Lenny's Podcast: Product | Career | Growth

Good Strategy, Bad Strategy | Richard Rumelt

January 21, 2024

AI Summary

5 min read

Richard Rumelt explains strategy as a way to overcome high-stakes challenges through diagnosis of the situation, a guiding policy for how to respond, and coherent actions that implement it without internal contradictions. Drawing from his books Good Strategy Bad Strategy and The Crux, he contrasts this "kernel" with common failures and shares how to identify leverage points like asymmetries or network effects.

Core Elements of Good Strategy

A good strategy starts with diagnosing the key challenge—what's really happening and why it's hard—rather than vague ambitions or goals like "grow faster." This leads to a guiding policy that sets overall direction, such as focusing on one market or approach, and ends with a few coherent actions that reinforce each other, like Microsoft's investment in AI leader OpenAI to reshape search. Without all three, it's not strategy; missing diagnosis skips root causes, while laundry lists of 17 priorities dilute focus, as no organization excels at everything.

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What you'll learn

1 `* (00:42) **Intro and Strategy Definition**`
2 `* (05:05) **Kernel of Good Strategy**`
3 `* (16:55) **Signs of Bad Strategy**`
4 `* (24:22) **Focus and Power in Strategy**`
5 `* (28:40) **Sources of Power and Examples**`
6 `* (47:19) **Using History and Analogies for Diagnosis**`
7 `* (55:59) **The Crux: Action Agenda Over Vision**`

+ Full timestamped outline available in the app

Show Notes

Richard Rumelt is a legend in the world of strategy. He’s the author of Good Strategy/Bad Strategy and The Crux: How Leaders Become Strategists, both of which are often recommended by guests on this podcast. From his early days teaching in Iran at a Harvard-sponsored business school to teaching at Harvard Business School itself to over four decades teaching at UCLA’s Anderson School of Management, Richard’s impact resonates globally. His strategic insights are sought after by major corporations including Microsoft, Shell, Apple, AT&T, Intel, and Commonwealth Bank and by governmental organizations such as the U.S. Army Special Operations Command. In this episode, we discuss:

• The essential components of a good strategy

• The importance of coherence in strategy

• Common pitfalls that create a bad strategy

• How “power” plays into strategy, and common sources of power

• The value of knowing history when developing effective strategies

• Why a strategy should simply be called an “action agenda”

• The need for one decider in an organization

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