Good strategy, bad strategy (Rumelt)

Richard Rumelt’s distinction between good and bad strategy centres on one idea: strategy is a coherent response to an important challenge. A good strategy diagnoses the obstacle, chooses a guiding approach and concentrates action where it can create leverage.

When to use it

• Use the framework to develop a strategy, test whether an existing plan is genuinely strategic and replace broad aspiration with a focused response to a consequential problem.

Origins

Rumelt’s work on corporate strategy, diversification and competitive advantage led to a long-running critique of plans that substitute ambition for problem solving. His chain-link example captures the logic: when one weak link can collapse the entire system, strengthening other links creates little value until the constraint is fixed. The failure of the Challenger O-ring in 1986 provides a stark illustration of system performance being limited by a critical vulnerability.

What it is

In Good Strategy, Bad Strategy, published in 2011, Rumelt argues that “strategy” loses meaning when it becomes a label for every goal, slogan or budget.

Bad strategy commonly displays four characteristics:

• Fluff: inflated language and jargon create an appearance of insight without making a choice.
• Failure to face the challenge: the plan does not diagnose the critical obstacle, so its success cannot be evaluated.
• Mistaking goals for strategy: desired outcomes and exhortations are offered without a method for overcoming difficulty.
• Bad strategic objectives: priorities are incoherent, impractical or disconnected from the diagnosed problem.

A good strategy has a three-part kernel:

• Diagnosis: a clear explanation of the challenge that reduces complexity without denying important facts.
• Guiding policy: the chosen approach and boundaries for dealing with that challenge.
• Coherent actions: mutually reinforcing commitments that implement the policy.

Rumelt also describes sources of strategic power:

• Leverage: concentrate effort on a pivotal point where action can trigger wider benefit.
• Proximate objectives: set an attainable next objective that resolves enough uncertainty to make further progress; see Setting SMART objectives.
• Chain-link logic: strengthen the weakest critical link before optimising parts that cannot improve overall performance. Challenger in 1986 remains the cautionary example.
• Design: configure activities, resources and customer experience as an integrated system.
• Focus: apply advantage where it matters and avoid attractive distractions; see Stick to the knitting (Peters and Waterman).
• Growth: treat healthy growth as a consequence of advantage, innovation or efficiency rather than an end pursued through value-destructive deals; see Creating value from mergers, acquisitions and alliances.
• Advantage: deepen, broaden and renew the strengths that create value; see Profit from the core (Zook).
• Dynamics: recognise and exploit a technological, regulatory, environmental or social wave.
• Inertia and entropy: understand how rigidity and disorder weaken organisations, including one’s own.

The sources are not a checklist to include in every strategy. They are lenses for identifying where focused action may produce disproportionate effect.

How to use it

Begin with the challenge, not the vision slide. Gather economic, customer, competitive, operational and risk evidence. Write several possible diagnoses and identify which facts each explains or ignores.

State the diagnosis in plain language. It should name the obstacle or opportunity without pretending that a symptom is the cause.

Develop a guiding policy that creates direction and exclusion. It might concentrate on a segment, remove a bottleneck, build a capability or sequence a transition. Explain why this approach fits the diagnosis better than the alternatives.

Translate the policy into a small set of coherent actions. Assign resources, ownership, sequence and measures. Test whether the actions reinforce one another and whether any major initiative contradicts the policy.

Use premortems, disconfirming evidence and milestones to revise the diagnosis as conditions change. Coherence does not mean rigidity.

Rumelt’s historical and business examples—from Nelson at Trafalgar to technology and industrial companies—show strategy as applied problem solving. Their value lies in the logic of concentration and design, not in copying a heroic narrative.

Top practical tip

Write the strategy on one page under three prompts: diagnosis, guiding policy and coherent actions. Circle the pivotal constraint, then identify which activities will stop or lose funding. A strategy that adds priorities without concentrating resources has probably not made the hard choice.

Top pitfall

Do not turn the kernel into another presentation template. A concise diagnosis can still be wrong, and a forceful narrative can suppress inconvenient evidence. Invite challenge, separate goals from strategy and judge coherence by resource commitments and observable action—not by eloquence or the strategist’s reputation.

Further reading

Rumelt, Richard. Good Strategy/Bad Strategy: The Difference and Why It Matters.