Published on February 14, 2022

Good Strategy Bad Strategy

Disclaimer: This is not a book summary but rather parts of the book I highlighted while reading the book. I don’t believe that a book summary does justice to book as a whole. If these notes intrigues you, imagine what reading the whole book would do?

In simple terms strategy is how an organisation will move forward. Doing strategy is figuring out how to advance the organisation’s interests. There’s a tendency to confuse strategy with the vision, mission, ambitions or inspirational leadership, these are virtues, good feeling words. Strategy is a coherent set of analyses, concepts, policies, arguments, and actions that respond to a high-stakes challenge. A good strategy contains three elements: a diagnosis, a guiding policy, and coherent actions.

Good and Bad Strategy

If you fail to identify and analyze the obstacles, you don’t have a strategy. Instead, you have either a stretch goal, a budget, or a list of things you wish would happen.

A long list of “things to do,” often mislabeled as “strategies” or “objectives,” is not a strategy. It is just a list of things to do. A good strategy has coherence, coordinating actions, policies, and resources so as to accomplish an important end. Many organizations, most of the time, don’t have this. Instead, they have multiple goals and initiatives that symbolize progress, but no coherent approach to accomplishing that progress other than “spend more and try harder.

Strategy is at least as much about what an organization does not do as it is about what it does.

Bad strategy is vacuous and superficial, has internal contradictions, and doesn’t define or address the problem. Bad strategy generates a feeling of dull annoyance when you have to listen to it or read it. Bad strategy is not simply the absence of good strategy. It grows out of specific misconceptions and leadership dysfunctions. To detect a bad strategy, look for one or more of its four major hallmarks: Fluff, Failure to face the challenge, Mistaking goals for strategy, Bad strategic objectives.

A hallmark of true expertise and insight is making a complex subject understandable. A hallmark of mediocrity and bad strategy is unnecessary complexity—a flurry of fluff masking an absence of substance.

When a leader characterizes the challenge as under-performance, it sets the stage for bad strategy. Under-performance is a result. The true challenges are the reasons for the under-performance. Motivation is an essential part of life and success, and a leader may justly ask for “one last push,” but the leader’s job is more than that. The job of the leader is also to create the conditions that will make that push effective, to have a strategy worthy of the effort called upon.

“Most corporate strategic plans are simply three-year or five-year rolling budgets combined with market share projections”

Bad strategy flourishes because it floats above analysis, logic, and choice, held aloft by the hot hope that one can avoid dealing with these tricky fundamentals and the difficulties of mastering them. Not miscalculation, bad strategy is the active avoidance of the hard work of crafting a good strategy. One common reason for choosing avoidance is the pain or difficulty of choice. A second pathway to bad strategy is the siren song of template-style strategy—filling in the blanks with vision, mission, values, and strategies. A third pathway to bad strategy is New Thought—the belief that all you need to succeed is a positive mental attitude.

The Kernel Of Good strategy

Good strategy is coherent action backed up by an argument, an effective mixture of thought and action with a basic underlying structure I call the kernel- the bare-bones minimum:

A diagnosis that defines or explains the nature of the challenge. A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as critical.
A guiding policy for dealing with the challenge. This is an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis.
A set of coherent actions that are designed to carry out the guiding policy. These are steps that are coordinated with one another to work together in accomplishing the guiding policy.

A great deal of strategy work is trying to figure out what is going on. Not just deciding what to do, but the more fundamental problem of comprehending the situation. At a minimum, a diagnosis names or classifies the situation, linking facts into patterns and suggesting that more attention be paid to some issues and less to others.

A good guiding policy tackles the obstacles identified in the diagnosis by creating or drawing upon sources of advantage. It creates advantage by anticipating the actions and reactions of others, by reducing the complexity and ambiguity in the situation, by exploiting the leverage inherent in concentrating effort on a pivotal or decisive aspect of the situation, and by creating policies and actions that are coherent, each building on the other rather than canceling one another out.

“I do not know whether meditation and other inward journeys perfect the human soul. But I do know that believing that rays come out of your head and change the physical world, and that by thinking only of success you can become a success, are forms of psychosis and cannot be recommended as approaches to management or strategy”

Sources of Power

In very general terms, a good strategy works by harnessing power and applying it where it will have the greatest effect.

Using leverage: strategic leverage arises from a mixture of anticipation, insight into what is most pivotal or critical in a situation, and making a concentrated application of effort.
Proximate objectives: A proximate objective names a target that the organization can reasonably be expected to hit, even overwhelm.
Chain-link systems: the excellence achieved by a well-managed chain-link system is difficult to replicate.
Using design: design of coordinated action, many effective strategies are more designs than decisions, more constructed than chosen.
Focus: attacking a segment of the market with a business system supplying more value to that segment than the other players can.
Growth: Healthy growth is not engineered. It is the outcome of growing demand for special capabilities or of expanded or extended capabilities.
Using advantage: press where you have advantages and side-step situations in which you do not. You must exploit your rivals’ weaknesses and avoid leading with your own.
Using dynamics: find fresh undefended high ground by creating it yourself through pure innovation or exploit a wave of change.
Inertia and entropy: successful strategies often owe a great deal to the inertia and inefficiency of rivals: resistance to change and a natural tendency to become less organized.

Good product-market strategy is useless if important competencies, assumed present, are absent and their development is blocked by long-established culture.

“The proposition that growth itself creates value is so deeply entrenched in the rhetoric of business that it has become an article of almost unquestioned faith that growth is a good thing”

Thinking Like A Strategist

When we do come up with an idea, we tend to spend most of our effort justifying it rather than questioning it. This personal skill is more important than any one so-called strategy concept, tool, matrix, or analytical framework. It is the ability to think about your own thinking, to make judgments about your own judgments.

Possibly the most useful shift in viewpoint is thinking about your own thinking. A great deal of human thought is not intentional—it just happens. One consequence is that leaders often generate ideas and strategies without paying attention to their internal process of creation and testing.

A new strategy is, in the language of science, a hypothesis, and its implementation is an experiment.
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 same logical structure as the problem of coming up with a good scientific hypothesis. A good strategy is, in the end, a hypothesis about what will work. Not a wild theory, but an educated judgment

The presumption that all important knowledge is already known, or available through consultation with authorities, deadens innovation. It is this presumption that stifles change in traditional societies and blocks improvement in organizations and societies that come to believe that their way is the best way. 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 work is necessarily empirical and pragmatic.

In reasoning about natural data, people tend to see patterns where there is only randomness, tend to see causes rather than associations, and tend to ignore information that conflicts with a maintained theory. The anomalies are not in nature but in the mind of the acute observer, revealed by a comparison between the facts and refined expectations. Think through the intersection between what was important and what was actionable.

To guide your own thinking in strategy work:

First, you must have a variety of tools for fighting your own myopia and for guiding your own attention.
Second, you must develop the ability to question your own judgment. If your reasoning cannot withstand a vigorous attack, your strategy cannot be expected to stand in the face of real competition.
Third, you must cultivate the habit of making and recording judgments so that you can improve.

Most of the time, when asked to generate more alternatives, people simply add one or two shallow alternatives to their initial insight. Consciously or unconsciously, they seem to resist developing several robust strategies.

Good strategy grows out of an independent and careful assessment of the situation, harnessing individual insight to carefully crafted purpose. Bad strategy follows the crowd, substituting popular slogans for insights.

Social herding presses us to think that everything is OK (or not OK) because everyone else is saying so. The inside view presses us to ignore the lessons of other times and other places, believing that our company, our nation, our new venture, or our era is different. It is important to push back against these biases. You can do this by paying attention to real-world data that refutes the echo-chamber chanting of the crowd—and by learning the lessons taught by history and by other people in other places.

The book and the author: Good Strategy bad Strategy is book from the author and strategy giant Richard Rumlet. First published in 2011, book website