Having a Goal Is Not the Same as Having a Strategy
Rumelt's framework cuts through the noise of strategic planning and forces leadership teams to confront whether they have a real strategy or just a well-formatted list of things they want to happen.
Book Review: Good Strategy Bad Strategy by Richard Rumelt
OVERVIEW
Most leadership teams have a strategy document. Very few have an actual strategy. The document describes where they want to go, lists their values, and names a handful of initiatives. It might look solid in a board deck. But it does not explain why the company will win, what problem it is solving, or what choices have been made about what not to do. At the $5M to $50M stage, this confusion is expensive. Companies are running hard but the effort is scattered across things that each seem reasonable in isolation but do not add up to a competitive position.
Richard Rumelt is a professor and strategy consultant who has advised companies and governments for decades. Good Strategy Bad Strategy, published in 2011, draws on his research and case studies to make a deceptively simple argument. Most of what passes for strategy is not strategy at all. It is bad strategy. And bad strategy is not just weak. It is actively harmful because it creates the illusion of direction while allowing real problems to go unaddressed.
Rumelt's core argument is this: good strategy starts with a diagnosis of the real challenge, builds a guiding policy to address it, and then sequences coherent actions that reinforce each other. Miss any of these three elements and you do not have a strategy. You have a goal. Or a budget. Or a vision statement. But not a strategy.
CONCEPTS
The kernel of good strategy. - Rumelt calls the core of any good strategy the kernel, and it has three parts. The first is the diagnosis, a clear statement of what challenge the company is actually facing. The second is the guiding policy, an approach for dealing with that challenge. The third is coherent actions, the specific moves the company will make that reinforce each other and the guiding policy. Most companies skip the diagnosis and go straight to actions, which is why their initiatives do not add up. The diagnosis is not optional. It is where strategy actually starts.
The four hallmarks of bad strategy. - Bad strategy is not just the absence of good strategy. It has recognizable features. Rumelt identifies four: fluff, which is language that sounds strategic but says nothing; failure to face the challenge, which means avoiding the hard diagnosis; mistaking goals for strategy, which means listing what you want without explaining how you will get there; and setting bad strategic objectives, which are either too vague or just a restatement of the budget. Growth-stage companies are especially prone to the third and fourth. A revenue target is not a strategy. Neither is "become the market leader."
The power of focus. - Good strategy concentrates resources and effort on a limited number of moves where the company can have disproportionate impact. Rumelt argues that strategy is fundamentally about choice, and the most important choices are the ones that say no. When a company tries to pursue five strategic priorities at once, it is not being ambitious. It is failing to make a decision. Focus is the mechanism that turns limited resources into real competitive leverage.
Proximate objectives. - One of the most useful ideas in the book is the proximate objective, a goal close enough that the path to it is clear and the team can actually believe it is achievable. Rumelt contrasts this with distant aspirational goals that feel motivating but create no traction. Growth-stage CEOs often set long-range targets without building the proximate steps that make the vision feel real to the team. Proximate objectives create momentum because they are within reach and the work required to hit them is visible.
Leverage through relative strength. - Rumelt's concept of leverage is about using what you already have in situations where it creates an outsized advantage. This is not about doubling down on comfort. It is about understanding where your capabilities, assets, or market position create a real advantage against a specific competitive challenge, then designing your strategy around that intersection. The diagnosis tells you where the challenge is. The guiding policy tells you how to bring your strengths to bear on it.
APPLICATION
Start with the diagnosis, not the goals. - Before your next strategy session, stop asking where you want to be in three years and start asking what the real challenge is right now. What is actually preventing growth? Where is the friction? What does the market not understand about you, or what do you not understand about the market? Write a one-paragraph diagnosis in plain language before anyone touches a slide deck. If your leadership team cannot agree on the diagnosis, everything downstream will be contested. The diagnosis is the foundation. Without it, you are not planning strategy, you are negotiating priorities.
Test your strategy for fluff. - Take your current strategy document and read each major statement out loud. Ask whether it could apply to any company in your industry. If the answer is yes, it is fluff. Real strategy is specific to your situation, your challenge, and your strengths. It should not be interchangeable with a competitor's plan. If you could swap your strategy into a rival's deck without anyone noticing, you do not have a strategy. This test sounds simple but it will cut through a lot of expensive ambiguity fast.
Check your actions for coherence. - List your top five strategic initiatives for this year. Then ask whether each one is directly connected to your guiding policy and your diagnosis. If you have initiatives that were added because someone on the leadership team pushed for them, or because they seemed like good ideas in isolation, they are likely undermining coherence. Coherent actions reinforce each other. When they do not, resources and attention leak. The question is not whether each initiative is good. The question is whether it belongs to this strategy.
Replace revenue targets with proximate objectives. - Revenue goals are outcomes, not strategy. Instead of anchoring your planning around a revenue number, identify the two or three things that need to be true for revenue to grow. Maybe it is landing three enterprise accounts. Maybe it is reducing sales cycle length by 30 percent. Maybe it is shipping a specific product capability. These are proximate objectives. They are specific, they are within reach, and hitting them creates real momentum toward the bigger number. This shift also makes accountability much cleaner because the team knows exactly what they are responsible for.
Stop pretending focus is easy. - Most leadership teams say they are focused, but the calendar and budget tell a different story. Real focus means some good ideas do not get resources. It means some markets do not get pursued. It means some customers get told no. If your leadership team cannot name two or three things the company is not doing this year, you are not focused. Run a focus audit. Write down every major initiative currently underway. Then ask which two or three matter most to your diagnosis and guiding policy. Everything else needs to be paused or killed. That conversation is uncomfortable. Have it anyway.
TAKEAWAY
The uncomfortable truth about most growth-stage companies is that they have never written a real strategy. They have goals, they have action plans, and they have a vision statement on the wall, but the connective tissue between them is missing. Rumelt's framework does not just help you write a better document. It exposes where the thinking has been avoided. The diagnosis is hard because it requires naming the real problem out loud, often a problem that implicates the leadership team itself. The guiding policy is hard because it requires making a genuine choice about how to compete. The coherent actions are hard because they require saying no to things people care about. But without all three, effort and capital get scattered across initiatives that each make sense in isolation but do not add up to a competitive position. If your leadership team cannot state the company's diagnosis in one clear sentence, that is the place to start.
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