Good Strategy, Bad Strategy

Why do most strategies fail while a few radically reshape industries? Richard Rumelt’s Good Strategy/Bad Strategy argues that the heart of effective strategy is not grand vision or motivational fluff, but clear diagnosis, decisive choice, and coordinated action. Rumelt calls this the kernel—a compact framework that separates real strategy from rhetoric. Good strategy begins when you stop pretending that goals are plans and face the real obstacles in front of you.

At its core, Rumelt proposes that strategy is a form of applied insight: you craft a way to overcome the most critical challenge. He divides this into three essential parts—diagnosis, guiding policy, and coherent actions. A diagnosis defines what’s really going on, the guiding policy sets a principle for response, and coherent actions are the tightly aligned steps that bring it to life. This triad is simple in theory but hard in practice—because it forces you to decide instead of merely proclaim.

The book’s arc: clarity, choice, and design

Across sixteen chapters, Rumelt dismantles the myths that make bad strategy persist—vague visions, unwillingness to choose, and worship of positive thinking—and then rebuilds from fundamentals. He teaches that good strategy is analytical and creative at once: you find leverage points through focus, proximate objectives, reframing, and design. You learn to detect weak links, exploit surprises, and ride waves of change. But all of these depend on disciplined thinking and courage to choose a path.

The examples range widely—Lou Gerstner’s IBM revival through reframing its purpose (“integrated solutions, not hardware”), Steve Jobs’s radical simplification of Apple’s product line, and Cisco’s positioning on the IP wave. Others illustrate failure: Enron’s jargon-filled fluff, Lehman Brothers’ goals-as-strategy, and Global Crossing’s market delusion. Through these stories, Rumelt makes strategy concrete and human: it’s about leaders facing uncertainty with clear eyes and coherent action.

The kernel as diagnostic tool

Rumelt’s kernel instantly clarifies why most companies confuse ambition with strategy. A goal—“grow 20%,” “be number one,” “transform culture”—has no mechanism. Only a diagnosis and guiding policy can link ambition to action. You can test any plan by asking three questions: What’s our diagnosis? What guiding policy arises from that? What coherent actions follow? If any is missing, you have a slogan, not a strategy.

Like a medical diagnosis, strategic diagnosis simplifies reality into a story that directs treatment. Kennan’s “containment” strategy against the USSR began with a clear diagnosis of Soviet motives. Lou Gerstner’s IBM turnaround required reframing the firm’s stagnation not as technological failure but as organizational misalignment. Steve Jobs’s Apple rescue used diagnosis (“too complex, bleeding cash”), guiding policy (“focus and simplify”), and coherent actions (“cut products, outsource manufacturing, sell directly”).

Why bad strategy dominates the world

Rumelt insists that bad strategy persists because it feels comfortable. It avoids trade-offs, glorifies motivation, and hides behind templates—“vision, mission, values”—that look strategic but aren’t. Organizations avoid choosing because choice creates pain and winners/losers. Moreover, consultants and executives substitute “New Thought” (positive thinking) for analysis. They believe fervor makes success inevitable, ignoring obstacles. Good strategy is uncomfortable precisely because it reveals what must be faced.

Understanding these roots matters. The reluctance to decide fosters consensus mush—commitments so vague that no one objects and no one acts. Breaking this pattern requires leadership willing to name problems and impose direction.

Focus, design, and reframing

A second major theme is focus—the act of concentrating effort on pivotal points of leverage. Good strategists reject distraction and diffuse action. Jobs’s product pruning, Schwarzkopf’s Desert Storm maneuver, and Marco Tinelli’s multi-stage coordination in Lombardy all show how focused moves create unexpected advantage. You surprise competitors by not behaving diffusely.

Reframing unlocks power. David beat Goliath not by matching strength but by changing the game—distance combat instead of armor battle. Sam Walton did the same by reframing the store-as-network, turning logistics and data into the unit of strategy. Andy Marshall reframed US defense planning by exploiting Soviet costly counters. In each case, insight, not size, created leverage.

Design and evolution

Strategy, Rumelt writes, is design under uncertainty. In “chain-link” systems—where weakest parts control total performance—you must coordinate multiple improvements together. Tinelli’s factory turnaround, JPL’s Voyager architecture, and IKEA’s tightly integrated flat-pack model illustrate how design coherence substitutes for sheer resources. High fit equals excellence but also fragility; when underlying conditions shift, integrated designs can crumble (as Xerox’s old model did).

You can’t escape constant change, but you can ride it. Waves of technological and regulatory shifts reshape industries. The strategist’s task is not prophecy but positioning—seeing a bit farther than others and acting early. Cisco rode four simultaneous technological waves by investing ahead of mainstream adoption. The principle: if you can see ten percent farther into an emerging attractor state (e.g., “IP everywhere”), you gain disproportionate advantage.

Thinking and judgment

Finally, Rumelt turns inward—to cognitive discipline. Strategy demands independent judgment amid noise and herding. You fight biases using tools: make lists, pre-commit your view before debate, destroy your own ideas, consult imaginary expert panels, and generate alternatives even after a “first good insight.” He warns against the “inside view”—believing your case is unique—and shows how herds inflated the cable and housing bubbles by mistaking price for truth. Strategic thinkers cultivate distance and sanity.

Core idea

Good strategy starts with clarity and choice. You diagnose reality, choose a guiding policy that focuses energy, and align coherent actions that reinforce one another. Everything else—vision statements, ambition, motivational talk—is decoration.

Rumelt’s book is a call to courage and craft. It teaches you that strategy is not planning—it’s design plus judgment. When you build it around the kernel, face challenges directly, and concentrate force at leverage points, you transform uncertainty into intelligent action.

Rumelt defines bad strategy not as failure but as confusion. It has recognizable markers that you can learn to spot: fluff, failure to face challenge, mistaking goals for strategy, and bad objectives. These patterns dominate corporate, government, and even educational planning—and cause entire organizations to waste years spinning slogans.

Fluff and false comfort

Fluff is the use of grand language to mask lack of thought. PowerPoint decks that tout “customer-centric synergy” sound visionary but hide incoherence. Enron’s bandwidth scheme, with consultant diagrams and buzzwords, is a textbook case. The cure is plain speaking—using direct terms that correspond to reality.

Avoiding the challenge

Most plans fail because they never define the obstacle. International Harvester ignored its crippling labor inefficiencies, projecting growth without reform. Government security documents often list dozens of aims but no diagnosis of the threat. Once a challenge is unnamed, you cannot design actions that matter.

Goals are not strategy

Ambition—“be number one,” “achieve 20% margins”—feels concrete but lacks mechanism. Chad Logan’s “20/20 plan” exemplifies the error. Rumelt urges you to ask for diagnosis, policy, and action every time someone substitutes motivation for analysis. As Lehman’s 2006 motto “grow faster by increasing risk appetite” showed, goal-as-strategy can destroy integrity when risk realities are ignored.

Bad objectives

Objectives fail when they are too many or too vague. The “dog’s dinner” problem—lists of disconnected initiatives—creates overload. The “blue-sky” problem—unrealistic aspirations—creates disillusionment. The remedy is focus. Select a few coherent actions that can reinforce each other and make genuine progress.

Practice check

When you hear a strategic claim, test it by asking three kernel questions. If it falters on clarity, coherence, or realism, you have detected bad strategy.

Learning to recognize bad strategy gives you a lifelong diagnostic skill. You will stop mistaking ambition for plan and start demanding substance. Once that habit forms, strategic conversations become sharper and more productive.

If we know what bad strategy looks like, why is it everywhere? Rumelt points to three intertwined forces: the reluctance to choose, the comfort of templates, and the cult of positive thinking. Each turns strategic work into ritual instead of analysis.

Unwillingness to choose

Strategy means making trade-offs. But human and political nature resist this. At DEC, executives could not agree among hardware, software, and services priorities. Their cycling preferences led to a harmless consensus: “committed to high quality products and services.” It sounded safe but meant nothing. Real strategic design requires saying “no”—a word rarely heard in committee rooms.

Template-style planning

Vision-mission-values templates pretend to be strategy but dodge real choice. Cornell’s mission statements and NEC’s “information society friendly to humans and the earth” are perfect examples—statements too vague to guide resource allocation. Consultants love them because they avoid conflict, but as Rumelt says, painless planning equals useless planning.

New Thought and magical optimism

From Emerson to modern gurus, a belief persists that willpower creates reality. Rumelt calls this “New Thought.” Its corporate forms are endless: “stretch goals,” “20–20 plans,” “bold vision” speeches. Jack Welch’s pragmatic advice (“know your business and act fast”) often gets distorted into motivational slogans. The danger is confusing morale with mechanism. Strategy is not magic—it is insight plus action.

Escaping the cycle

To break these entrenched patterns, you must face conflict. A true strategist forces trade-offs and articulates diagnosis and guiding policy even when stakeholders prefer vagueness. Rumelt’s prescription is political courage: the willingness to say, “This path, not that one.”

Leadership truth

Good strategy is inherently political because it displaces comfort and reallocates power. If you avoid that, you choose drift.

In Rumelt’s world, courage is analytic as well as moral. Being willing to choose—openly and rationally—is the first act of leadership. Without that, all the vision in the world stays empty.

Rumelt emphasizes two tools of leverage—focus and design. Complexity tempts leaders to diffuse energy; good strategy concentrates it. Focus means selecting a pivot where effort generates disproportionate effect. Design means aligning elements so their interactions amplify success. Together they create what Rumelt calls “unexpected advantage.”

Focus: narrowing to power

Steve Jobs’s overhaul of Apple in 1997 shows how ruthless focus confounds competitors. His diagnosis was simple: too many products and too little cash. He cut the product line to four categories, outsourced production, and redirected attention to design and brand. The result: simplicity as strength. General Schwarzkopf did the same militarily by channeling overwhelming force into a concentrated “left hook” maneuver during Desert Storm. In both, concentration at a pivot point turned complexity into clarity and surprise.

Design: coherence and fit

Design-type strategy arises when policies, processes, and resources fit tightly together. IKEA’s low-cost flat-pack system is an elegant example—everything, from manufacturing through in-store layout, serves the affordability theme. This tight fit substitutes design intelligence for raw scale. Hannibal’s encirclement tactics at Cannae and JPL’s Voyager architecture are other forms of intelligent integration across components.

Chain-link logic

Performance limited by a weak link requires systemic fix, not local tweaks. Tinelli’s Lombardy factory succeeded only when improvements to quality, sales, and cost happened sequentially across departments. The Challenger disaster’s O-ring failure shows the converse—ignoring one weak link destroys whole systems.

Power principle

Concentration and coherence multiply results. Focus directs energy; design ensures it reinforces itself. Together they form the strategist’s leverage mechanism.

Rumelt urges you to overcome discomfort with simplicity. Strategic power arises from saying “no” to distractions, engineering fit instead of patchwork, and accepting short-term pain for systemic gain. That discipline distinguishes design from drift.

One of Rumelt’s most creative techniques is reframing—changing how you define the situation to discover hidden power. When you view problems differently, what looked like weakness can become the source of strength. Strategic creativity often arises from asking new questions, not from adding resources.

David versus Goliath mindset

The biblical metaphor is perfect: David abandoned armor warfare to use a sling. He changed the mode of combat, exposing Goliath’s vulnerability. That principle recurs in business and politics—define the frame rather than play by inherited rules. You can win not by being stronger but by fighting a different battle.

Wal-Mart: changing the unit of analysis

Sam Walton reframed retail economics. Instead of treating stores as independent units needing big-city traffic, he treated them as nodes in a logistics network. Centralized distribution, satellite data, and scale buying transformed small-town stores into profit engines. The strategic unit wasn’t the store; it was the network. That shift turned constraints into advantage.

Andy Marshall: reframing competition

Marshall’s defense analysis reframed Cold War rivalry as cost-imposition, not balance. Instead of matching Soviet weapons, he advised investing in systems (stealth, precision) that forced the Soviets to spend disproportionately to counter them. It was a masterclass in asymmetrical leverage—the conceptual reframing created economic pressure.

Reframing test

Ask: What is our real unit of value? What are opponents’ strengths that become weaknesses in a new frame? What decision boundaries can we redraw to change the game?

Reframing is not lucky genius—it’s analyzable creativity. By altering perspective, you expose asymmetries others overlook and open paths to advantage. In Rumelt’s view, reframing turns insight into power.

Rumelt redefines competitive advantage as the ability to deliver higher buyer value at lower cost than rivals—but warns that owning an advantage is not the same as creating wealth. You only grow wealth when you deepen, broaden, or extend that advantage so its underlying resources become more valuable or harder to imitate.

Sustaining advantage through isolation

Sustainable advantage requires isolating mechanisms—assets others can’t easily copy. These include patents, brand reputation, tacit knowledge, and network effects. Apple’s ecosystem (iPhone, App Store, iTunes) sustains value because it’s interlocked and socially sticky.

“Interesting” advantage: the Resnicks’ case

Stewart and Lynda Resnick turned farms into brands (POM Wonderful, Wonderful Pistachios) by coordinating agronomy, processing, marketing, and R&D. They created demand via funded science, scaled processing, and unique packaging. The insight: choose businesses where you can increase value, not just capture current returns. Their patience across decades exemplifies Rumelt’s idea of active design—combining production and learning loops so knowledge compounds.

Four levers of wealth creation

• Deepen — widen the surplus gap by raising quality or cutting cost.
• Broaden — apply the same skills to adjacent markets.
• Create demand — invest in marketing and education that make your resource scarcer.
• Strengthen isolation — reinforce patents, learning curves, and reputational moats.

Strategic test

Ask not whether you have an advantage—ask how you can make it grow faster than rivals can imitate it.

Wealth creation, Rumelt concludes, is dynamic. You earn persistent returns by investing in learning, scale, and brand coherence—and by designing conditions that make those assets compound over time.

Rumelt closes by recasting strategy as a scientific process—a series of hypotheses tested in reality. You can think, analyze, and predict, but until you experiment you don’t know. Great strategists use controlled trials, observe anomalies, and evolve policy through learning. Howard Schultz’s Starbucks story exemplifies this discipline.

Test and learn

Schultz began with the idea of Milan-style espresso as daily ritual. He launched Il Giornale to test behaviors, adjusting menu and service until he found an American model. Owning the roasting operation let Starbucks learn faster than competitors—it captured feedback across the value chain. Strategy becomes an empirical loop: hypothesize, act, measure, learn, revise.

Cultivating judgment

Thinking like a strategist means managing biases. You make lists, note current priorities, pre-commit conclusions, destroy your first ideas, and mentally consult “virtual panels of experts.” Good judgment arises from deliberate self-critique, not quick confidence. Rumelt’s TiVo experiment shows most managers cling to initial insights—they fail to generate and test alternatives. The best thinkers keep generating options until evidence narrows them.

Avoiding herds and bubbles

Global Crossing and the 2008 credit crash illustrate herd psychology and the “inside view.” Investors assumed unique immunity to history while ignoring fundamentals. Rumelt prescribes using the outside view—empirical precedent and structural analysis—to stay sane. His rule: watch incentives and leverage; don’t assume smooth sailing equals safety.

Scientific mindset

Treat every strategy as a hypothesis about cause and effect. Run tests, measure outcomes, and evolve your theory. Over time, this discipline builds true strategic capability.

Rumelt’s final message is behavioral: cultivate independent thinking, evidence-based iteration, and the courage to admit uncertainty. Strategy is not faith—it’s discovery. When you repeatedly test, learn, and design coherence, you stay ahead of both noise and herds.