Richard Rumelt Quotes

The kernel of a strategy contains three elements: a diagnosis, a guiding policy, and coherent action.

Good strategy works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes.

It is hard to show your skill as a sailor when there is no wind.

A leader’s most important job is creating and constantly adjusting this strategic bridge between goals and objectives.

A hallmark of true expertise and insight is making a complex subject understandable. A hallmark of mediocrity and bad strategy is unnecessary complexity—a flurry of fluff masking an absence of substance.

The first step of making strategy real is figuring out the big ‘aha’ to gain sustainable competitive advantage—in other words, a significant, meaningful insight about how to win.

A strategy coordinates action to address a specific challenge.

A strategy is like a lever that magnifies force.

Good strategy requires leaders who are willing and able to say no to a wide variety of actions and interests. Strategy is at least as much about what an organization does not do as it is about what it does.

The discipline of analysis is to not stop there, but to test that first insight against the evidence.

The most basic idea of strategy is the application of strength against weakness. Or, if you prefer, strength applied to the most promising opportunity.

Mistaking goals for strategy. Many bad strategies are just statements of desire rather than plans for overcoming obstacles.

If you fail to identify and analyze the obstacles, you don’t have a strategy. Instead, you have either a stretch goal, a budget, or a list of things you wish would happen.

Bad strategy is long on goals and short on policy or action. It assumes that goals are all you need. It puts forward strategic objectives that are incoherent and, sometimes, totally impracticable. It uses high-sounding words and phrases to hide these failings.

At the core, strategy is about focus, and most complex organizations don’t focus their resources. Instead, they pursue multiple goals at once, not concentrating enough resources to achieve a breakthrough in any of them.

A good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them.

Strategy is visible as coordinated action imposed on a system. When I say strategy is “imposed,” I mean just that. It is an exercise in centralized power, used to overcome the natural workings of a system. This coordination is unnatural in the sense that it would not occur

the language of business strategy: identify your strengths and weaknesses, assess the opportunities and risks (your opponent’s strengths and weaknesses), and build on your strengths.

A good strategy includes a set of coherent actions. They are not “implementation” details; they are the punch in the strategy. A strategy that fails to define a variety of plausible and feasible immediate actions is missing a critical component.

Without constant attention, the design decays. Without active maintenance, the lines demarking products become blurred, and coherence is lost.

Unlike a stand-alone decision or a goal, a strategy is a coherent set of analyses, concepts, policies, arguments, and actions that respond to a high-stakes challenge.

Nevertheless, the doctrine that one can impose one’s visions and desires on the world by the force of thought alone retains a powerful appeal to many people. Its acceptance displaces critical thinking and good strategy.

The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors.

When someone says “Managers are decision makers,” they are not talking about master strategists, for a master strategist is a designer.

Strategies focus resources, energy, and attention on some objectives rather than others. Unless collective ruin is imminent, a change in strategy will make some people worse off. Hence, there will be powerful forces opposed to almost any change in strategy. This is the fate of many strategy initiatives in large organizations.

Strategy does not eliminate scarcity and its consequence—the necessity of choice. Strategy is scarcity’s child and to have a strategy, rather than vague aspirations, is to choose one path and eschew others. There is difficult psychological, political, and organizational work in saying “no” to whole worlds of hopes, dreams, and aspirations.

Strategy is the craft of figuring out which purposes are both worth pursuing and capable of being accomplished.

Bad strategy is long on goals and short on policy or action.

Good strategy is not just “what” you are trying to do. It is also “why” and “how” you are doing it.

bad strategy is the active avoidance of the hard work of crafting a good strategy.

Simply being ambitious is not a strategy.

many effective strategies are more designs than decisions—are more constructed than chosen.

the deeper meaning of focus—a concentration and coordination of action and resources that creates an advantage.

Good strategy and good organization lie in specializing on the right activities and imposing only the essential amount of coordination.

the kernel of strategy—a diagnosis, a guiding policy, and coherent action—applies to any complex setting.

To obtain higher performance, leaders must identify the critical obstacles to forward progress and then develop a coherent approach to overcoming them.

form of bad strategic objectives occurs when there is a scrambled mess of things to accomplish—a “dog’s dinner” of strategic objectives.

Many people call the guiding policy “the strategy” and stop there. This is a mistake. Strategy is about action, about doing something. The kernel of a strategy must contain action.

A strategy is, like a scientific hypothesis, an educated prediction of how the world works.

A great deal of strategy work is trying to figure out what is going on. Not just deciding what to do, but the more fundamental problem of comprehending the situation.

the main impediment to action is the forlorn hope that certain painful choices or actions can be avoided—that the whole long list of hoped-for “priorities” can all be achieved.

good strategy has an essential logical structure that I call the kernel. The kernel of a strategy contains three elements: a diagnosis, a guiding policy, and coherent action.

Design always involves a certain amount of trial and error, and hardware trials and errors are much more costly.

The truth is that venture capital is invested not in plans but in the individuals who have proposed the venture and have committed themselves to running it.

You will have a much harder time dealing with a gnarly challenge if you have not distilled it down to a crux. No one solves a problem they cannot comprehend and hold in their mind.

Strategy cannot be a useful concept if it is a synonym for success. Nor can it be a useful tool if it is confused with ambition, determination, inspirational leadership, and innovation.

Nevertheless, strategy is primarily about deciding what is truly important and focusing resources and action on that objective. It is a hard discipline because focusing on one thing slights another.

In a changing world, a good strategy must have an entrepreneurial component. That is, it must embody some ideas or insights into new combinations of resources for dealing with new risks and opportunities.

If the challenge is not defined, it is difficult or impossible to assess the quality of the strategy. And if you cannot assess a strategy’s quality, you cannot reject a bad strategy or improve a good one.

A design-type strategy is an adroit configuration of resources and actions that yields an advantage in a challenging situation. Given a set bundle of resources, the greater the competitive challenge, the greater the need for the clever, tight integration of resources and actions. Given a set level of challenge, higher-quality resources lessen the need for the tight integration of resources and actions. These

we should seek coordinated policies only when the gains are very large. There will be costs to demanding coordination, because it will ride roughshod over economies of specialization and more nuanced local responses.

I don’t actually know what I know until I work to write it down. The process of writing reveals contradictions, weak arguments, and places where more data is needed to back up an opinion. And it helps sort out the important from the less important

Strategic coordination, or coherence, is not ad hoc mutual adjustment. It is coherence imposed on a system by policy and design. More specifically, design is the engineering of fit among parts, specifying how actions and resources will be combined.

Strategy is scarcity’s child and to have a strategy, rather than vague aspirations, is to choose one path and eschew others. There is difficult psychological, political, and organizational work in saying “no” to whole worlds of hopes, dreams, and aspirations.

Given that background, I was interested in what Steve Jobs might say about the future of Apple. His survival strategy for Apple, for all its skill and drama, was not going to propel Apple into the future. At that moment in time, Apple had less than 4 percent of the personal computer market. The de facto standard was Windows-Intel and there seemed to be no way for Apple to do more than just hang on to a tiny niche. In the summer of 1998, I got an opportunity to talk with Jobs again. I said, “Steve, this turnaround at Apple has been impressive. But everything we know about the PC business says that Apple cannot really push beyond a small niche position. The network effects are just too strong to upset the Wintel standard. So what are you trying to do in the longer term? What is the strategy?” He did not attack my argument. He didn’t agree with it, either. He just smiled and said, “I am going to wait for the next big thing.

A strategy is a way through a difficulty, an approach to overcoming an obstacle, a response to a challenge. If the challenge is not defined, it is difficult or impossible to assess the quality of the strategy. And if you cannot assess a strategy’s quality, you cannot reject a bad strategy or improve a good one.

When a leader characterizes the challenge as underperformance, it sets the stage for bad strategy. Underperformance is a result. The true challenges are the reasons for the underperformance. Unless leadership offers a theory of why things haven’t worked in the past, or why the challenge is difficult, it is hard to generate good strategy.

Despite the roar of voices wanting to equate strategy with ambition, leadership, “vision,” planning, or the economic logic of competition, strategy is none of these. The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors.

This particular pattern—attacking a segment of the market with a business system supplying more value to that segment than the other players can—is called focus. Here, the word “focus” has two meanings. First, it denotes the coordination of policies that produces extra power through their interacting and overlapping effects. Second, it denotes the application of that power to the right target.*

Today, as then, many effective strategies are more designs than decisions—are more constructed than chosen. In these cases, doing strategy is more like designing a high-performance aircraft than deciding which forklift truck to buy or how large to build a new factory. When someone says “Managers are decision makers,” they are not talking about master strategists, for a master strategist is a designer.

In many situations, the main impediment to action is the forlorn hope that certain painful choices or actions can be avoided—that the whole long list of hoped-for “priorities” can all be achieved. It is the hard craft of strategy to decide which priority shall take precedence. Only then can action be taken. And, interestingly, there is no greater tool for sharpening strategic ideas than the necessity to act.

The best answer to this puzzle is that the real surprise was that such a pure and focused strategy was actually implemented. Most complex organizations spread rather than concentrate resources, acting to placate and pay off internal and external interests. Thus, we are surprised when a complex organization, such as Apple or the U.S. Army, actually focuses its actions. Not because of secrecy, but because good strategy itself is unexpected.

The peril of a potent resource position is that success then arrives without careful ongoing strategy work. Own the original patent on the plain-paper photocopier, or own the Hershey’s brand name, or the Windows operating system franchise, or the patent on Lipitor, and there will be many years during which profits will roll in almost regardless of how you arrange your business logic. Yes, there was inventive genius in the creation of these strategic resources, but profits from those resources can be sustained, for a time, without genius.

It is often said that a strategy is a choice or a decision. The words “choice” and “decision” evoke an image of someone considering a list of alternatives and then selecting one of them. There is, in fact, a formal theory of decisions that specifies exactly how to make a choice by identifying alternative actions, valuing outcomes, and appraising probabilities of events. The problem with this view, and the reason it barely lightens a leader’s burden, is that you are rarely handed a clear set of alternatives. In the case at hand, Hannibal was certainly not briefed by a staff presenting four options arranged on a PowerPoint slide. Rather, he faced a challenge and he designed a novel response. Today, as then, many effective strategies are more designs than decisions—are more constructed than chosen. In these cases, doing strategy is more like designing a high-performance aircraft than deciding which forklift truck to buy or how large to build a new factory. When someone says “Managers are decision makers,” they are not talking about master strategists, for a master strategist is a designer.

Strategy cannot be a useful concept if it is a synonym for success. Nor can it be a useful tool if it is confused with ambition, determination, inspirational leadership, and innovation. Ambition is drive and zeal to excel. Determination is commitment and grit. Innovation is the discovery and engineering of new ways to do things. Inspirational leadership motivates people to sacrifice for their own and the common good.1 And strategy, responsive to innovation and ambition, selects the path, identifying how, why, and where leadership and determination are to be applied.

The kernel of a strategy contains three elements: A diagnosis that defines or explains the nature of the challenge. A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as critical. A guiding policy for dealing with the challenge. This is an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis. A set of coherent actions that are designed to carry out the guiding policy. These are steps that are coordinated with one another to work together in accomplishing the guiding policy.

Treating strategy like a problem in deduction assumes that anything worth knowing is already known—that only computation is required. Like computation, deduction applies a fixed set of logical rules to a fixed set of known facts. For example, given Newton’s law of gravity, one can deduce (calculate) the period of Mars’s orbit around the sun. Or given the costs and capacities of tankers, pipelines, and refineries, one can optimize the flow of oil and refined product within an integrated oil company. If everything worth knowing is already known, the problem of action reduces to crank winding.

Executives who complain about “execution” problems have usually confused strategy with goal setting. When the “strategy” process is basically a game of setting performance goals—so much market share and so much profit, so many students graduating high school, so many visitors to the museum—then there remains a yawning gap between these ambitions and action. Strategy is about how an organization will move forward. Doing strategy is figuring out how to advance the organization’s interests. Of course, a leader can set goals and delegate to others the job of figuring out what to do. But that is not strategy. If that is how the organization runs, let’s skip the spin and be honest—call it goal setting.

Quality matters when quantity is an inadequate substitute. If a building contractor finds that her two-ton truck is on another job, she may easily substitute two one-ton trucks to carry landfill. On the other hand, if a three-star chef is ill, no number of short-order cooks is an adequate replacement. One hundred mediocre singers are not the equal of one top-notch singer. Keeping children additional hours or weeks in broken schools—schools that can neither educate nor control behavior—does not help and probably increases resentment and distrust.

From a psychological perspective, there can be returns to focus or concentration when people ignore signals below a certain threshold (called a “salience effect” in psychology) or when they believe in momentum—that success leads to success.

A design-type strategy is an adroit configuration of resources and actions that yields an advantage in a challenging situation. Given a set bundle of resources, the greater the competitive challenge, the greater the need for the clever, tight integration of resources and actions. Given a set level of challenge, higher-quality resources lessen the need for the tight integration of resources and actions.

Talking with real estate experts and contractors about home remodeling, I learned that in assessing a property’s potential, one should identify the limiting factors. If a house is near a noisy highway, that is a limiting factor.

IKEA’s adroit coordination of policies is a more integrated design than anyone else’s in the furniture business. Traditional furniture retailers do not carry large inventory, traditional manufacturers do not have their own stores, normal retailers do not specify their own designs or use catalogs rather than salespeople, and so on. Because IKEA’s many policies are different from the norm and because they fit together in a coherent design, IKEA’s system has a chain-link logic. That means that adopting only one of these policies does no good—it adds expense to the competitor’s business without providing any real competition to IKEA. Minor adjustments just won’t do—to compete effectively with IKEA, an existing rival would have to virtually start fresh and, in effect, compete with its own existing business. No one did. Today, more than fifty years after IKEA pioneered its new strategy in the furniture industry, no one has really replicated it.

Taylor’s assignment was to think through the intersection between what was important and what was actionable.

That uneasy sense of ambiguity you feel is real. It is the scent of opportunity.

To search for a new insight, one would have to put aside the comfort of being oriented and once again cast around in choppy waters for a new source of stability. There is the fear of coming up empty-handed. Plus, it is unnatural, even painful, to question our own ideas.

Thought is not only power; it is also the form of all things. The conditions that we attract will correspond exactly to our mental pictures. It is quite necessary, then, that the successful business man should keep his mind on thoughts of happiness, which should produce cheerfulness instead of depression; he should radiate joy, and should be filled with faith, hope and expectancy.… Put every negative thought out of your mind once and for all. Declare your freedom. Know no matter what others may say, think or do, you are a success, now, and nothing can hinder you from accomplishing your goal.11

What is most important is that these individual’s visions became genuinely shared among people throughout all levels of their companies—focusing the energies of thousands and creating a common identity among enormously diverse people.”12

A good strategy does more than urge us forward toward a goal or vision. A good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them.

Rather, the term “strategy” should mean a cohesive response to an important challenge.

Strategy is about how an organization will move forward.

Yes, you might be able to drag a giant block of rock across the ground with muscles, ropes, and motivation. But it is wiser to build levers and wheels and then move the rock.

Thus, the objectives a good strategy sets should stand a good chance of being accomplished, given existing resources and competence.

The problem with all this was that it ignored the elephant in the elevator. You can’t discern the elephant by studying the plan because the plan doesn’t mention it. The

come to grips with the fundamental obstacles and problems that stand in the organization’s way. Looking

Whatever you think about this definition of leadership, a problem arises when it is confused with strategy. Leadership and strategy may be joined in the same person, but they are not the same thing. Leadership inspires and motivates self-sacrifice. Change, for example, requires painful adjustments, and good leadership helps people feel more positively about making those adjustments. Strategy is the craft of figuring out which purposes are both worth pursuing and capable of being accomplished.

Not miscalculation, bad strategy is the active avoidance of the hard work of crafting a good strategy. One common reason for choosing avoidance is the pain or difficulty of choice. When leaders are unwilling or unable to make choices among competing values and parties, bad strategy is the consequence. A second pathway to bad strategy is the siren song of template-style strategy—filling in the blanks with vision, mission, values, and strategies. This path offers a one-size-fits-all substitute for the hard work of analysis and coordinated action. A third pathway to bad strategy is New Thought—the belief that all you need to succeed is a positive mental attitude. There are other pathways to bad strategy, but these three are the most common. Understanding how and why they are taken should help you guide your footsteps elsewhere. THE

The product lineup was too complicated and the company was bleeding cash. A friend of the family asked me which Apple computer she should buy. She couldn’t figure out the differences among them and I couldn’t give her clear guidance, either. I was appalled that there was no Apple consumer computer priced under $2,000. We are replacing all of those desktop computers with one, the Power Mac G3. We are dropping five of six national retailers—meeting their demand has meant too many models at too many price points and too much markup.

I do not know whether meditation and other inward journeys perfect the human soul. But I do know that believing that rays come out of your head and change the physical world, and that by thinking only of success you can become a success, are forms of psychosis and cannot be recommended as approaches to management or strategy. All analysis starts with the consideration of what may happen, including unwelcome events. I would not care to fly in an aircraft designed by people who focused only on an image of a flying airplane and never considered modes of failure.

A guiding policy creates advantage by anticipating the actions and reactions of others, by reducing the complexity and ambiguity in the situation, by exploiting the leverage inherent in concentrating effort on a pivotal or decisive aspect of the situation, and by creating policies and actions that are coherent, each building on the other rather than canceling one another out.

That would be a very painful road. Many noses would get out of joint. It would be better to win people over to this point of view rather than force them over.” “Right,” I said. “You would only take all those painful steps if it were really important to get action on this concept. Only if it were really important.

The art of strategy is not finding your one true goal and passionately pursuing it with all your heart and soul in everything you do—that is a type of mental illness called monomania. The art of strategy is not setting higher and higher performance goals for people and using charisma, carrots, and sticks to push them toward attaining those goals—that presumes that someone somewhere knows how to find a way through the thicket of problems the organization actually faces.

A strategy that fails to define a variety of plausible and feasible immediate actions is missing a critical component.

When I say strategy is “imposed,” I mean just that. It is an exercise in centralized power, used to overcome the natural workings of a system.

The first step of making strategy real is figuring out the big ‘aha’ to gain sustainable competitive advantage—in other words, a significant, meaningful insight about how to win.” Yes, Welch believed in stretch, but he also said “If you don’t have a competitive advantage, don’t compete.

When organizations are unable to make new strategies—when people evade the work of choosing among different paths into the future—then you get vague mom-and-apple-pie goals that everyone can agree on. Such goals are direct evidence of leadership’s insufficient will or political power to make or enforce hard choices. Put differently, universal buy-in usually signals the absence of choice.

A good strategy defines a critical challenge. What is more, it builds a bridge between that challenge and action, between desire and immediate objectives that lie within grasp.

I would not care to fly in an aircraft designed by people who focused only on an image of a flying airplane and never considered modes of failure. Nevertheless, the doctrine that one can impose one’s visions and desires on the world by the force of thought alone retains a powerful appeal to many people. Its acceptance displaces critical thinking and good strategy.

Resources are to coordinated activity as capital is to labor. It takes a great deal of labor to build a dam, but the dam’s services may then be available, for a time, without further labor. In the same way, Xerox’s powerful resource position—its knowledge and patents regarding plain-paper copying—was the accumulated result of years of clever, focused, coordinated, inventive activity. And, like a dam, once that well-protected resource position was achieved, it persisted for many years.

McCracken’s “grow by 50 percent” is classic bad strategy. It is the kind of nonsense that passes for strategy in too many companies. First, he was setting a goal, not designing a way to deal with his company’s challenge. Second, growth is the outcome of a successful strategy,