Good Strategy, Bad Strategy. The difference and why it matters.

246 Pages·2016·2.17 MB·English

by  Richard Rumelt

Praise for Good Strategy/Bad Strategy

“Rumelt’s new book clearly elevates the discussion of strategy. Using compelling examples and
penetrating insights, Good Strategy/Bad Strategy provides new and powerful ways for leaders to
tackle the obstacles they face. The concepts of ‘the kernel’ and ‘the proximate objective’ are
blockbusters. This is the new must-have book for everyone who leads an organization in business,
government, or in between.”
—Robert A. Eckert, chairman and CEO of Mattel

“Rumelt’s non–fast food approach to strategy is terrific. A pleasure to read, this book explains what
is, and what is not, good strategy and good strategic thinking. The examples, stories, and anecdotes
kept me engaged throughout this well-written book.”
—Brian Farrell, chairman, president, and CEO of THQ Inc.

“In his provocative new book, Richard Rumelt lays bare an uncomfortable truth: Most companies
have strategies that are quixotic, muddled, and undifferentiated. This is hardly surprising, since in
recent years the very idea of ‘strategy’ has been dumbed down by a deluge of naïve advice and
simplistic frameworks. Rumelt cuts through the clutter and reminds managers that the essence of
strategy is a clear and differentiated point of view that supports forceful and coherent action. Drawing
on a wealth of examples, Rumelt identifies the critical features that distinguish powerful strategies
from wimpy ones—and offers a cache of advice on how to build a strategy that is actually worthy of
the name. If you’re certain your company is already poised to outperform its rivals and outrun the
future, don’t buy this book. If, on the other hand, you have a sliver of doubt, pick it up pronto!”
—Gary Hamel, coauthor of Competing for the Future

“Richard Rumelt really ‘gets it’! Too many strategy books delve into esoteric subjects and forget that
a strategy is really about action. Rumelt reinforces that a strategy is the set of actions an organization
or team should implement and, just as important, the actions an organization should avoid as they
drive forward in their market. As General George S. Patton is oft quoted, ‘A good plan violently
executed now is better than a perfect plan executed next week.’ Good Strategy/Bad Strategy focuses
the reader on developing a set of actions around identified trigger points and passionately
implementing those actions. The book contains many case examples that illustrate Rumelt’s points.
Richard Rumelt reinforces that a strategy is not a goal or objectives. It is the battle plan for action that
is designed upon a unique set of attributes or conditions (kernels) that sets an organization apart from
its competitors (leverages) and results in exceptional and sustainable profits.”
—Chuck Harrington, CEO of Parsons Corporation
“This is the first book on strategy I have read that I have found difficult to put down. For Rumelt,
strategy is no more—or less—than structured, intelligent thinking about business. This book teaches
you how to do it.”
—John Kay, London Business School

“Books on corporate strategy are rare. Rarer still are ones that explain good versus bad strategy
through clear illustrations where organizations got it right or wrong. This is a must-read for CEOs or
planners whose job depends on getting it right!”
—Kent Kresa, former chairman of General Motors and former CEO of Northrop Grumman

“Any executive reading this book will be motivated to examine the strategy of his or her firm, come to
a judgment about it, and then work to develop or improve it. The many fascinating examples of good
strategy provide great insight, but even more valuable are those of the ‘bad’ variety. Rumelt writes
with great verve and pulls no punches as he pinpoints such strategy ‘sins’ as fluff, blue-sky
objectives, and not facing the problem.”
—James Roche, former secretary of the air force and president of Electronic Sensors & Systems,
Northrop Grumman

“There are precious few books that enable you to not only rethink the way you think but also improve
your performance. Richard Rumelt’s brilliant Good Strategy/Bad Strategy is one, a milestone in both
the theory and practice of strategy. Cutting to the core of what makes the difference between success
and being an also-ran, Rumelt uses vivid examples from the contemporary business world and global
history that clearly show how to recognize the good, reject the bad, and make good strategy a living
force in your organization.”
—John Stopford, chairman of TLP International and Professor Emeritus, London Business
School

“Good Strategy/Bad Strategy pinpoints the polar difference: the diagnosis and actions that constitute
good strategy, the fluff and failures that cause the bad. Richly illustrated and persuasively argued by a
researcher, teacher, and consultant, Richard Rumelt has authored the playbook for anybody in a
leadership position who must think and act strategically.”
—Michael Useem, professor of management, The Wharton School, University of Pennsylvania,
and author of The Leadership Moment
GOOD STRATEGY/BAD STRATEGY

THE DIFFERENCE AND WHY IT MATTERS

R P. R
ICHARD UMELT
First published in Great Britain in 2011 by
PROFILE BOOKS LTD
3A Exmouth House
Pine Street
London EC1R 0JH
www.profilebooks.com
First published in the United States of America in 2011 by
Crown Business, an imprint of the Crown Publishing Group,
a division of Random House, Inc., New York
Copyright © Richard Rumelt, 2011
1 3 5 7 9 10 8 6 4 2
Printed and bound in Great Britain by
Clays, Bungay, Suffolk
The moral right of the author has been asserted.
All rights reserved. Without limiting the rights under copyright reserved above, no part of this
publication may be reproduced, stored or introduced into a retrieval system, or transmitted, in any
form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the
prior written permission of both the copyright owner and the publisher of this book.
A CIP catalogue record for this book is available from the British Library.
ISBN 978 1 84668 480 7
eISBN 978 1 84765 746 6
The paper this book is printed on is certified by the © 1996 Forest Stewardship Council A.C.
(FSC). It is ancient-forest friendly. The printer holds FSC chain of custody SGS-COC-2061
For Ruthjane
CONTENTS

INTRODUCTION OVERWHELMING OBSTACLES

PART I GOOD AND BAD STRATEGY
CHAPTER 1 GOOD STRATEGY IS UNEXPECTED

How Steve Jobs saved Apple
Business 101 is surprising
General Schwarzkopf’s strategy in Desert Storm
Why “Plan A” remains a surprise
CHAPTER 2 DISCOVERING POWER

David and Goliath is a basic strategy story
Discovering Wal-Mart’s secret
Marshall and Roche’s strategy for competing with the Soviet Union
CHAPTER 3 BAD STRATEGY

Is U.S. national security strategy just slogans?
How to recognize fluff
Why not facing the problem creates bad strategy
Chad Logan’s 20/20 plan mistakes goals for strategy
What’s wrong with a dog’s dinner of objectives?
How blue-sky objectives miss the mark
CHAPTER 4 WHY SO MUCH BAD STRATEGY?

Strategy involves choice, and DEC’s managers can’t choose
The path from charisma to transformational leadership to fill-in-the-blanks template-style
strategy
New Thought from Emerson to today and how it makes strategy seem superfluous
CHAPTER 5 THE KERNEL OF GOOD STRATEGY

The mixture of argument and action lying behind any good strategy
Diagnosing Starbucks, K–12 schools, the Soviet challenge, and IBM
Guiding policies at Wells Fargo, IBM, and Stephanie’s market
The president of the European Business Group hesitates to act
Incoherent action at Ford
Centralization, decentralization, and Roosevelt’s strategy in WWII
PART II SOURCES OF POWER
CHAPTER 6 USING LEVERAGE

Anticipation by Toyota and insurgents in Iraq
How Pierre Wack anticipated the oil crisis and oil prices
Pivot points at 7-Eleven and the Brandenburg Gate
Harold Williams uses concentration to make the Getty a world presence in art
CHAPTER 7 PROXIMATE OBJECTIVES

Why Kennedy’s goal of landing on the moon was a proximate and strategic objective
Phyllis Buwalda resolves the ambiguity about the surface of the moon
A regional business school generates proximate objectives
A helicopter pilot explains hierarchies of skills
Why what is proximate for one organization is distant for another
CHAPTER 8 CHAIN-LINK SYSTEMS

Challenger’s O-ring and chain-link systems
Stuck systems at GM and underdeveloped countries
Marco Tinelli explains how to get a chain-link system unstuck
IKEA shows how excellence is the flip side of being stuck
CHAPTER 9 USING DESIGN

Hannibal defeats the Roman army in 216 B.C. using anticipation and a coordinated
design of action in time and space
How a design-type strategy is like a BMW
Designing the Voyager spacecraft at JPL
The trade-off between resources and tight configuration
How success leads to potent resources that, in turn, induce laxity and decline
Design shows itself as order imposed on chaos—the example of Paccar’s heavy-truck
business
CHAPTER 10 FOCUS

A class struggles to identify Crown Cork & Seal’s strategy
Working back from policies to strategy
The particular pattern of policy and segmentation called “focus”
Why the strategy worked
CHAPTER 11 GROWTH

The all-out pursuit of size almost sinks Crown
A noxious adviser at Telecom Italia
Healthy growth
CHAPTER 12 USING ADVANTAGE

Advantage in Afghanistan and in business
Stewart and Lynda Resnick’s serial entrepreneurship
What makes a business “interesting”
The puzzle of the silver machine
Why you cannot get richer by simply owning a competitive advantage
What bricklaying teaches us about deepening advantage
Broadening the Disney brand
The red tide of pomegranate juice
Oil fields, isolating mechanisms, and being a moving target
CHAPTER 13 USING DYNAMICS

Capturing the high ground by riding a wave of change
Jean-Bernard Lévy opens my eyes to tectonic shifts
The microprocessor changes everything
Why software is king and the rise of Cisco Systems
How Cisco rode three interlinked waves of change
Guideposts to strategy in transitions
Attractor states and the future of the New York Times
CHAPTER 14 INERTIA AND ENTROPY

The smothering effect of obsolete routine at Continental Airlines
Inertia at AT&T and the process of renewal