Good Strategy Bad Strategy

In one sentence

Good strategy is the "kernel" of diagnosis, guiding policy, and coherent action, whereas bad strategy is merely a list of goals, fluff-filled corporate speak, or internal operational plans disguised as strategy.

Why read this (and who it's for)

Most product leaders and executives mistake planning for strategy. They believe that setting ambitious KPIs (e.g., "Become the #1 CRM by 2026") constitutes a strategy. Rumelt argues that these are merely goals—the destination, not the map.

This book is for Product Managers, Founders, and Executives who find themselves with high-level visions but struggle to execute because their teams seem uncoordinated or overwhelmed by competing priorities. After reading this, you will be able to strip away the "fluffy" corporate jargon from your roadmap, identify the actual obstacles holding your product back, and build a cohesive plan of action that forces trade-offs and creates a competitive advantage.

The big idea

Rumelt argues that strategy is often misunderstood because we confuse it with goals. A goal is a desired outcome (e.g., "increase revenue by 20%"). Strategy is the specific logic of how you will achieve that outcome in a world of competing interests and limited resources. If your strategy doesn't involve making choices, creating trade-offs, and coordinating actions to overcome a specific hurdle, you don't have a strategy—you have a "to-do" list.

The core of good strategy is the Kernel. To have a strategy, you must:

1. Diagnose the challenge (What is the obstacle?).
2. Guide the response (How will we approach this specifically?).
3. Align the actions (What specific steps will we take together?).

Most "bad" strategies fail because they lack one of these three components. They are either purely aspirational (no diagnosis), purely operational (no guiding policy), or disconnected (no coherent action). Rumelt asserts that strategy is only effective when it creates a unique position for the organization—a way of doing things that is fundamentally different from the competition.

Key ideas

The Kernel: Diagnosis, Guiding Policy, and Coherent Action

The "Kernel" is the indispensable core of any good strategy. It requires a clear diagnosis of the challenges facing the organization, a guiding policy on how to deal with those challenges, and a set of coherent actions designed to carry out that policy.

Why it matters: Without this trinity, your roadmap is just a collection of features. If you can't explain the obstacle (Diagnosis), why you chose this specific path (Guiding Policy), and how every feature/task supports that path (Coherent Action), your team will likely work on things that don't actually move the needle.

In the book: Rumelt uses the example of a company trying to enter a crowded market. A bad strategy says, "We want to be the best." A good strategy diagnoses that the market is over-saturated with high-priced options, sets a policy to win on extreme affordability and simplicity, and executes by stripping away all non-essential features.

Strategy vs. Goals

Goals are what you want to achieve; strategy is how you intend to get there. Many organizations mistake "Goal-setting" for "Strategy-making." A goal like "Increase market share" is a destination, not a plan of attack.

Why it matters: If you treat goals as strategies, you will find yourself constantly reacting to the market without a proactive plan. You'll be "busy" but won't actually be gaining any ground because you haven't identified the leverage points that make winning possible.

In the book: Rumelt highlights how many corporate plans are just lists of "ambitious goals" (e.g., "be the leader in innovation") without any actual plan for how to compete against rivals who are also claiming to be leaders in innovation.

The Importance of Trade-offs

A strategy that doesn't say "no" is not a strategy. Because resources (time, money, talent) are finite, choosing one path means deliberately abandoning others. Strategy is the art of choosing what not to do.

Why it matters: In product development, this is the difference between a "feature-rich" product that is bloated and confusing, and a "focused" product that solves a specific pain point perfectly. If you try to please everyone, your strategy becomes diluted and ineffective.

In the book: Rumelt argues that if you cannot identify what you are giving up to achieve your goal, you haven't actually made a strategic choice; you've just made a wish list.

Competitive Advantage: Different, Not Just Better

Most companies try to be "better" than their competitors (faster, cheaper, prettier). However, "better" is hard to sustain because competitors can quickly copy your improvements. True competitive advantage comes from being different—occupying a unique space that is difficult to replicate.

Why it matters: For a product, this means finding a "Blue Ocean" or a unique value proposition that isn't just an incremental improvement on the incumbent's features. It’s about changing the rules of the game so that your competitors' strengths become irrelevant.

In the book: He discusses how some companies win not by out-performing others in every category, but by choosing to excel in one specific area while intentionally underperforming in others (e.g., a budget airline that offers no meals and fewer routes but wins on price).

Focus and Coordination

Good strategy requires "Focus" (concentrating resources on a narrow set of objectives) and "Coordination" (ensuring that all actions work together toward the same goal).

Why it matters: Many products fail because different teams are working at cross-purposes. The marketing team might be pushing for one type of user, while the engineering team is building features for another. Strategy provides the "glue" that ensures every department's efforts reinforce each other.

In the book: Rumelt emphasizes that a strategy must be coherent. If your actions are contradictory (e.g., trying to be both the cheapest and the most premium), they will cancel each other out, leading to organizational paralysis.

Frameworks & tools

The Strategy Kernel Diagnostic

Use this 3-step framework to evaluate any product roadmap or business plan. If it fails any of these three tests, it is "Bad Strategy."

1. Diagnosis (The "Why")

• Identify the specific obstacle: Is it a competitor's price? A technical limitation? A lack of user awareness? A fragmented market?
• Question to ask: "What is the specific reality we are trying to navigate?"

2. Guiding Policy (The "How")

• Define the overall approach to overcoming that obstacle. This should be a set of principles, not a list of features.
• Example: "We will win by being the only tool that allows non-technical users to automate complex workflows in under 5 minutes."

3. Coherent Actions (The "What")

• List the specific projects, products, or marketing pushes that directly execute the Guiding Policy.
• Rule: Every action must be a direct consequence of the Guiding Policy. If an action doesn't help overcome the diagnosed obstacle, it should be cut.

The "Trade-off" Audit

Use this to ensure your strategy isn't just a wish list. For every major initiative on your roadmap, answer:

1. What are we choosing NOT to do? (Identify the specific features or markets being ignored).
2. Why is this trade-off necessary? (Explain how giving up those things allows us to win in our chosen area).
3. How does this create a "Different" position? (How does this choice make it harder for competitors to copy us?)

Memorable examples & stories

Southwest Airlines

Southwest didn't try to be a "full-service" airline; they chose to be a low-cost, high-frequency carrier. They accepted the trade-off of not offering meals or assigned seating in exchange for being able to turn planes around faster and offer lower prices. Lesson: Strategy is about choosing what to give up.

IKEA

IKEA’s success isn't just "cheap furniture." It is a coordinated strategy involving design, logistics (flat-packing), and retail experience. They didn't try to be the best furniture store; they created a new way of buying furniture that required customers to do some of the work (assembly) in exchange for much lower prices. Lesson: Strategy requires coordination across different functions (design, supply chain, etc.).

The "Better" Trap

Rumelt describes how many companies try to be "better" than a competitor by simply adding more features. This leads to a "feature war" where the incumbent always has an advantage because they have more resources. Lesson: To win, you must be different, not just better.

Key quotes

"Strategy is about making choices." (Paraphrased) Why it matters: If there are no trade-offs, there is no strategy.

"Good strategy is about the 'how,' not the 'what.'" (Paraphrased) Why it matters: Goals are destinations; strategy is the path to get there.

"A good strategy must be coherent." (Paraphrased) Why it matters: Actions that work against each other will result in zero progress, regardless of how much effort is expended.

How to apply it

This week

1. The "Fluff" Audit: Look at your current product roadmap or company goals. Highlight every word that is a "buzzword" (e.g., synergy, world-class, innovative). If you cannot point to a specific action associated with that word, strike it out.
2. Identify the Obstacle: Instead of asking "How can we grow?", ask "What is the primary obstacle preventing us from growing right now?" (e.g., Is it high churn? Low awareness? A competitor's feature?) Write this down in one sentence.
3. The Trade-off Test: Pick your top priority project. Write down three things you are not doing because of this project. If you can't think of any, your project isn't a strategy; it's just a task.

Ongoing

1. Kernel Check-ins: During every roadmap review, start with the Diagnosis. Before discussing features, the team must agree on what obstacle we are trying to overcome this quarter.
2. The Coherence Filter: When a new feature request comes in, ask: "How does this specifically help us overcome [Current Obstacle]?" If it doesn't, it goes to the bottom of the backlog.
3. Differentiation Review: Once a quarter, ask: "If our competitor had our exact budget and team, could they copy what we just did in 6 months?" If the answer is yes, your strategy isn't "different" enough.

Common pitfalls

• The "Planning" Trap: Thinking that a 50-page slide deck of goals equals a strategy. Rumelt warns that many companies produce beautiful documents that contain zero actual strategy because they lack a diagnosis and coherent actions.
• Internal Focus: Focusing only on internal processes (e.g., "We need to be more agile") without looking at the external reality of the market. Strategy must be rooted in the outside world.
• The Complexity Bias: Thinking that a good strategy must be complicated. Actually, good strategy is often simple because it focuses on the crux of the problem. If you can't explain your strategy to a new hire in two minutes, it’s probably too complex to be actionable.

Connects to

1. Blue Ocean Strategy: While Rumelt focuses on the internal logic of strategy (the Kernel), Blue Ocean focuses on the external market space (creating uncontested markets). They are highly complementary: Blue Ocean provides the "where," and Rumelt provides the "how."
2. Good to Great (Jim Collins): Collins focuses on organizational flywheels and disciplined execution; Rumelt provides the intellectual framework for what that execution should actually be aiming at.

If you remember only three things

• Strategy is a Kernel: Diagnosis, Guiding Policy, and Coherent Action.
• Strategy requires Trade-offs: If you aren't saying "no" to something, you don't have a strategy.
• Be Different, not just better: Competitive advantage comes from unique positions that are hard for others to replicate quickly.

Internalize it

• Reflection questions

  1. What is the single biggest obstacle our product faces today? (Not "how can we grow," but what is stopping us?)
  2. If I had to describe our strategy in one sentence without using any buzzwords, what would it be?
  3. What are we currently doing that does not contribute to overcoming our primary obstacle? Why are we still doing it?
  4. How would a competitor react if they saw our current roadmap? Would they find it easy to copy?

• Flashcards Q: What are the three components of the "Strategy Kernel"? A: Diagnosis, Guiding Policy, and Coherent Action.

Q: Why is a goal (e.g., "Increase revenue by 10%") not a strategy? A: Because a goal is a destination; strategy is the specific plan/logic of how to reach that destination while overcoming obstacles.

Q: What is the difference between being "better" and being "different"? A: "Better" usually means incremental improvements (faster, cheaper) which are easy to copy. "Different" means creating a unique position or trade-off that is harder for competitors to replicate.

Q: Why is "Trade-off" central to strategy? A: Because resources are finite. Strategy is the deliberate choice of what not to do in order to focus resources on what matters most.

Q: What does it mean for actions to be "Coherent"? A: It means all actions work together toward the same goal rather than competing with or distracting from one another.