Good Strategy Bad Strategy: The Difference and Why It Matters - Review

Good Strategy Bad Strategy: The Difference and Why It Matters by Richard P. Rumelt
My rating: 4 of 5 stars

It has been a while since I read a strategy book, a topic I have always liked but the last books/articles i have read felt they did not add that much.

However, I have seen this book recommend several times by different persons/authors and reluctantly decided to give it a try (must confess i bought the book more than 1 year ago ...) and i did not regret any single page.

This book is one of the best i have read on this subject and strongly recommend it to all that are interested on the topic. It helps that i agree with the vision that the author has on what is strategy and how one should approach and deploy it.

It was really close to my heart the following key messages:

1. the relevance of having a good STRATEGY (having into consideration how often we see the absence of strategy or even worst bad strategy in several organizations)

2. the concept of sources of power that underpin your strategy (leverage, proximate objectives, chain-link systems, using design, focus, growth, using dynamics, inertia and entropy)

3. the kernel of good strategy - 1. Establish a correct diagnosis; 2. Define a clear guiding policy; 3. Deploy coherent actions

4. Think strategy like a science - Observe, raise the relevant Questions; generate alternative hypothesis; run Experiment; analyze and draw conclusions and, Report conclusion and act upon them.

My highlighted quotes from the book (24!):

1. "...A good strategy does more than urge us forward toward a goal or vision. A good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them. And the greater the challenge, the more a good strategy focuses and coordinates efforts to achieve a powerful competitive punch or problem-solving effect. ..."

2. "... 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. ..."

3."...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. ..."

4. "...Business leaders know their organizations should have a strategy. Yet many express frustration with the whole process of strategic planning. The reason for this dissatisfaction is that most corporate strategic plans are simply three-year or five-year rolling budgets combined with market share projections. Calling a rolling budget of this type a “strategic plan” gives people false expectations that the exercise will somehow result in a coherent strategy. ..."

5."...You can call these annual exercises “strategic planning” if you like, but they are not strategy. They cannot deliver what senior managers want: a pathway to substantially higher performance. To obtain higher performance, leaders must identify the critical obstacles to forward progress and then develop a coherent approach to overcoming them. This may require product innovation, or new approaches to distribution, or a change in organizational structure. Or it may exploit insights into the implications of changes in the environment—in technology, consumer tastes, laws, resource prices, or competitive behavior. ..."

6. "...To help clarify this distinction it is helpful to use the word “goal” to express overall values and desires and to use the word “objective” to denote specific operational targets. ..."

7. "... 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. ..."

8. "... When a leader characterizes the challenge as underperformance, it sets the stage for bad strategy. Underperformance is a result. The true challenges are the reasons for the underperformance. ..."

9. "... The core content of a strategy is a diagnosis of the situation at hand, the creation or identification of a guiding policy for dealing with the critical difficulties, and a set of coherent actions. ..."

10. "...Good strategy is not just “what” you are trying to do. It is also “why” and “how” you are doing it. ..."

11. "...A guiding policy 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. ..."

12. "...Strategy is about action, about doing something. The kernel of a strategy must contain action. It does not need to point to all the actions that will be taken as events unfold, but there must be enough clarity about action to bring concepts down to earth. ..."

13. “Without action, the world would still be an idea.”

14. "... That is, the resource deployments, policies, and maneuvers that are undertaken should be consistent and coordinated. The coordination of action provides the most basic source of leverage or advantage available in strategy. ..."

15. "... agents. Strategic coordination, or coherence, is not ad hoc mutual adjustment. It is coherence imposed on a system by policy and design. More specifically, design is the engineering of fit among parts, specifying how actions and resources will be combined. ..."

16. "... In very general terms, a good strategy works by harnessing power and applying it where it will have the greatest effect. In the short term, this may mean attacking a problem or rival with adroit combinations of policy, actions, and resources. In the longer term, it may involve cleverly using policies and resource commitments to develop capabilities that will be of value in future contests. ..."

17. "... In competitive strategy, the key anticipations are often of buyer demand and competitive reactions. ..."

18."... The basic definition of competitive advantage is straightforward. If your business can produce at a lower cost than can competitors, or if it can deliver more perceived value than can competitors, or a mix of the two, then you have a competitive advantage. ..."

19. "... One must reexamine each aspect of product and process, casting aside the comfortable assumption that everyone knows what they are doing. Today, this approach to information flows and business processes is sometimes called “reengineering” or “business-process transformation.” Whatever it is called, the underlying principle is that improvements come from reexamining the details of how work is done, not just from cost controls or incentives. ..."

20. "... During the relatively stable periods between episodic transitions, it is difficult for followers to catch the leader, just as it is difficult for one of the two or three leaders to pull far ahead of the others. But in moments of transition, the old pecking order of competitors may be upset and a new order becomes possible. ..."

21. "... Fortunately, a leader does not need to get it totally right—the organization’s strategy merely has to be more right than those of its rivals. ..."

22. "... This property of mass—resistance to a change in motion—is inertia. In business, inertia is an organization’s unwillingness or inability to adapt to changing circumstances. ..."

23. "...entropy measures a physical system’s degree of disorder, and the second law of thermodynamics states that entropy always increases in an isolated physical system. Similarly, weakly managed organizations tend to become less organized and focused. ..."

24. "... Similarly, one can sense a business firm that has not been carefully managed. Its product line grows less focused; prices are set low to please the sales department, and shipping schedules are too long, pleasing only the factory. ..."

Rumelt, Richard. Good Strategy/Bad Strategy. Profile. Kindle Edition.


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