Rumelt describes strategizing as identifying pivotal issues within your market and your industry and making a plan focused on forceful, results-oriented action. He reminds readers that strategy has little to do with ambitious goals, vision, leadership, innovation or determination. For many business leaders, strategy means promulgating meaningless slogans that tout impressive but unrealistic goals. A sound business strategy presents a specific action plan to overcome a defined challenge. Rumelt says good strategy involves multiple analyses and the painstaking development of thoughtful, expertly implemented policies that surmount obstacles and move the firm profitably ahead.

1. Some Impressionistic takes from the book of
Richard Rumelt
“Good Strategy Bad Strategy”
The Difference –Why it matters?
by Ramki
ramaddster@gmail.com

2. About the Author
Richard P. Rumelt (born 1942) is the Harry
and Elsa Kunin Professor of Business &
Society at UCLA Anderson, a graduate
school of business and management. He
earned his Bachelor’s and Master’s of
Science degrees in Electrical Engineering
from UC Berkeley, and received his
doctorate from the Harvard Business School
(HBS). Prior to UCLA, he worked as a
systems design engineer, and taught at the
HBS and Iran Center for Management
Studies.

3. Prelude
 Most leaders will agree that Strategy is crucial for an
organization’s success. Yet most organizations don’t have a
good strategy; they confuse strategy with ambition, innovation,
inspirational leadership, goal-setting, high-level decisions,
determination or successful outcomes.
 A Strategy should be a cohesive blend of ideas, analyses,
policies and actions in response to an important, high-stakes
challenge.
 It’s about uncovering the critical factors in a situation, then
directing your energy and resources to addressing those factors
through focused, coordinated action.
 In this book, Rumelt explains the difference between good
strategy and bad strategy, with specific tips and guidelines for
crafting good strategies.

4. “The Objective of this book is to wake you up to
the dramatic differences between good strategy
and bad strategy and to give you a leg up toward
crafting good strategies.”

5. Strategy is designing a way to deal with a challenge. A
good strategy, therefore, must identify the challenge to
be overcome, and design a way to overcome it. To do
that, the kernel of a good strategy contains three
elements: a diagnosis, a guiding policy, and coherent
action.
The Kernel of Strategy

6. The Kernel of Strategy
 A diagnosis defines the challenge. What's holding you back from
reaching your goals? A good diagnosis simplifies the often
overwhelming complexity of reality down to a simpler story by
identifying certain aspects of the situation as critical. A good diagnosis
often uses a metaphor, analogy, or an existing accepted framework to
make it simple and understandable, which then suggests a domain of
action.
 A guiding policy is an overall approach chosen to cope with or
overcome the obstacles identified in the diagnosis. Like the guardrails
on a highway, the guiding policy directs and constrains action in
certain directions without defining exactly what shall be done.
 A set of coherent actions dictate how the guiding policy will be carried
out. The actions should be coherent, meaning the use of resources,
policies, and maneuvers that are undertaken should be coordinated
and support each other (not fight each other, or be independent from
one another).

9. Good Strategy Vs. Bad Strategy
 Good strategy is simple and obvious. Good strategy identifies the key
challenge to overcome.
 Bad strategy fails to identify the nature of the challenge. If you don't
know what the problem is, you can't evaluate alternative guiding
policies or actions to take, and you can't adjust your strategy as you
learn more over time.
 Good strategy includes actions to take to overcome the challenge.
Actions are not "implementation" details; they are the punch in the
strategy.
 Strategy is about how an organization will move forward. Bad
strategy lacks actions to take. Bad strategy mistakes goals, ambition,
vision, values, and effort for strategy (these things are important, but
on their own are not strategy).
 Good strategy is designed to be coherent - all the actions an
organization takes should reinforce and support each other. Leaders
must do this deliberately and coordinate action across departments.

10. Good Strategy Vs. Bad Strategy
 Bad strategy is just a list of "priorities" that don't support each other,
at best, or actively conflict with each other, undermine each other,
and fight for resources, at worst. The rich and powerful can get away
with this, but it makes for bad strategy.
 This was the biggest "ah-ha!" moment for me. All strategy I've
seen has just been a list of unconnected objectives. Designing a
strategy that's coherent and mutually reinforces itself is a huge
step forward in crafting good strategies.
 Good strategy is about focusing and coordinating efforts to achieve
an outcome, which necessarily means saying "No" to some goals,
initiatives, and people. Bad strategy is the result of a leader who's
unwilling or unable to say "No." The reason good strategy looks so
simple is because it takes a lot of effort to maintain the coherence of
its design by saying "No" to people.
 Good strategy leverages sources of power to overcome an obstacle.
It brings relative strength to bear against relative weakness

11. “A good strategy has an essential logical
structure that I call the kernel.”
“A good strategy honestly acknowledges the
challenges being faced and provides an
approach to overcoming them.”

12. Bad strategy is not just the absence of good strategy. It
comes from misconceptions that hinder sound strategy.
Beware of Bad Strategy

13. How to identify Bad Strategy
 There are 4 hallmarks of bad strategies:
 Fluff, i.e. gibberish masquerading as strategic concepts. They
use abstract buzzwords like “customer-centric” or “cutting-
edge” to portray high-level thinking and hide the lack of
substance.
 Failure to face the challenge. If you don’t define the obstacles
or problems, you can’t respond to them effectively.
 Mistaking goals for strategy. A bad strategy is often a statement
of desire (e.g. reduce processing time by 50%) instead of a
plan for overcoming obstacles (e.g. fixing a vital bottleneck).
 A strategic objective is a means of overcoming an obstacle. For
example, to achieve broad “goals” like freedom, security and
justice, the United States breaks them down into actionable
objectives, e.g. to defeat the Taliban and to rebuild deteriorating
infrastructure. Bad strategic objectives fail to address the critical
issues or are simply unfeasible.

14. Forms of Bad Strategy
Dog's Dinner Objectives:
A long list of "things to do," often mislabeled as "strategies" or
"objectives."
These lists usually grow out of planning meetings in which
stakeholders state what they would like to accomplish, then they
throw these initiatives onto a long list called the "strategic plan" so that
no one's feelings get hurt, and they apply the label "long-term" so that
none of them need be done today.
In tech-land, I see a lot of companies conflate OKRs (Objectives
and Key Results) with strategy.
OKRs are an exercise in goal setting and measuring progress
towards those goals (which is important), but it doesn't replace
strategy work.
The process typically looks like this: once a year, each department
head is asked to come up with their own departmental OKRs,
which are supposed to be connected to company goals (increase
revenue, decrease costs, etc.).

15. Forms of Bad Strategy
Dog's Dinner Objectives:
Then each department breaks down their OKRs into sub-OKRs for
their teams to carry out, which are then broken down into sub-sub-
OKRs for sub-teams and/or specific people, so on down the chain.
This process just perpetuates departmental silos and are rarely
cohesive or mutually supportive of each other (if this does happen,
its usually a happy accident).
Department and team leaders often throw dependencies on other
departments and teams, which causes extra work for teams that
they often haven 't planned for and aren't connected to their own
OKRs, which drags down the efficiency and effectiveness of the
entire organization. Its easy for leaders to underestimate this drag
since its hard to measure, and what isn't measured isn't managed.

16. Forms of Bad Strategy
 Setting objectives is not the same as creating a strategy to reach
those goals.
 You still need to do the hard strategy work of making a diagnosis of
what obstacle is holding you back, creating a guiding policy for
overcoming the obstacle, and breaking that down into coherent
actions for the company to take (which shouldn't 't be based on what
departments or people or expertise you already have, but instead you
should look at what competencies you need to carry out your strategy
and then apply existing teams and people to carrying them out, if they
exist, and hire where you 're missing expertise, and get rid of
competencies that are no longer needed in the strategy).
 OKRs can be applied at the top layer as company goals to reach,
then applied again to the coherent actions (i.e. what's the objective of
each action, and how will you know if you reached it?), and further
broken down for teams and people as needed. You still need an
actual strategy before you can set OKRs, but most companies
conflate OKRs with strategy.

17. Forms of Bad Strategy
Blue Sky Objectives:
 A blue-sky objective is a simple restatement of the desired state of affairs or of the
challenge. It skips over the annoying fact that no one has a clue as to how to get
there.
 For example, "underperformance" isn't a challenge, it's a result. It's a
restatement of a goal. The true challenge are the reasons for the
underperformance. Unless leadership offers a theory of why things haven't
worked in the past (a.k.a. a diagnosis), or why the challenge is difficult, it is hard
to generate good strategy.
The Unwillingness or Inability to Choose:
 Any strategy that has universal buy-in signals the absence of choice. Because
strategy focuses resources, energy, and attention on some objectives rather than
others, a change in strategy will make some people worse off and there will be
powerful forces opposed to almost any change in strategy (e.g. a department head
who faces losing people, funding, headcount, support, etc., as a result of a change in
strategy will most likely be opposed to the change). Therefore, strategy that has
universal buy-in often indicates a leader who was unwilling to make a difficult choice
as to the guiding policy and actions to take to overcome the obstacles.
 This is true, but there are ways of mitigating this that he doesn't 't discuss, which
I talk about in the "Closing Thoughts" section below.

18. Forms of Bad Strategy
Template-style “Strategic planning:"
 Many strategies are developed by following a template of what a "strategy"
should look like. Since strategy is somewhat nebulous, leaders are quick to
adopt a template they can fill in since they have no other frame of reference for
what goes into a strategy.
 These templates usually take this form:
 The Vision: Your unique vision of what the org will be like in the future.
Often starts with "the best" or "the leading."
 The Mission: High-sounding politically correct statement of the purpose
of the org.
 The Values: The company's values. Make sure they are non-
controversial.
 The Strategies: Fill in some aspirations/goals but call them strategies.
 This template-style strategy skips over the hard work of identifying the key
challenge to overcome, and setting out a guiding policy and actions to
overcome the obstacle. It mistakes pious statements of the obvious as if
they were decisive insights. The vision, mission, and goals are usually
statements that no one would argue against, but that no one is inspired by,
either.

19. Key differences between Good & Bad Strategy

20. Key Reasons why Bad Strategy is prevalent
 It’s hard to focus on one area because you must give up something
else. Leaders who’re unwilling/unable to choose between different
values or stakeholder priorities end up with a vague compromise
with no strategic focus.
 Many leaders use a template-style approach which involves filling in
their vision, mission, values and “strategies” into a fixed template.
 The result is actually an expression of their goals and aspirations,
which can still be useful for articulating an inspiring vision, but lacks
the analysis and coherent actions of a real strategy.
 New thought teaches the use of positive thinking to attract your
desired outcomes. The idea is to only envision your success and
avoid all thoughts of failure.
 Such beliefs discourage people from facing and tackling their
problems, which is the crux of strategy.

21. “In business, most deep strategic changes are
brought about by a change in diagnosis—a
change in the definition of the company’s
situation.”
“Good strategy is not just ‘what’ you are trying to
do. It is also ‘why’ and ‘how’ you are doing it.”
“Strategy is at least as much about what an
organization does not do as it is about what it
does.”

22. At the root, strategy is about applying your
biggest strengths to your biggest opportunity .
Good Strategies Amplify the Impact of Your Strength

23. Coherent Strategy
 Having a coherent strategy already gives you 2 natural sources
of strength:
 A good strategy gives you a natural advantage since most
organizations don’t have one and won’t expect you to have one.
 In any situation, you can uncover hidden insights just by looking
at things from a fresh perspective—to identify new sources of
strength, weakness, opportunities and threats.
 For example, conventional wisdom said that a full-line discount
store required a population base of at least 100,000.
 Walmart defined its “store” differently—instead of having huge
stores in big cities, it created an integrated network of stores in
less-populated suburbs and fused them using data and systems.
Walmart’s success came from
 Adopting a different perspective on discount retailing and
 Counting on big chains (like Kmart) not responding until it was
too late.

24. Harnessing Source of Power
There are many ways to leverage power to overcome obstacles.
Harness sources of power and use them where they’ll have the
biggest impact. In this section, we’ll share several important
sources of power.

25. Strategic Leverage
 Strategic leverage is about (i) exploiting an imbalance to create a
disproportionate payoff, and/or (ii) directing limited resources toward 1
pivotal objective. It comes from a mix of anticipation, pivot points and
concentrated effort.
 You can gain an advantage from insightful predictions or anticipation of
others’ behavior (e.g. customers’ or rivals’ responses to current
events/trends). For example, during the SUV boom in the USA, Toyota
already invested >$1bil in hybrid gasoline-electric technologies. This was
in anticipation that (a) fuel-supply pressures would increase the demand
for hybrid vehicles, and (b) other automakers would respond by licensing
Toyota’s technology instead of developing their own.
 Look for pivot points that can magnify the effects of focused effort. 7-
Eleven focused its organizational energy on the decisive aspects of each
market. In Japan, they catered to local tastes and the love for novelty by
using store data to rapidly develop new product offerings.
 In China, they stood out from competitors with spotless interiors, tasty
lunches and white-gloved personnel who smiled and bowed to
customers.

26.  Apply concentrated effort on the few most crucial objectives. This creates
disproportionate gains because
 You’re maximizing the returns from limited resources (e.g. cash or
leaders’ time/cognition), and
 You’re more likely to achieve threshold effects (i.e. payoffs that can only
be attained with a minimum level of effort). That’s why successful
businesses prefer to dominate a small market segment (vs having a tiny
slice of many big markets), and politicians tend to tailor their plans to
specific groups (instead of catering to the whole population).
 Instead of having an unreachable goal that no one knows how to achieve,
choose a proximate objective that’s close enough to be feasible, i.e. a
target that you can reasonably achieve or even exceed. This makes the
goal concrete enough so people can
 Work out how to get there, and
 Focus their energy and resources accordingly. Kennedy’s ambitious
goal to put a man on the moon by 1969 was actually a proximate
objective: he knew the required technology was within reach and it was
just a matter of directing and coordinating resources accordingly
Strategic Leverage

27.  When an organization faces crippling complexity and uncertainty, it’s
the leaders’ responsibility to resolve ambiguity, simplify the problem
so it becomes solvable, and risk being blamed if they’re wrong. When
NASA engineers tried to design a machine that could land on the
moon, they got stuck since no one knew what the moon surface was
like. Phyllis Buwalda fixed the problem by coming up with a model of
the moon’s surface—this was only a best-guess, but it provided a
proximate objective to help the engineers move ahead.
 It’s a misconception that the more uncertain the situation, the further
you must plan. The reverse is true: the more dynamic a situation, the
worse your forecasts will be and the more you must take a position
and create options by setting a proximate strategic objective. It’s like
playing chess—you can’t checkmate your opponent from the onset,
but you can keep making moves to improve your position relative to
your opponent’s. Ask yourself: What’s the 1 objective that’s feasible
and can make the biggest difference if achieved?
Strategic Leverage

28.  In any organization, you’ll probably have a hierarchy of objectives,
where high-level proximate objectives cascade into lower-level
proximate objectives. Your long-term goals will also guide your short-
term goals.
 You can only focus on a new strategic objective if your basics are in
place. You must master how to take off and land a plane before you
attempt complex maneuvers. Likewise, a startup’s local operations must
be running like clockwork before it’s ready to expand into complex
international operations.
 A Chain-link system is one where the overall performance is limited by
its weakest link. You can’t enhance the system until the weak link(s) are
fixed.
 In a chain-link system with poor quality, you can get stuck since you’ll
only waste resources and reduce overall profitability if you increase the
quality in 1 part of the chain without addressing others. For example,
there’s no point adding sophisticated machines without skilled workers,
or to educate people in a domain with no jobs.
Strategic Leverage & Chain Link System

29. Harnessing Source of Power
 The only way to get unstuck is to tackle the bottlenecks one at a time until
the entire system is upgraded. For example, you may have to improve your
product quality first, then upgrade your sales capabilities, then reduce
costs, before you see higher profits.
 This requires
 Insight into the key bottlenecks and
 Leaders’ willingness to absorb short-term losses for future gains.
 Chain-link systems can work for or against you. If you’re stuck in a low-
quality system, it can be hard to improve the entire chain. But in a well-
designed, well-managed chain-link system, you can achieve a level of
excellence that’s hard for rivals to replicate.
 For example, IKEA’s success formula is no secret, yet no one has
successfully duplicated its strategy so far.
 That’s because IKEA has
 Built excellence into all its core activities,
 Chain-linked these activities tightly and
 Mastered the diverse expertise required for these activities. This makes
it hard for competitors to copy their strategy without replicating the
entire system.

30. Design
 A good strategy uses design to fit different pieces together into
a coherent whole.
 Most systems have many moving parts with complex
relationships. For instance, to create a luxury car, you must
address all aspects of the driving experience, buying
experience, pricing, advertising etc. All parts of the system must
be carefully designed to meet the overall system’s needs and to
avoid wasteful duplication.
 There’s a trade-off to be balanced. A tightly-integrated strategy
allows you to achieve a lot with limited resources, but its
narrower focus also makes you more vulnerable and inflexible.
 If you’re facing resource constraints and massive challenges
(e.g. a startup in a competitive market), a tightly-designed
strategy can help you to succeed. But if you’re a huge company
with ample resources, you can afford to have slightly less
specialization and integration.

31. Design & Focus
 Strategic resources are assets which offer fairly long- lasting
advantages and can’t be easily duplicated by others. With such
resources, it’s possible to earn more profits without a well-designed
strategy. However, don’t rely on those resources and get lulled into
complacency.
 Xerox’s patents on plain paper copying gave it a strong advantage in
the 1950s. It could’ve used this lead time to develop other strategic
resources (e.g. superior paper-handling abilities) to strengthen its
position. Unfortunately, Xerox didn’t do so and eventually lost its edge
to other companies like Canon and IBM.
 Focus is about serving a particular market segment much better than
other players can.
 It involves
 Coordinating policies in a synergistic way to deliver extra power,
then
 Directing that power to the right market segment. In short, focus on
your core segment instead of spreading your resources too thinly.

32. Growth
 Growth in itself is not a strategy. Healthy growth—reflected in a
market share gain and superior profits—comes from offering
superior value & developing the demand for your capabilities. It’s
the reward for successful innovation and efficiency.
 Leaders often make the mistake of pursuing mergers and
acquisitions for economies of scale and better cash flows. Such
engineered growth won’t add value unless (i) you’re buying the
company for less than it’s worth, or (ii) you’re in a special position
to add more value to the business than others. Otherwise, it’s
enough to contract the service instead of buying the company.
 Metal container-maker Crown Cork & Seal made its success by
focusing on short runs for small businesses with rush orders.
However, its new CEO pursued an aggressive growth program
with 20 acquisitions from 1989-1997. Crown became the world’s
biggest container manufacturer but lost focus and its stock price
fell from $55 to $5 between 1998 and 2001.

33. Growth
 Asymmetries between rivals can be turned into an advantage. Know
the relative strengths/weaknesses between you and your rivals, and
exploit the advantage.
 Strengths and weaknesses are relative because a strength in 1
context may be a weakness in another. You must press where you
have advantages and avoid situations where you don’t. Exploit your
rivals’ weaknesses without exposing your own.
 In business, competitive advantage is the ability to
 Produce at a lower cost than rivals,
 Deliver more perceived value than rivals, or
 A combination of both.
 No advantage is universal, i.e. it’ll be limited to certain products,
buyer groups, locations etc.
 To sustain an advantage, you need “isolating mechanisms” that
prevent rivals from duplicating it. These include patents, reputations,
commercial/social relationships, network effects, knowledge and
skills gained from experience, etc.

34. Growth
 Competitive advantages don’t always translate into wealth or profits. Once
you have an advantage, use ≥1 of these 4 value-creating changes to
harness the advantage fully:
 Deepen an advantage by widening the gap between buyer value and
cost, i.e. increase buyer value, reduce costs, or both. Re-examine
every aspect of the product/process and challenge prevailing norms
and assumptions. In the 1900s, Frank Gilbreth doubled the productivity
of bricklaying just by observing and improving the thousand-year-old
process.
 Extend the existing advantage into new areas, such as how Walt
Disney successfully extended its family-friendly brand and reputation
into films/movies
 Create higher demand for the advantaged products/ services. However,
make sure you have the resources to serve/capture the new demand
generated.
 Create/strengthen isolating mechanisms to prevent rivals from
duplicating you. You can work on stronger patents, copyrights and
brand-name protections, or keep refining your methods/products so
they’re harder to imitate.

35. Dynamics
 Dynamics are the waves of change that roll over an industry, including a
mix of shifts in technology, competition, politics, and buyer preferences.
Such changes are beyond an organization’s control, but you can see
them coming and exploit the new sources of advantage that they leave
behind.
 As a strategist, you must do your own analysis instead of relying on
analysts or pundits. Combine your proprietary knowledge with industry
trends and consider second order effects. For example, the deregulation
and digitization of the telco industry were long-anticipated, but no one
expected (a) the rise of software as a new source of advantage and (b)
the deconstruction of the computer industry.
 In the past, systems were integrated by CPUs. With the birth of cheap
microprocessors, individual component parts (e.g. keyboards, modems)
became “smarter”, removing the need for complex systems integration by
companies like IBM and DEC. Customers could also use software with
general-purpose microprocessors to create any desired behavior (which
was also much faster and cheaper than creating new hardware). Small
software teams were now thriving while big incumbents struggled.

36. Harnessing Source of Power
 This was how Cisco Systems—started by 2 university staff
members—became a major telco equipment player.
 In the early 1980s, Stanford University created a solution to
connect its separate networks.
 Later, 2 other Stanford staff refined the solution, started Cisco
Systems and bought the legal rights to the software.
 Thereafter, Cisco rode 3 simultaneous waves between 1988-
1993:
 The microprocessor and rise of software,
 The rise of corporate networking, and
 The rise of Internet Protocol (IP) networking.
 Then in 1993, Internet usage reached the general public,
resulting in an explosion of demand for Cisco routers.
 The combination of skill and luck allowed them to ride the
powerful waves of change to achieve phenomenal success

37. 5-Guide Posts
 You can’t forecast the future, but you can detect waves with 5
guideposts.
Rising fixed costs which may force industry consolidation.
Changes in government policy (especially deregulation) which
changes the competitive landscape.
Predictable biases in forecasting: people tend to wrongly assume
that
Growth trend will continue indefinitely,
Big firms will triumph over small/mid- sized ones, and
Competitors will follow existing leaders’ strategies.
Incumbents’ response to change (as elaborated in the sections on
inertia and entropy).
The attractor state which describes how an industry “should” end
up if it meets buyer needs as efficiently as possible. During the
telco industry turmoil of 1995–2000, Cisco Systems already
described the industry’s attractor state with its strategic vision of
“IP everywhere”.

38. Inertia
 Inertia is the inability or unwillingness to adapt to change.
 You can exploit larger rivals’ inertia as they’re often slow to respond.
For example, Netflix triumphed now-bankrupt Blockbuster because the
latter refused to give up its focus on retail stores.
 There are 3 categories of organizational inertia:
 Inertia of routine: An organization’s operational rhythm shapes its
people’s activities and perceptions. The
 1978 airline deregulation in the USA changed the rules of the game,
yet many airlines continued use the same pricing models and
planning tools. In 1981, the 3 major airlines (United, American, and
Eastern) lost $240mil in total, while the shorter-haul airlines (Delta,
Frontier, USAir etc.) made a profit.
 Cultural inertia refers to entrenched social behavior or meaning (e.g.
work norms, values, political coalitions) that are change-resistant. To
break the inertia, start with simplification: remove complex process,
administrative layers and so on. You can also inject a leader who
represents new norms/values, or set a challenging goal that’d push
people to build new work habits and routines.

39. Inertia
 Inertia by proxy comes from a conscious decision not respond
to a change/attack to avoid disrupting existing profit streams.
Businesses may “allow” rivals to poach their fringe customers
until they decide that it’s more important to start changing than
hang on to old sources of profits.
 In science, entropy refers to a system’s level of disorder.
 The 2nd law of thermodynamics says that entropy will always
increase in a physical system.
 So, organizations will naturally become less
focused/organized with time, just like how an untended garden
gets overgrown with weeds.
 It takes ongoing effort to maintain an organization’s purpose
and processes. Watch for common signs of entropy, e.g. loss
of focus in product lines, delayed shipping, and so on.

40. Sources of Power in a Good Strategy
Although external ideas and feedback are useful, the
most vital tool to a strategist could simply be to change
your own way of thinking.

41. The Science of Strategy
 A Strategy is like a scientific hypothesis. Both operate at the edge of
knowledge (between the known and unknown), with a conjecture that must
be validated by logical & empirical tests. In short, a good strategy is a well-
formed hypothesis of what’ll work.
 Treat your strategy as a hypothesis. Test your insight against
established principles and accumulated business knowledge. If it passes,
then test it in the market. Don’t confuse subjective opinion with fact—
always test your beliefs and assumptions with observable data in the real-
world.
 Capture proprietary information about various business elements and
how they interact, so you can effectively test and refine your strategy.
 Treat anomalies as an opportunity to discover valuable insights. Howard
Schultz noticed how Italian espresso bars had surprisingly high turnover at
relatively high prices, and hypothesized that he could bring this concept to
America. Schultz started his own shop, Il Giornale, and rapidly
experimented with various models.
 He started with opera music, baristas dressed in vests and bow ties, and
kept evolving until he found a viable model that led to the now-familiar
Starbucks experience.

42. Use and Keep your Head
 Apart from knowledge, a good strategist needs 3 essential
Skills/habits:
 Overcome your myopia,
 Question your own judgment, and
 Record your judgments so you can evaluate/improve them.
 Use these techniques to strengthen your strategic thinking:
 Make a list of the 10 most important things you can do and
start doing item #1. Once you see what’s important and
actionable, you’ll feel more urgency to act on the vital issues.
 Don’t latch on to the first insight or solution that comes to
mind.
 Test if it meets the kernel of a good strategy: diagnosis,
guiding policy, and coherent actions. If not, review your
analysis/options. Shift your focus away from what’s being
done to why it’s being done. Consider the problems that
you’re trying to address.

43. Use and Keep your Head
 It’s hard to critique your own idea. So, imagine a virtual panel of
experts (people with relevant expertise whom you respect) and have
a mental debate with them.
 Rumelt’s panel includes people like Steve Jobs, Jack McDonough,
Bruce Scott, David Teece, and other domain-specific experts. Once
you’ve refined your idea, you can discuss them with your
colleagues.
 Improve your judgment through practice. Consider an issue at an
upcoming meeting and commit your judgments to writing. During the
meeting, voice/debate those judgments to learn faster.
 Keep your head instead of blindly following the crowd. Even
analysts, strategists and investors can be swept up by herd instincts
and miss the mark altogether. Form your independent judgments
about important issues.

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45. Learning’s for Application
 One of the things as I read the book is how much overlap there
is between doing strategy work and design work - diagnosing
the problem, creating multiple potential solutions (i.e. the double
diamond ), looking at situations from multiple perspectives,
weighing tradeoffs in potential solutions, and more. The core of
strategy, as he defines it, is identifying and solving problems.
Sound familiar? That's the core of design! He even states, "A
master strategist is a designer."
 Rumelt goes on to hold up many examples of winning
strategies and advantages from understanding customer needs,
behaviors, pain points, and building for a specific customer
segment. In other words, doing user-centered design. He
doesn't specifically reference any UX methods, but it was clear
to me that the tools of UX work apply to strategy work as well.

46. Learning’s for Application
 The overlap with design doesn't end there. He has a section
about how strategy work is rooted in intuition and subjectivity.
There's no way to prove a strategy is the "best" or "right" one. A
strategy is a judgement of a situation and the best path
forward. You can say the exact same thing about design as
well.
 Since a strategy can't be proven to be right, Rumelt
recommends considering a strategy a "hypothesis" that can be
tested and refined over time. Leaders should listen for signals
that their strategy is or is not working, and make adjustments
accordingly. In other words, strategists should iterate on their
solutions, same as designers.

47. Learning’s for Application
 Furthermore, this subjectivity causes all kinds of challenges for
leaders, such as saying "no" to people, selling people on their
version of reality, and so on. He doesn't talk about how to
overcome these challenges, but as I read the book I realized these
are issues that designers have to learn how to deal with.
 Effective designers have to sell their work to people to get it built.
Then they have to be prepared for criticism, feedback, questions,
and alternate ideas. Since their work can't be "proven" to be
correct, it's open to attack from anyone and everyone. If their work
gets built and shipped to customers, they still need to be open to it
being "wrong" (or at least not perfect), listen to feedback from
customers, and iterate further as needed. All of these soft skills are
ways of dealing with the problems leaders face when implementing
a strategy.

49. In other words, design work is strategy work. As Rumelt
says, "Good strategy is design, and design is about
fitting various pieces together so they work as a
coherent whole."

50. Mail your comments to ramaddster&gmail.com