Key Insights: Good Strategy Bad Strategy
Richard Rumelt's complaint is about language. In most organisations "strategy" has swollen to mean ambition, a growth target, or a budget. He shrinks it back to a specific act of intellect: find the decisive obstacle, choose an approach that excludes, and concentrate coordinated action there.
5 Pillars of Success
1. The Kernel: three parts that must lock together
Every good strategy Rumelt examines contains the same core, which he calls the kernel. A **diagnosis** answers "what is going on here?" and names the critical difficulty. A **guiding policy** states the approach to that difficulty — a direction, not a target. **Coherent action** is the set of coordinated moves that carry the policy out and reinforce one another.
The parts are a logic test, not documents. A policy without a diagnosis is arbitrary; actions that do not follow from the policy are a to-do list. Coherence, not cleverness, is the source of power, because a rival cannot copy one piece and collect the benefit. When Apple returned to health in 1997, the kernel was a diagnosis of near-bankruptcy, a policy of radical simplification, and the coordinated action of cutting the product line to a handful of machines.
2. Diagnose the obstacle — and make the diagnosis arguable
Diagnosis is the hardest part, because it is a judgement about which of many facts actually matter, expressed plainly and often as analogy: we are the high-cost producer in a commoditising market. A diagnosis is a claim about reality, so it can be wrong, and it should be stated so evidence could contradict it.
Two failure modes recur. The first is no diagnosis at all: a plan that never says what stands in the way cannot be evaluated, only believed. The second is a diagnosis chosen for comfort, one that blames the market or a competitor while avoiding a weakness in your own cost base, product, or culture. That is where most strategies are quietly hollowed out.
3. Reject the four signatures of bad strategy
Rumelt's catalogue of failure is instantly recognisable. **Fluff** stacks abstract nouns to create the impression of high-level thought while saying nothing. **Failure to face the challenge** describes what the organisation will do well without naming what blocks it. **Mistaking goals for strategy** declares "our strategy is 20% annual growth" — a desired outcome dressed up as a plan. **Bad objectives** arrive as the dog's dinner, a list of unrelated priorities that commits to nothing, or as the blue-sky objective that ignores resources and feasibility.
Bad strategy survives because it is easier: it excludes nothing and offends no internal constituency.
4. Concentrate force at a pivot point
Leverage is power obtained by concentrating effort where it counts, and Rumelt breaks it into anticipation, a pivot point, and concentration. Anticipation means reasoning about the forces already in play rather than forecasting statistically. A pivot point is a place where modest effort produces disproportionate effect: a design win, a distribution channel, an industry standard, a customer segment. Concentration means refusing to spread the same resources evenly.
At Trafalgar, Nelson broke the conventional line-ahead formation and drove through the enemy line, concentrating force instead of trading broadsides evenly. Dividing effort evenly across everything is usually the timid choice.
5. Fix the weakest link, not the strongest
Some systems perform only as well as their weakest link. In discount retailing, Wal-Mart's advantage was a whole configuration: distribution centres with stores clustered within a day's drive, its own logistics, systems linking stores to suppliers, everyday low prices, and a culture of cost discipline. Kmart copied individual links, such as larger stores, and gained nothing, because the value lived in the interaction.
Two rules follow: diagnose the bottleneck before investing, and accept that specialisation can beat generalisation. Crown Cork and Seal under John Connelly made its money in short-run, service-heavy can segments the giants found unattractive — a design whose return came from what it refused to do. Growth, in Rumelt's account, is a consequence of that advantage, not a strategy in itself.
Key Takeaway
"Good strategy is not a wish list or motivational rhetoric. It is a precise diagnosis of a pivotal challenge and a coordinated concentration of power to overcome it."
Practical Task
1. Write the diagnosis before the plan, in one paragraph a sceptical outsider could argue with. Name the decisive obstacle, not the ambition. 2. Check it for comfort: does it blame the market or a competitor while avoiding your own cost base, product, or culture? 3. Draft the guiding policy as an approach, not a target. One sentence for the route, a second listing what it forbids. 4. Rank candidate pivot points — where modest effort would produce disproportionate effect — then concentrate resources there this quarter. 5. Set a proximate objective that is concrete, bounded, and resolvable into work you can start now. 6. Map your value chain as links and fix the weakest one first. 7. Write down what evidence would prove the diagnosis wrong, and set a review date.