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Rumelt's good strategy principles
SKILL.md
| Name | strategy |
| Description | Rumelt's good strategy principles |
name: strategy description: "Good strategy principles" allowed-tools: []
Rumelt: Good Strategy Bad Strategy
Richard Rumelt's core belief: Most strategy is bad strategy. Fluff, goals masquerading as strategy, failure to face the challenge. Good strategy is rare, clear, and actionable.
The Foundational Principle
"The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors."
Good strategy isn't about ambition. It's about insight into the problem and coherent action to address it.
The Kernel of Good Strategy
Every good strategy has three elements:
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│ THE KERNEL │
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│ 1. DIAGNOSIS What's really going on? What's the │
│ challenge we face? │
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│ 2. GUIDING POLICY What's our approach? What trade-offs │
│ define our direction? │
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│ 3. COHERENT ACTION What specific steps? How do they │
│ reinforce each other? │
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└─────────────────────────────────────────────────────────────────┘
1. Diagnosis
The diagnosis defines the challenge. It simplifies overwhelming complexity into a comprehensible problem.
Good diagnosis:
- Names the critical factors
- Frames the situation in a way that suggests action
- Is based on insight, not just observation
Example:
- Bad: "We face a competitive market"
- Good: "Our high cost structure makes us vulnerable to low-cost competitors in the value segment, while our brand doesn't command premium prices in the luxury segment. We're stuck in the middle."
2. Guiding Policy
The guiding policy is an overall approach to overcome the obstacle identified in the diagnosis.
Good guiding policy:
- Creates advantage by anticipating actions of others
- Channels action without specifying everything
- Makes trade-offs explicit
Example:
- Bad: "We will be customer-focused"
- Good: "We will focus exclusively on the professional segment, abandoning consumer sales, and compete on service rather than price"
3. Coherent Actions
Coherent actions are feasible, coordinated activities that implement the guiding policy.
Good coherent actions:
- Are specific and actionable
- Reinforce each other
- Are coordinated, not scattered
Example:
- Bad: "Improve quality, reduce costs, increase innovation, expand market share"
- Good: "Exit the consumer product line by Q2, retrain sales force on enterprise selling, invest the freed-up resources in 24/7 support infrastructure, launch enterprise-only features in Q3"
Bad Strategy
Bad strategy isn't just the absence of good strategy. It has its own characteristics:
Hallmark 1: Fluff
"Fluff is superficial restatement of the obvious combined with a generous sprinkling of buzzwords."
Example: "Our strategy is to be a customer-centric organization that leverages synergies across our portfolio to deliver innovative solutions that maximize shareholder value."
Translation: Nothing. Word salad.
Hallmark 2: Failure to Face the Challenge
If you can't name the challenge, you can't have a strategy for it.
Example: "Our strategy is to grow revenue by 20% per year."
What's missing: Why aren't we growing? What's in the way? What will we do differently?
Hallmark 3: Mistaking Goals for Strategy
Goals are not strategy. Strategy is how you'll achieve goals.
Example: "Our strategy is to be #1 in our market."
What's missing: How? What will you do? What trade-offs?
Hallmark 4: Bad Strategic Objectives
Objectives should be focused and feasible. Bad objectives are:
- A long list of "priorities" (if everything is priority, nothing is)
- Blue-sky goals disconnected from action
- Impossible given current resources
Example: "Our priorities are: quality, innovation, customer satisfaction, employee engagement, sustainability, market leadership, and operational excellence."
What's missing: Which one matters most? What will you sacrifice?
Sources of Power
Good strategy creates advantage. Rumelt identifies sources of power:
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."
Find the pivot point. Apply force there.
Proximate Objectives
Objectives that are close enough to be feasible and far enough to matter.
Too proximate: "Answer customer calls within 3 rings" Too distant: "Become the global leader" Just right: "Within 18 months, be the clear #1 choice in the SMB segment in North America"
Chain-Link Systems
Systems where every link must be strong. The weakest link limits the whole.
Implication: Don't invest in strengthening strong links. Fix the weakest link.
Focus
Concentrate resources. Don't spread thin.
"The most basic idea of strategy is the application of strength against weakness."
The Rumelt Test
When evaluating strategy, ask:
- Is there a diagnosis? Does it name the real challenge? Or is it vague?
- Is there a guiding policy? Does it make trade-offs? Or is it "be excellent"?
- Are actions coherent? Do they reinforce each other? Or is it a to-do list?
- Is it fluff? Buzzwords without meaning?
- Is it just goals? "Be #1" is not strategy.
- Does it face the challenge? Or avoid naming what's hard?
- Are objectives proximate? Achievable yet meaningful?
- Is focus present? Or trying to do everything?
When Reviewing Strategy
Apply these checks:
- Diagnosis names the actual challenge (not vague)
- Guiding policy makes trade-offs explicit
- Actions are specific and coordinated
- Actions reinforce each other (not scattered)
- Not fluff (no empty buzzwords)
- Not goals masquerading as strategy
- Challenge is faced, not avoided
- Objectives are proximate (achievable)
- Resources are focused, not spread thin
- Weakest links identified (chain-link thinking)
Strategy Development Process
Rumelt's approach to developing strategy:
1. Diagnose First
Don't jump to solutions. Understand the problem.
Questions:
- What is the challenge?
- Why does it exist?
- What's keeping it from being solved?
2. Look for Leverage
Find pivot points where focused effort creates disproportionate results.
Questions:
- What's the crux—the hard part that, if solved, unlocks everything?
- Where can concentrated effort have outsized impact?
3. Design Coherent Action
Actions must work together. Each action should reinforce others.
Questions:
- Do these actions conflict with each other?
- Do they build on each other?
- Is anything missing that would prevent success?
4. Test for Bad Strategy
Apply the hallmarks:
- Is this fluff?
- Am I avoiding the challenge?
- Are these just goals?
- Are objectives scattered or focused?
Common Mistakes
"We need a strategy" - You need a good strategy. Most strategy is bad.
"Our strategy is to win" - That's a goal. How?
"We'll improve everything" - That's not strategy. What will you not do?
"Let's brainstorm our strategy" - Strategy comes from insight, not consensus.
"Here are our strategic priorities" (lists 12 things) - If everything is priority, nothing is.
When NOT to Use This Skill
Use a different skill when:
- Analyzing industry forces → Use
competition(Five Forces, positioning) - Analyzing competitive moats → Use
moats(7 Powers framework) - Navigating crisis → Use
leadership(wartime leadership) - Managing team operations → Use
management(OKRs, leverage)
Rumelt is the strategy quality skill—use it to distinguish good strategy from bad and ensure diagnosis-policy-action coherence.
Sources
- Rumelt, "Good Strategy Bad Strategy" (2011)
- Rumelt, UCLA Anderson lectures
- Rumelt, "The Perils of Bad Strategy" (McKinsey Quarterly)
"Bad strategy is not simply the absence of good strategy. It grows out of specific misconceptions and leadership dysfunctions." — Richard Rumelt