Good Strategy Bad Strategy

Overview

Good Strategy/Bad Strategy is Richard Rumelt's framework for distinguishing genuine strategy from the fluff that passes for it in most organizations. The core insight: most "strategies" are just goals, visions, or wish lists—not actual strategies. Real strategy consists of a coherent kernel with three parts: diagnosis (what's really going on), guiding policy (overall approach), and coherent actions (coordinated steps).

Rumelt spent decades studying why some strategies succeed and others fail. His conclusion: bad strategy is shockingly common, even in successful companies. It stems from inability or unwillingness to make hard choices, confusion between goals and strategy, and template-thinking that produces generic "strategies" empty of content.

The Kernel framework provides a diagnostic tool for evaluating whether you have a real strategy or just strategic-sounding words. Good strategy acknowledges obstacles, makes hard choices about what not to do, and coordinates actions to concentrate power at decisive points. Bad strategy mistakes goals for strategy, ignores challenges, and fails to translate vision into actionable steps.

Key Principle: The most common cause of bad strategy is a weak diagnosis. The second is confusing goals with strategy. Goals, ambitions, visions, missions, values—none of these are strategy. Strategy is fundamentally about what you'll do in response to a challenge.

When to Use This Framework

Ideal Scenarios

• Strategic planning cycles: Annual or multi-year strategy development
• Competitive response: Reacting to market changes or competitive threats
• Resource allocation: Deciding where to invest limited resources
• Product strategy: Determining which markets to enter and how to compete
• Organizational alignment: Getting teams coordinated on priorities
• Strategy evaluation: Auditing existing strategy to identify weaknesses
• Crisis response: Rapidly formulating response to sudden challenges

Warning Signs You Need This

• Your "strategy" is mostly goals and aspirations without addressing how to achieve them
• Strategy documents are filled with buzzwords, generic statements, and consultant-speak
• Different teams interpret the strategy completely differently
• No one can articulate what trade-offs the strategy requires
• The strategy doesn't acknowledge significant obstacles or challenges
• Leadership confuses "being strategic" with long-term thinking or ambition
• Strategy sessions produce lists of things to do without clear prioritization

Core Process

1. Diagnose the Challenge

Purpose: A great deal of strategy work is trying to figure out what is going on—not just deciding what to do, but comprehending the situation and identifying the biggest barriers to forward progress.

What it is: Simplifying the overwhelming complexity of reality to identify critical aspects of the situation. A good diagnosis names or classifies the challenge and provides a frame for further action.

What it's not: A laundry list of every problem or challenge. Diagnosis requires judgment about what matters most.

Questions to answer:

• What is the fundamental nature of the challenge we face?
• What are the critical bottlenecks or leverage points?
• Which obstacles, if removed, would most advance our position?
• What patterns explain our current situation?
• What assumptions are we making that might be wrong?

Output: A clear, simple statement of the core challenge that everyone can understand and that reveals where to focus effort.

Example: Netflix (2007): "Our DVD rental business is highly profitable but will eventually be disrupted by streaming video delivery. The critical challenge is building streaming capabilities before someone else dominates that space."

2. Formulate Guiding Policy

Purpose: Outline an overall approach to overcoming the obstacles highlighted in the diagnosis. Like guardrails on a highway, guiding policy directs and constrains action without fully defining it.

What it is: A general method or approach for dealing with the challenge. It channels action in certain directions without specifying exactly what shall be done.

What it's not: A goal, vision, or desired outcome. "Be the market leader" is not a guiding policy—it's a goal.

Characteristics:

• Anticipates and reduces the complexity of the challenge
• Exploits leverage or sources of advantage
• Makes hard choices about what not to do
• Creates actionable boundaries for decisions

Questions to answer:

• What general approach will we take to address this challenge?
• What are we ruling out or saying no to?
• What advantage can we create or exploit?
• What's our theory for how this approach overcomes the obstacle?

Output: A clear statement of approach that rules out many possible actions while enabling coherent ones.

Example: Netflix guiding policy: "Shift investment aggressively toward streaming technology and content licensing while maintaining DVD business for cash flow. Accept lower margins during transition."

3. Design Coherent Actions

Purpose: Specify the set of feasible actions that are coordinated with one another to accomplish the guiding policy. These are steps that work together, each building on the others.

What it is: Concrete, coordinated steps designed to carry out the guiding policy. The actions should be coherent—they should reinforce each other rather than scatter effort.

What it's not: A random list of initiatives or projects. Coherent actions build on each other systematically.

Characteristics:

• Specific enough to be implemented
• Coordinated—one action supports another
• Resource-feasible given constraints
• Directly address the diagnosis through the guiding policy

Questions to answer:

• What specific actions will we take in the next planning period?
• How do these actions reinforce each other?
• What resources (people, money, time) does each require?
• What's the logical sequencing and dependencies?
• What will we stop doing to resource these actions?

Output: A coordinated set of 3-7 specific actions with clear owners, timelines, and resource commitments.

Example: Netflix coherent actions (2007):

1. License streaming rights from major studios
2. Build streaming technology platform
3. Integrate streaming into existing subscriber base (free with DVD subscription initially)
4. Develop recommendation algorithms for streaming catalog
5. Gradually shift marketing emphasis from DVD to streaming

4. Test for Strategy Quality

Bad strategy markers (Rumelt's warning signs):

• Fluff: Gibberish masquerading as strategic concepts or arguments
• Failure to face the challenge: Not defining the core challenge or ignoring it
• Mistaking goals for strategy: Confusing desired outcomes with a method to achieve them
• Bad strategic objectives: Objectives that fail to address critical issues or are impractical given available resources

Good strategy markers:

• Creates new sources of advantage or exploits existing ones
• Makes hard choices and trade-offs explicit
• Concentrates resources at decisive points
• Provides clear link from diagnosis → policy → actions
• Can be explained simply to someone outside the organization

Application: Review your kernel. Does each component exist? Does it pass the quality tests? If not, iterate.

Real-World Example

Context: Desert Storm (1991)

General Schwarzkopf faced the challenge of removing Iraqi forces from Kuwait. Iraq had the world's fourth-largest army, entrenched in defensive positions, with experience from the Iran-Iraq war.

Application of Kernel Framework

Diagnosis: Iraqi strength was in static defense and numbers. Their weakness was in mobile operations, command-and-control, and air defense. The critical leverage point: if coalition forces could achieve air supremacy and attack from an unexpected direction, Iraqi static defenses became irrelevant.

Guiding Policy: Achieve complete air dominance first, then execute rapid flanking attack from the west (through desert Iraq considered impassable) while feinting frontal assault to fix Iraqi forces in place.

Coherent Actions:

1. Six-week air campaign to destroy Iraqi air force, command infrastructure, and supply lines
2. Build up forces in Saudi Arabia while conducting visible amphibious assault training (deception)
3. Secretly move heavy armor divisions far west into desert
4. Launch ground war with massive western flanking movement ("left hook")
5. Fix Iraqi forces with Marine feint toward Kuwait City from south
6. Cut off retreat routes with airborne and armored units

Outcome

100-hour ground war, decisive victory with minimal coalition casualties. Success came from coherent strategy where diagnosis identified leverage points, guiding policy exploited them, and actions coordinated to maximum effect.

What Made It Good Strategy

• Clear diagnosis: Identified Iraqi weakness (mobility, C&C) vs. strength (static defense)
• Focused guiding policy: Avoided attacking Iraqi strengths, exploited specific weaknesses
• Coherent actions: Each action reinforced others; deception enabled flanking; air campaign enabled ground speed
• Hard choices: Said "no" to direct frontal assault despite political pressure for quick action

Anti-Patterns

Strategic fill-in-the-blank templates: Using consulting frameworks to generate generic strategies ("We will be the market leader in X by leveraging Y to deliver Z to customers"). These produce fluff, not strategy.

Confusing goals with strategy: "Our strategy is to grow 20% per year" or "Our strategy is to be #1 in customer satisfaction"—these are goals, not strategy.

Laundry lists of initiatives: Calling a collection of projects a "strategy" without coherence or clear diagnosis.

Ignoring obstacles: Strategies that don't acknowledge or address significant challenges facing the organization.

Dog's dinner of objectives: Too many priorities, which means no actual priorities—resources scatter ineffectively.

Blue-sky objectives: Goals that sound inspiring but are disconnected from current reality or resources (Rumelt calls this "bad strategic objectives").

Analysis without judgment: Doing extensive analysis but failing to diagnose what actually matters—every problem weighted equally.

Happy talk: Refusing to acknowledge hard truths about competitive position or market realities.

Related Frameworks

• Only the Paranoid Survive (Grove): Strategic inflection points often trigger need for new diagnosis and strategy
• Playing to Win (Lafley/Martin): Complementary framework with five strategic choices—can be combined with Kernel
• The Hard Thing About Hard Things (Horowitz): Managing through the difficult execution of hard strategic choices
• Blue Ocean Strategy: Creating uncontested market space—one type of guiding policy
• OODA Loop (Boyd): Observe-Orient-Decide-Act—the "orient" phase is diagnosis
• 7 Powers (Helmer): Identifying sources of enduring competitive advantage (feeds into guiding policy)
• First Principles Thinking: Strip assumptions to find fundamental truths (supports diagnosis)
• Wardley Mapping: Visual strategic diagnosis tool showing evolution and dependencies

Sources

• Rumelt, Richard. Good Strategy Bad Strategy: The Difference and Why It Matters. Crown Business, 2011.
• Lenny's Newsletter summary
• Fred Perrotta on Kernel framework
• Quantive podcast on 3-part framework