Summary: Good Strategy Bad Strategy

Review and Analysis of Rumelt's Book

BusinessNews Publishing

• Publisher: Must Read Summaries
• Year: 2016
• eBook ISBN: 9782511020654
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

The must-read summary of Richard Rumelt's book: `Good Strategy Bad Strategy: The Difference and Why It Matters`.

This complete summary of the ideas from `Good Strategy Bad Strategy` explains what strategy is and exposes the three elements of a good strategy: diagnosis, guiding policy, and coherent actions, thus effectively providing you with the tools necessary to identify, devise and implement a good strategy.

Added- value of this summary:
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To learn more read `Good Strategy Bad Strategy` and figure out how to advance your organisation’s interests!

Summary of Good Strategy Bad Strategy (Richard Rumelt)

1. Good Strategy vs. Bad Strategy – The Defining Differences

Bad strategy is more than just the absence of good strategy. All too often, bad strategy consists of nothing more than platitudes, unrealistic goals and warm-and-fuzzy sounding slogans. Good strategy, by contrast, specifies how the organization will focus its resources to respond to a challenge and move forward. Good strategy has three parts:

For any business, there are two sources of strength which are huge and naturally important. These are:

The unfortunate reality is good business strategies are reasonably rare and somewhat unexpected. Most organizations don’t have a business strategy which provides them with coherence so actions, policies and resources can be applied to the accomplishment of an important end. All too often, there are unconnected targets, incompatible interests and a laundry list of desirable outcomes rather than a robust strategy.

“Good strategy requires leaders who are willing and able to say no to a wide variety of actions and interests. Strategy is as much about what an organization does not do as it is about what it does.”

– Richard Rumelt

When you have a good strategy in place, it then becomes more likely that you will get insights into new sources of strength and weakness you can exploit. Take the case of Wal-Mart. Before Wal-Mart came along, the prevailing wisdom was: “A full-line discount store needs a population base of at least 100,000 to be profitable.” Wal-Mart then started to build and operate forty-five-thousand-square-foot stores in small towns. It was able to do this because it created a network of 150 stores served by a distribution center where purchasing decisions were centralized. By doing this, Wal-Mart effectively redefined the definition of a “store” and replaced it with “the network” which became Wal-Mart’s basic unit of management. By managing its supply chain efficiently, Wal-Mart was able to build sufficient efficiency into its stores that they could serve much smaller populations than their competitors. Good strategy often generates new insights because people are able to look at things from a different perspective.

“Bad strategy is not simply the absence of good strategy. It grows out of specific misconceptions and leadership dysfunctions. Once you develop the ability to detect bad strategy, you will dramatically improve your effectiveness at judging, influencing and creating strategy.”

– Richard Rumelt

The four major hallmarks of bad strategy are:

• Fluff – the stated strategy is gibberish or superficial restatements of the obvious mixed with buzzwords. Example: “Our fundamental strategy is customer-centric intermediation.” What does that mean? This is an empty phrase. It’s like a bank saying: “Our fundamental strategy is to be a bank.” Fluff results when expertise, thought and analysis are completely absent.
• Failure to face the challenge – which is serious because if you cannot define the challenge, you cannot come up with a strategy to improve it. A strategy is a way to respond to a challenge or to overcome an obstacle. If the challenge is not defined, it becomes impossible to assess the quality of the strategy and instead you end up with something which is more like a stretch goal, a budget or a laundry list of things you hope will happen.
• Mistaking goals for strategy – being content to have statements of intent rather than concrete plans for overcoming obstacles. Stating “We will grow revenue by 20% a year while maintaining a profit margin of at least 20%” isn’t a strategy. It’s a goal. There’s nothing wrong with setting goals but they are not strategy. To obtain higher performance, managers must identify obstacles to growth and develop a coherent approach to overcoming them. That’s when a true strategy will emerge.
• Utilizing bad strategic objectives – you fail to address critical issues or you come up with something completely impractical. Good strategy focuses energy and resources on a very few pivotal objectives which will lead to a cascade of favorable outcomes. If you’ve got a long “dog’s breakfast” of random objectives or “blue sky” objectives where you shoot for the stars in the hope of hitting a nearby mountain, you don’t have a strategy. You have some feel good stuff but it isn’t a strategy – even if you’re just restating what your boss wants.

Bad strategy flourishes because:

• Companies are unwilling or unable to choose goals.
• Managers are following a fill...

Table of contents

• Title page
• Book Presentation
• Summary of Good Strategy Bad Strategy (Richard Rumelt)
• About the Summary Publisher
• Copyright