BOOK REVIEW

Good strategy, bad strategy: the difference and why it matters, By Richard P. Rumelt. New York, NY:

Random House, 2011. 336pp.

Reviewed by David Bakuli, Department of Economic & Management, Westfield State University,

Westfield, MA 01086, USA.

Students, professors, and practitioners of strategy will welcome Richard Rumelts new book Good

Strategy, Bad Strategy: The Difference and Why it Matters (Rumelt, 2011). Executive MBA students

will especially welcome its unconventional, yet intuitive, treatment of the subject. Professor Rumelts

thesis is that strategy is a coordinated and coherent response to competition and limited resources that

identifies and prioritizes how, why, and where leadership and attention can be focused to move an

organization towards specific aims. Many ideas that we call strategic are actually hollow because they

do not diagnose the specific challenges blocking these aims. They instead confuse us through

mistaking end-goals, buzzwords, and fluff for honest appraisals and concrete action plans. If it is not a

plan for overcoming specific difficulties or obstacles, it is not a strategy.

The book is divided into three sections: Good and Bad Strategy; Sources of Power; and Thinking

like a Strategist. In the first section of the book, Rumelt differentiates between good and bad strategy and

offers this distinction in five chapters: good and bad strategy, good strategy is unexpected, discovering

power, bad strategy, why so much bad strategy, and the kernel of good strategy.

In the second part of the book Chapters 6 to 15, Rumelt dedicates a chapter to each source of

power: leverage, proximate objectives, chain-link systems, using design, focus, growth, using

advantage, using dynamics, and inertia and entropy. This list, says Rumelt, is not exhaustive as there

are more sources of power that strategists employ. To conclude the section, Chapter 15 integrates the

above nine sources of power.

The third and final section of the book, Thinking Like a Strategist, has three chapters: the science of

strategy, using your head, and keeping your head. In Chapter 17, Using Your Head, Rumelt poses five

questions to help a manager or strategist identify sources of power: What are you trying to accomplish,

i.e. what is the purpose of your division, or department you are in charge of? How is

the competition in your sector/industry? What are your divisions strengths or weaknesses? and what

are the most difficult management issues you have faced in your position?. According to Rumelt,

the most common obstacle to all strategic situations is the strategists myopia or cognitive biases.

To overcome this limitation, Rumelt suggests that strategists have to cultivate the ability to question their

own judgement, summon a variety of tools to fight cognitive biases, and record their judgements often.

Following these techniques, he advises, will increase the likelihood that the strategic decisions they make

will be consistent, coherent, and effective. The author draws heavily from decades of experience

consulting to business, political, and military leaders to offer readily recognizable and accessible case

studies. Some which illustrate good strategic thinking at work, others which show the bad variety.

To situate Good Strategy, Bad Strategy in the strategy literature, I will cite definitions of

strategy from three books representative of textbooks used at undergraduate and graduate level in

the United States. Most textbooks on strategy give almost identical process-based definitions

of strategic management. In one textbook, strategic management is defined as environmental

scanning (both external and internal), strategy formulation (strategic or long-range planning), strategy

JOURNAL OF MANAGEMENT & ORGANIZATION 365

implementation, and evaluation and control (Wheelen & Hunger, 2002, p. 2). According to

David (2008, p. 4), strategic management is the art and science of formulating, implementing, and

evaluating cross-functional decisions that enable an organization to achieve its objectives. Similarly,

Gamble and Thompson (2009, p. 3) contend that strategy aims to address three questions: What is

the current state of the business? What is the desired state of the business? And, how does the

company reach that desired state? Thus, they argue, a companys strategy consists of the competitive

moves and business approaches management has developed to attract and please customers, conduct

operations, grow the business, and achieve performance objectives. To achieve performance objectives

and the vision, Gamble and Thompson propose a five-stage linear strategic management process: stage

1 develop a strategic vision; stage 2 set objectives; stage 3 craft a strategy to achieve the objectives

and the vision; stage 4 implement and execute the strategy; and stage 5 monitor developments,

evaluate performance, and initiate corrective actions (Gamble & Thompson, 2009, p. 15). Rumelt

calls the above approaches template-style strategies.

In contrast to the above linear process of strategic management, Rumelt argues that a strategy

begins with a hypothesis about what the crucial factors are in a given situation and what actions could

work to address those factors. Beginning with these educated and testable assumptions, good strategic

thinking must then involve induction, analogy, judgement, and insight. Furthermore, he suggests that

good strategy is a hard nut to crack and once cracked will contain three layers: a diagnosis, guiding

policies, and a set of coherent actions.

The diagnosis layer defines the nature of the challenge. It identifies the aspects of the situation that

are critical to the organization. It also classifies the challenge into a certain type so that if a company

has prior experience with similar challenges it can retrieve the appropriate response from its existing

toolbox. It is in the diagnosis layer, he argues, where the organization can revisit the current strategy

and make adjustments if it is not achieving the intended outcomes. Often a diagnosis is a judgement

call and cannot be proven, especially when the challenges presented are ill-structured or intertwined.

Next are the guiding policies. Once you have identified the challenge, you need to have a set of

guidelines, procedures, or policies that advise how you deal with the situation. Good policies, Rumelt

asserts, direct and constrain action; define methods for grappling with the situation; draw upon

sources of advantage; reduce complexity and ambiguity; and build on each other to leverage gains.

The last and third layer in the strategy nut is a coherent set of actions. These are coordinated

actions taken to implement the guiding policies. To be effective, argues Rumelt, a strategy must

coordinate actions across the organization and, when executed properly, effective coordination in itself

may indeed be an additional source of competitive advantage.

Good Strategy, Bad Strategy is a well-written book that breaks the monotony of the hitherto linear,

monolithic treatment of strategy by incumbent textbooks. Practitioners, educators, and students of

strategy will find this book a welcome addition to current strategy textbooks. The book uses ample

real-world examples to make the discussion of strategy engaging and grounded in recognizable

experiences. The examples come from such a wide cross-section of industries that their lessons apply

to any situation including an individuals self-drive for personal excellence.

References

David, F. R. (2008). Strategic management: Concepts and cases. Upper Saddle River, NJ: Prentice-Hall.

Gamble, J. E., & Thompson, A. A. (2009). Essentials of strategic management: The quest for competitive advantage.

New York, NY: McGraw-Hill.

Rumelt, R. P. (2011). Good strategy, bad strategy: The difference and why it matters. New York, NY: Random House, Inc.

Wheelen, T. L., & Hunger, J. D. (2002). Strategic management and business policy. Upper Saddle River, NJ: Prentice-

Hall.

In 200 words/PDF file/APA formatted provide your thoughts on how a marketing team can go about developing good strategic thinking. What process, practices and approach would you recommend?

Tip: do some secondary research on "developing a marketing strategy" or "marketing strategy principles".