Good Strategy, Bad Strategy by Richard Rumelt is a well-known business and strategy book from 2011. Its central concept is focus — and more precisely, focus + asymmetry: finding where a small, well-directed push moves the system far more than a large, unfocused effort. The purpose of that push is value creation — producing the greatest positive impact for customers, stakeholders, and society with the least waste of time, capital, and attention.
Good Strategy/Bad Strategy in a nutshell
Core Concept: This book explores what makes a good strategy and why so many organizations are unable to create and implement one, and also exposes what is “bad strategy.” It highlights the importance of having clear analysis, identifying the core challenges, and developing a coherent approach to address them. Rumelt’s core argument is that good strategy isn’t about lofty mission statements or vague goals — it’s about diagnosing the real challenge, creating a clear guiding policy, and taking coherent actions that address that challenge directly.
- The emphasis on focus — real strategy concentrates resources on the most critical issues rather than trying to be all things to all people.
- The kernel of good strategy:
- Diagnosis – Identify the core problem or opportunity that, if solved, will create the most value.
- Guiding Policy – Choose the approach most likely to unlock that value.
- Coherent Action – Take mutually reinforcing steps that deliver the value in practice.
- Bad strategy hallmarks: Fluff, failure to face the challenge, mistaking goals for strategy, and poor objectives.
Overall Takeaway: “Good Strategy/Bad Strategy” is about understanding the real challenges, having a clear and coherent plan to address those challenges, and ensuring that all actions are aligned to that plan. It encourages organizations to develop and implement practical, coherent, and achievable strategies based on a solid understanding of their business.
Key Elements of Bad Strategy
I like this quote from Rumelt (2017):
“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.”
You can spot a bad strategy when it falls into one or more of these traps:
- Fluff – Vague, meaningless language that offers no clear direction or solution.
- Failure to Face Challenges – Avoiding a direct, honest analysis of the problem and its context.
- Mistaking Goals for Strategy – Presenting a desired end state as if it were a plan to achieve it.
- Bad Objectives – Choosing objectives that are meaningless, unfocused, or unattainable.
Key Principles of Good Strategy
A good strategy is built on discipline, clarity, and focus. It typically reflects these principles:
- Work and Analysis – Grounded in deep thought and rigorous analysis to identify the true core challenge.
- Coherence – Every action aligns with a clear, overarching plan and reinforces a single, unified direction.
- Focus – Concentrates resources on the most important issues, avoiding the temptation to do everything at once.
Key Elements – the Kernel – of Good Strategy
The kernel of Rumelt’s good strategy has three elements:
- Diagnosis – The “what’s really going on” clarity step. Identifying and clearly defining the key challenges and the reasons they exist, backed by hard analysis. Frames the situation so everyone understands the true nature of the problem and what must be addressed — separating symptoms from root causes.
- Guiding Policy – The “how we will win” rulebook. A clear, coherent strategic approach for dealing with the identified obstacles and addressing the core problems. Shapes and constrains choices — a directional filter that accepts actions aligned with the policy and rejects those that are not.
- Coherent Action – The “what we’re doing right now to win” list. A coordinated set of actions deliberately aligned to the guiding policy and designed to deliver the desired outcome. Concrete, measurable steps that reinforce one another rather than pulling in different directions.
Aren’t Guiding Policy and Coherent Action the same?
They sound similar, but they’re not. The guiding policy sets the overall rules and direction — the “how we will win.” Coherent actions are the specific moves you make within those rules to put the strategy into practice.
Why people confuse them:
- The guiding policy can feel abstract, so people instinctively start listing examples — which are actually coherent actions.
- High-profile actions (e.g., “Acquire a start-up”) can look strategic on their own, but in Rumelt’s model they only count as “good” if they clearly align with the guiding policy.
They differ in time horizon and function: the guiding policy sets the rules of the game; coherent actions are the moves you make inside those rules.
Other names for the same thing
Rumelt’s three-part “kernel” is his own framing, but the concepts are widely used under different names in other strategy frameworks.
| Rumelt’s Term | Common Alternate Names | Examples in Other Frameworks |
|---|---|---|
| Diagnosis | Situation analysis, problem framing, root cause analysis, insight, “Where are we now?” | SWOT analysis (Strengths, Weaknesses, Opportunities, Threats), McKinsey’s “diagnose and understand,” Lean problem statement |
| Guiding Policy | Strategic intent, overall approach, strategic direction, vision + strategic thrust, “How will we win?” | Porter’s “generic strategies” (cost leadership, differentiation, focus), Lafley & Martin’s “Where to play / How to win” |
| Coherent Action | Action plan, initiatives, implementation roadmap, operational plan, execution, “What will we do?” | OKRs (Objectives & Key Results), Balanced Scorecard initiatives, McKinsey 7-S “structure + systems” alignment |
Rumelt treats these three as inseparable — a good strategy must have all three in a logically linked chain. Many other frameworks treat them more loosely or as separate exercises.
Examples of Good Strategy
It all makes a lot more sense by looking at examples. These highlight the differences between the elements of the kernel of good strategy.
Example – Military Mission
Rumelt was inspired by military thinking so I start with an example from that context.
- Diagnosis – Intelligence assessment. “The enemy is concentrated here, supply lines are exposed, terrain favours defence.” ? You’ve identified the true problem/opportunity.
- Guiding Policy – Campaign plan / operational doctrine. “We will avoid direct confrontation with their strongest units, cut supply lines, and force them to withdraw.” ? The approach, the rules of the game you’ll play for the campaign.
- Coherent Action – Specific, coordinated orders and manoeuvres. “Move the 3rd Brigade through the mountain pass at night; send engineers to blow the rail bridge; deploy recon drones over the supply depot; launch diversionary artillery at 0500.” ? Actions designed to apply the guiding policy in a reinforcing way.
- Value impact: Preserves resources, reduces casualties, and increases the chance of a decisive outcome without prolonged conflict.
Example – Coffee Roaster Breaking into an Overcrowded Specialty Coffee Scene
- Diagnosis – Competitor dominates high-end coffee market due to brand prestige, but their service is slow and locations are inconvenient.
- Guiding Policy – Win customers by delivering premium coffee faster and more conveniently than anyone else, without compromising quality.
- Coherent Actions –
- Roll out mobile ordering with 2-minute pickup guarantee.
- Partner with luxury hotel chains for in-lobby coffee kiosks.
- Train staff to prepare premium drinks in under 45 seconds.
- Value impact: Faster, more convenient service positions the brand as the high-end choice for busy professionals, increasing repeat visits and premium pricing
Example – Tech Company Entering AI Market
- Diagnosis – Our consumer electronics products are losing market share to competitors integrating AI features; we risk irrelevance if we do not match or surpass their capabilities.
- Guiding Policy – Become the leading AI-enhanced device maker by embedding proprietary AI features that are seamlessly integrated into hardware and tied to our cloud ecosystem. Avoid chasing generic AI applications; focus only on features that enhance device stickiness and user loyalty.
- Coherent Actions –
- Create an internal “AI Lab” to develop device-embedded AI assistants.
- Acquire a small AI start-up specializing in low-power neural processors.
- Launch a flagship smartphone with on-device AI translation and photo-editing.
- Train retail staff to demo AI features in all stores.
- Negotiate exclusive rights to certain AI language models for our devices.
- Value impact: Proprietary AI features drive customer loyalty, reduce churn, and enable higher-margin device sales.
Sources of Power
When you’re considering the coherent actions in your strategy, the real question is: **where can a small push have the greatest effect?** Rumelt’s answer is his **nine sources of power** — specific ways to create disproportionate impact. They’re how you generate **asymmetry**: the small, well-directed push that moves the system far more than a large, unfocused effort. And they’re not just about winning — they’re about creating disproportionate **value** by concentrating effort where it changes the game the most.
The nine “sources of power” are:
- Leverage – Focus resources on the most critical constraint or opportunity to create outsized results.
- Proximate Objectives – Set goals close enough to be feasible, but ambitious enough to stretch capabilities.
- Chain-Link Systems – Strengthen the weakest link in interconnected activities.
- Design – Create a strategy as a tailored, coherent whole rather than a collection of independent parts.
- Focus – Apply concentrated force to one or a few key areas rather than dispersing effort.
- Growth by Advantage – Expand into areas where your existing strengths give you an edge.
- Using Dynamics – Take advantage of predictable changes over time.
- Anticipation – Predict competitors’ moves or environmental changes before they happen.
- Inertia and Entropy – Exploit competitors’ slowness to adapt and the natural drift toward disorder.
Mastering these sources is how you turn strategy from a plan on paper into disproportionate value in the real world — the kind of impact that competitors can’t easily copy.
Next Step
If you want to test your strategy, start with the kernel: is your diagnosis sharp, your guiding policy clear, and your actions coherent? Then ask which of the nine sources of power you’re using to create leverage. The answers will tell you whether your plan is just a document — or a strategy that can actually win.
If you want help shaping your strategy and strengthening your kernel, reach out — that’s exactly what I do.