Introduction
“Good Strategy Bad Strategy” by Richard Rumelt (2011) is a guide for identifying effective and ineffective strategies. It falls under the domains of Strategic Leadership and Strategic Planning, providing readers with tools to discern good strategies from bad ones and offering actionable insights to better formulate and execute strategic plans.

Point: Core Components
A good strategy contains a “kernel” composed of three essential elements: a diagnosis, a guiding policy, and coherent actions.

Example:
The turnaround of the Continental Airlines in the 1990s.

Action:
When creating a strategy, ensure it includes a clear diagnosis of the challenge, an overarching guiding policy to address it, and a set of coherent actions to implement the policy.

Point: Clear Diagnosis
A robust strategy starts with a clear diagnosis of the problem or challenge, which simplifies the complexity of the situation.

Example:
IBM’s diagnosis in the 1990s under CEO Lou Gerstner, recognizing the need to shift from hardware to services.

Action:
Spend adequate time and resources understanding the core issues your organization faces before jumping to solutions.

Point: Unified Direction
A guiding policy lays out an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis.

Example:
GE under Jack Welch, focusing on being number one or two in their industries.

Action:
Formulate a clear guiding policy that provides direction and limits the range of actions employees should consider.

Point: Consistent Actions
Coherent actions are steps aligned with the guiding policy and your diagnosis, ensuring unity and focus in execution.

Example:
Walmart’s operational strategy of low cost, which translates into coherent actions like supply chain efficiency and store location strategies.

Action:
Ensure each action step in your strategic plan supports one another and aligns directly with the guiding policy.

Point: Recognizing Bad Strategy
Bad strategy often results from fluff, lack of clarity, mistaking goals for strategy, and ignoring critical issues.

Example:
BP’s multiple strategic missteps, such as cost-cutting that led to the Deepwater Horizon disaster.

Action:
Critically evaluate your strategic plans to ensure they are more than just aspirational goals and contain clear, actionable components.

Point: Leveraging Strategic Power
Rumelt identifies sources of power that can create a tipping point towards success, including leverage, proximate objectives, and chain-link systems.

Example:
Apple’s focus on design excellence and integrated ecosystems.

Action:
Identify and harness strategic powers available to your organization, like unique resources or market positions that can give you a substantial edge.

Point: Focusing Resources
Effective strategy focuses resources on critical points and leverages them for maximum impact.

Example:
NVIDIA’s concentration on graphics processing and dominance in the GPU market.

Action:
Allocate resources to the areas within your organization where they can achieve the most significant results rather than spreading them thinly.

Point: Interlinked Processes
In a chain-link system, the weakest link limits the overall performance. Improving any single link without addressing the weakest is ineffective.

Example:
Procter & Gamble’s innovation process that links R&D, marketing, and distribution.

Action:
Evaluate all links in your organizational processes and target improvements at the weakest link to enhance overall performance.

Point: Achievable Goals
Setting proximate objectives means setting clear and achievable goals that provide direction and momentum.

Example:
NASA’s 1960s proximate objective of landing a man on the moon.

Action:
Break down your long-term goals into smaller, achievable steps that can be clearly communicated and executed.

Point: Distinguishing Strategy from Goals
Growth, profitability, and shareholder returns are outcomes, not strategies.

Example:
Microsoft’s strategic shifts to embrace cloud computing with Azure, rather than just focusing on growth metrics.

Action:
Ensure that strategy formulation starts with understanding competitive dynamics and creating a roadmap, not just setting financial targets.

Point: Applying Analytical Rigor
Effective strategists apply analytical rigor to understand the competition, including thinking about competitor actions and reactions.

Example:
Southwest Airlines’ examination of cost structures and competitor pricing to maintain its low-cost advantage.

Action:
Analyze your competitors thoroughly and anticipate their responses to your strategic moves.

Point: Identifying Pitfalls
Common pitfalls in strategic planning include vision and mission statements that don’t guide action, and vague strategic objectives.

Example:
General Motors’ broad mission statements that lacked actionable guidance.

Action:
Craft specific, actionable strategies rather than vague aspirational statements.

Point: Executing Well
Even the best strategies can fail without excellent execution.

Example:
Toyota’s attention to detail and adherence to the Toyota Production System.

Action:
Focus on flawless execution by investing in processes, monitoring progress, and maintaining discipline in implementation.

Point: Adapting Over Time
Strategy is not static; it should adapt to changes in the environment.

Example:
Netflix’s transition from DVD rentals to streaming.

Action:
Continuously review and adapt your strategy based on environmental changes, competitive pressures, and new opportunities.

“Good Strategy Bad Strategy” emphasizes the significance of clear, actionable strategies over vague aspirations. By focusing on a solid diagnosis of problems, setting guiding policies, and implementing coherent actions, leaders can navigate toward success. Assessing and leveraging the power within the organization, avoiding common pitfalls, and ensuring exceptional execution are vital for any effective strategic plan.