Richard Rumelt

“Good strategy…” is a specific, concentrated book and cohesive response to the challenges that different companies face. The necessity to form a business strategy occurs due to the limited nature of resources. Creation of business strategy requires from a strategist to cerebrate strenuously, make difficult management decisions and implement them across the company. This is probably the true reason why effective strategies are not a common phenomenon in the professional world. The process of creating a qualitative business strategy demands a disciplined and methodical approach. Richard P. Rumelt places a set of necessary instruments for the achievement of this object at his readers’ disposal. A good strategy recognizes challenges and offers solutions to overcome them. Good strategy is a hypothesis, while its adoption is an analogue of experiment. 

The characteristic feature of good strategy is that it clearly conveys the essence and logic of the necessary actions. Process of creating a strategy resides in modeling of an integral method by which a company proceeds. The most daunting task for a leader is to determine the most significant challenges that a company faces, and elaborate a consistent mechanism to surmount these challenges. First, the building of a strategy requires to determine the points of application of the forces in that market in which one is interested, as well as to form the action plan. A good strategy is based on the deep situation analysis and oftentimes demands a revision of considered decisions. It takes high concentration to resolve fundamental not minor problems.

A good strategy expects a rational application of competitive advantages for the achievement of high-water mark. High growth of a company can be made to last longer by generating new competitive advantages or augmenting the existing ones. As is often the case in business, such advantages distinguish victors from the vanquished. However, it is important to keep in mind that any single company cannot be in the lead in all the areas of activities, so the leader’s main priority is to look for the unique advantages of the company. Considering the changing environment on the market, the necessity to attain stable and competitive advantages becomes even more important. In other words, it is essential for a leader to be able to comprehend the latest developments, rush onward and manage to turn the unprecedented wave of sweeping changes in favor of his or her company. At the same time, it is important to pay heed and react to the smallest details, which will help to comprehend the peculiarities of a particular situation. The concerted actions will allow a leader to leapfrog the rivals, those that possess immense inertia in particular.

A strategy is not merely a set of ambitious objectives, leadership, innovation or aplomb. Under a strategy, the vast majority of myopic leaders imply a set of meaningless slogans and eloquent appeals to achieve phantasmal goals. As the ill luck would have it, bad strategies materialize in the business world more often as compared to the good ones.

A good strategy has a fundamental logical structure, which Rumelt calls a kernel. This kernel consists of three underlying components: diagnostics of a critical situation, leading policy, and coherent actions. A good strategy may include many other components, but this set is an indispensable basis for a subsequent development.

First, it is important to determine the character of a challenge facing the company and figure out what is really happening to the company. Successful diagnostics can simplify harsh reality, singling out its certain aspects as critical. Mere diagnostics is not, of course, a solution to the problem. It demands further steps of determining regularities and facts, which require more profound understanding. However, diagnostics will enable managers to determine and classify a situation in a proper manner, having tied facts together, and concentrated attention on the critical aspects. Leading policy is a system of indicators, which point out a tangible way to the achievement of strategic goals. Thus, a good leading policy determines a method of resolving critical problems that were diagnosed previously. The company’s efforts will nudge this company in the right direction only if they are coherent, unwavering, and coordinated.

A bad strategy does not simply mean lack of a good strategy. It materializes and consolidates a series of erroneous appraisals and inadequate leadership practices. There are four major features of a bad strategy:

1)      Incompetence to accept the challenge (it is impossible to create an effective strategy if the main problem of a company is unidentified);

2)      Poor interpretation of a strategy (a myriad of bad strategies are simply a declaration of the desired results, while they should include recommendations of how to overcome the obstacles; any objectives will remain a wish list if they are not buttressed up by the logic of concrete actions);

3)      “Gibberish” (a set of incoherent and obscure statements, which hamper the progress by substituting comprehension of the really important moments in the daily life of a company for hazy slogans and fancy words);

4)      Bad strategic objectives (a bad strategy pays little attention to the development of modus operandi, as if formulation of the objectives was be-all and end-all; consequently, these objectives oftentimes run counter to each other or are simply unattainable).

Unfortunately, bad strategies are numerous and widespread because they are easier to invent, as compared to the good ones. They do not result simply from miscalculations or errors in the competitive situation appraisal, or distribution of resources. Bad strategies blossom because the indolent leaders aspire to rescind the necessity to analyze, as well as fail to arrive at the logical conclusions, and assess available opportunities. Bad strategies are a result of the stubborn eschewal from the prolonged hard process of strategy modeling.

Creation of a strategy occurs at the level of thinking, though it requires a sound ability to judge and evaluate. An ability to take an unjaundiced view becomes even more important if the list of main strategic objectives is concluded. Thus, the future managers will be able to form an effective system of translating abstract concepts into concrete actions, which, in its turn, will help them to understand their own prejudices, mistakes and restrictions. Intellectual shortsightedness is peculiar to all managers to some extent. The more profound and clear-cut knowledge of the real challenges that a company face they have, the better they understand the logic of building a good strategy.