressed.

Selecting the right diagnosis, ultimately, is a judgment. There will always be a human element to this process.

Guiding Policy. Given the selected diagnosis, there is an approach of how to address it. Guiding policies are not action steps, but they are the “guardrails” on what work needs to be done. Simply stated, a guiding policy should facilitate focused actions.

Coherent Action. Diagnosis and guiding policy without coherent action is just a non-starter in making changes or progress forward. Strategy needs action; it is the oxygen to make it come alive. Coherent actions are aligned ones. Actions need to be coordinated and consistent between departments, flowing from the diagnosis and operating within the guiding policy.

This is what makes a strategy crisp and real. This is what makes it good.

Insight #1

Knowing What a Bad Strategy Is Helps Develop a Good One

"Not miscalculation, bad strategy is the active avoidance of the hard work of crafting a good strategy. One common reason for choices avoidance is the pain or difficulty of choice."- Good Strategy Bad Strategy, page 58

As important as it is to know what makes a strategy good, it is essential to understand what makes one bad. Bad strategy can happen for two general reasons. The first is leadership, and the second is mistaken concepts of what a strategy is.

Leadership needs to make choices and center the discussions on strategy. Unfortunately, leaders sometimes work hard to avoid making tough choices. It can be painful, at times, to make these choices. The reality is that not making the strategic choices can be more painful and harmful later on. Often, this avoidance can result in leaders pursuing a template or a “new thought” strategy, sidestepping actually making the tough choices. Flowery and boilerplate strategies are worthless and show a clear lack of leadership.

The lesson learned: Make the tough, painful choices. It is what leaders do to implement good strategy.

The other element is mistaken strategy. Mr. Rumelt outlines several traits of what constitutes a bad strategy:

  • Fluff
  • Failure to face the challenge
  • Taking goals for strategy
  • Ignoring critical issues or defining impractical or unfeasible objectives

The lesson learned: Avoid taking the easy road by just outlining platitudes. A good strategy needs a kernel, not a lot of unnecessary glamour or shallow structure.

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Insight #2

Give Up Self-Judgment

"To generate a strategy, one must put aside the comfort and security of pure deduction and launch into the murkier waters of induction, analogy, judgment, and insight."- Good Strategy Bad Strategy, page 245

Mr. Rumelt dedicates a complete section of the book to “Sources of Power” in developing a good strategy. They include elements such as leverage, proximate objectives, focus, using design, and several others. Each element has value in how to empower a strategy.

To select the right “power” requires us to think like a strategist. It sounds fundamentally simple, but this may be the real power. Thinking it through can be done by using one or more of the following approaches:

  • Engage a panel of experts. This can be former leaders we have worked with, past professors, or other experts. Essentially, we use this panel of experts to challenge our thoughts and the way we are evaluating the situation and strategy. It is a panel of people, convened in our mind, to challenge us and to raise the level of our thinking.
  • Write it down. You can think about a strategy, think about the diagnosis, think about the guiding policy, and think about the coherent actions. When we write it down, it becomes more real, and it enables us to think more deeply about whether or not the strategy makes real sense.
  • Practice. It is one thing to read a book about strategy; it is a completely different thing to put it into practice. Take a situation and map the kernel out. It is amazing what it will do for your organization and leadership capabilities.

Good Strategy Bad Strategy is more than a business book. It is a methodical, realistic way to ensure we are developing good strategies. We need to be a complete leader by stepping up to the challenge of developing a good strategy and avoiding bad ones.

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Richard P. Rumelt

My teaching, research, and consulting focus on competitive strategy and the nature of competitive advantage. To visit my academic home page, click here.

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