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 strategy is like a lever that magnifies force.

A strategy coordinates action to address a specific challenge.

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.

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.

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.

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

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.

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.

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

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.

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.

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

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

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.

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.

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.

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.

Simply being ambitious is not a strategy.

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

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.

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

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

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

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

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.

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.

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.

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.

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

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.

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

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

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.

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.

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.

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.

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.

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.

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.

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.

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,

The proposition that growth itself creates value is so deeply entrenched in the rhetoric of business that it has become an article of almost unquestioned faith that growth is a good thing.

A great deal of human thought is not intentional—it just happens.

Of course, it turned out that there is no more reason for one company to own networks all over the world than there is for UPS to own all the roads on which its trucks travel.

Good Strategy/Bad Strategy by Richard Rumelt.

Quality matters when quantity is an inadequate substitute.

If you have a special skill or insight at removing limiting factors, then you can be very successful.

A good strategy has coherence, coordinating actions, policies, and resources so as to accomplish an important end.

A good strategy coordinates policies across activities to focus the competitive punch.

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.

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 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. FAILURE

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.

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.

Perspective also plays a major role. Strategic theorist Richard Rumelt put it this way: “One person’s strategy is another’s tactics—that is, what is strategic depends on where you sit.” For instance, from the overall perspective of corporate strategy, business units are expected to execute tactics. But from the perspective of a single unit within the business, these tactics for the company are likely part of its strategy.

It seems obvious in hindsight. Both the rise of software’s importance and the computer industry’s deconstruction had a common cause: the microprocessor. Yet these connections were far from obvious in the beginning. Everyone in high tech could see the microprocessor, but understanding its implications was a much more difficult proposition.

A word that can mean anything has lost its bite. To give content to a concept one has to draw lines, marking off what it denotes and what it does not. To begin the journey toward clarity, it is helpful to recognize that the words “strategy” and “strategic” are often sloppily used to mark decisions made by the highest-level officials. For example, in business, most mergers and acquisitions, investments in expensive new facilities, negotiations with important suppliers and customers, and overall organizational design are normally considered to be “strategic.

Whenever a company succeeds greatly there is a complementary story of impeded competitive response.

Having conflicting goals, dedicating resources to unconnected targets, and accommodating incompatible interests are the luxuries of the rich and powerful, but they make for bad strategy. Despite this, most organizations will not create focused strategies. Instead, they will generate laundry lists of desirable outcomes and, at the same time, ignore the need for genuine competence in coordinating and focusing their resources. 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. CHAPTER TWO DISCOVERING

Good strategy grows out of an independent and careful assessment of the situation, harnessing individual insight to carefully crafted purpose. Bad strategy follows the crowd, substituting popular slogans for insights.

The presumption that all important knowledge is already known, or available through consultation with authorities, deadens innovation. It is this presumption that stifles change in traditional societies and blocks improvement in organizations and societies that come to believe that their way is the best way. Yo generate a strategy, one must put aside the comfort and security of pure deduction and launch into the murkier waters of induction, analogy, judgment, and insight.

What is proximate for one nation, one organization, or even one person may be far out of reach to another. The obvious reason is differences in skills and accumulated resources. My understanding of this was sharpened during an afternoon discussion about helicopters. A man I know only as PJ lives on the East Cape of Baja California, about thirty miles north of San Jose del Cabo, on the Sea of Cortez. He is now a surfer and fisherman, but PJ was once a helicopter pilot, first in Vietnam, and then in rescue work. The land in Baja California is unspoiled by shopping malls, industry, paved highways, or fences. Sitting on a hilltop in the warm winter we could see the gray whales jump and hear their tails slap on the water. Making conversation, I offered that “helicopters should be safer than airplanes. If the engine fails, you can autorotate to the ground. It’s like having a parachute.” PJ snorted. “If your engine fails you have to pull the collective all the way down, get off the left pedal and hit the right pedal hard to get some torque. You have about one second to do this before you are dropping too fast.” He paused and then added, “You can do it, but you better not have to think about it.” “So, everything has to be automatic?” I asked.

I met with Chad Logan a few days after our first get-together. I told him that I would explain my point of view and then let him decide whether he wanted to work with me on strategy. I said: I think you have a lot of ambition, but you don’t have a strategy. I don’t think it would be useful, right now, to work with your managers on strategies for meeting the 20/20 goal. What I would advise is that you first work to discover the very most promising opportunities for the business. Those opportunities may be internal, fixing bottlenecks and constraints in the way people work, or external. To do this, you should probably pull together a small team of people and take a month to do a review of who your buyers are, who you compete with, and what opportunities exist. It’s normally a good idea to look very closely at what is changing in your business, where you might get a jump on the competition. You should open things up so there are as many useful bits of information on the table as possible. If you want, I can help you structure some of this process and, maybe, help you ask some of the right questions. The end result will be a strategy that is aimed at channeling energy into what seem to be one or two of the most attractive opportunities, where it looks like you can make major inroads or breakthroughs. I can’t tell you in advance how large such opportunities are, or where they may be. I can’t tell you in advance how fast revenues will grow. Perhaps you will want to add new services, or cut back on doing certain things that don’t make a profit. Perhaps you will find it more promising to focus on grabbing the graphics work that currently goes in-house, rather than to competitors. But, in the end, you should have a very short list of the most important things for the company to do. Then you will have a basis for moving forward. That is what I would do were I in your shoes. If you continue down the road you are on you will be counting on motivation to move the company forward. I cannot honestly recommend that as a way forward because business competition is not just a battle of strength and wills; it is also a competition over insights and competencies. My judgment is that motivation, by itself, will not give this company enough of an edge to achieve your goals. Chad Logan thanked me and, a week later, retained someone else to help him. The new consultant took Logan and his department managers through an exercise he called “Visioning.” The gist of it was the question “How big do you think this company can be?” In the morning they stretched their aspirations from “bigger” to “very much bigger.” Then, in the afternoon, the facilitator challenged them to an even grander vision: “Think twice as big as that,” he pressed. Logan

Attention, like a flashlight beam, illuminates one subject only to darken another.

This process of justifying expenditures as counters to Soviet expenditures conditioned U.S. actions on Soviet strengths, expressed as threats, not on Soviet weaknesses and constraints. We had a war strategy—a catastrophic spasm—but no plan about how to compete with the Soviet Union over the long term.” Soft-spoken, Marshall watched my eyes, checking that I understood the implications of his statements. He took out a document, a thin sheaf of paper, and began to explain its meaning: “This document reflects thoughts about how to actually use U.S. strengths to exploit Soviet weaknesses, a very different approach.

Behind almost all of these forces and events lay the indirect competitive logic that Marshall and Roche expressed in 1976: use your relative advantages to impose out-of-proportion costs on the opposition and complicate his problem of competing with you.

One analysis, the Princeton Project on National Security, succinctly described the situation: “While the Bush administration’s 2002 National Security Strategy did articulate a set of U.S. national goals and objectives, it was not the product of a serious attempt at strategic planning.… The articulation of a national vision that describes America’s purpose in the post–September 11th world is useful—indeed, it is vital—but describing a destination is no substitute for developing a comprehensive roadmap for how the country will achieve its stated goals.”2

Just as in a large university, the breakthroughs of a tiny number of very talented individuals had been used to justify a contemplative life for thousands of others.

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.

our strategy was tuned to please the customer, not to deal with competition.

Scientists had worked up three or four theories about how the moon was formed. The lunar surface might be soft, the powdery residue of eons of meteoric bombardment.

Richard Rumelt’s Good Strategy/Bad Strategy,

This section of the book explores a number of fundamental sources of power used in good strategies: leverage, proximate objectives, chain-link systems, design, focus, growth, advantage, dynamics, inertia, and entropy.

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.

a good goal, or good objective, flows out of a process of problem solving. A good objective has the form of a task—set up operations in Australia, work with a particular customer to solve a product quality problem, create a breakaway team to focus on developing a better waterproof coating, and so on. Starting with unsupported goals—like gain market share—lacks entrepreneurial insight and tries to get performance by flogging the system.