Good Strategy Bad Strategy: Rumelt's Strategy Kernel

tl;dr

• Good Strategy Bad Strategy is Richard Rumelt’s foundational strategy text with the strategy kernel from three elements: diagnosis of the central challenge, guiding policy for overcoming it, and coherent actions for implementation — Rumelt’s diagnosis as strategic bottleneck identification rather than wishful thinking.
• Without diagnosis there is no strategy — only wish lists, budgets, or hope. Rumelt: “If you fail to identify and analyze the obstacles, you don’t have a strategy.”
• Knowing Rumelt’s four hallmarks of bad strategy — fluff, failure to face the challenge, mistaking goals for strategy, bad objectives — lets you diagnose your own strategy document in 10 minutes and avoid the most common errors before the next planning cycle.

What Is Good Strategy Bad Strategy?

Good Strategy Bad Strategy is Richard Rumelt’s 2011 foundational text on strategy. Its central structural model — the strategy kernel — consists of three elements. Rumelt defines: “Good strategy is coherent action backed up by an argument, an effective mixture of thought and action with a basic underlying structure I call the kernel.” The three elements:

1. Diagnosis — What is the central challenge? The diagnosis simplifies complexity by identifying certain aspects as critical and others as secondary. Rumelt’s colleague John Mamer put it simply: “It looks to me as if there is really only one question you are asking in each case. That question is ‘What’s going on here?’”

2. Guiding Policy — What principle overcomes the challenge? The guiding policy channels action without prescribing every step. Rumelt compares it to highway guardrails: “Like the guardrails on a highway, the guiding policy directs and constrains action without fully defining its content.”

3. Coherent Actions — What coordinated steps implement the guiding policy? The actions must work together, not against each other. Rumelt: “The coordination of action provides the most basic source of leverage or advantage available in strategy.”

Rumelt’s diagnosis as strategic bottleneck identification means: the first step of good strategy is not goal-setting but identifying the central obstacle. Those who cannot name the obstacle cannot overcome it.

IBM 1993 — Diagnosis Changes Everything

Lou Gerstner took over a struggling IBM in 1993. The prevailing diagnosis was that IBM was too integrated and should be broken up. Gerstner offered a different diagnosis: “In an increasingly fragmented industry, IBM was the one company that had expertise in all areas. Its problem was not that it was integrated but that it was failing to use the integrated skills it possessed.” New guiding policy: exploit IBM’s uniqueness through tailored customer solutions. Same facts, different diagnosis — completely different strategy.

The 4 Hallmarks of Bad Strategy

Bad strategy is not the absence of good strategy: “Bad strategy is not simply the absence of good strategy. It grows out of specific misconceptions and leadership dysfunctions.” Rumelt identifies four hallmarks:

1. Fluff — Buzzwords masquerading as analysis. A retail bank’s strategy: “Our fundamental strategy is one of customer-centric intermediation.” Rumelt’s translation: “Our bank’s fundamental strategy is being a bank.” A hallmark of expertise is making the complex understandable. A hallmark of mediocrity is unnecessary complexity.

2. Failure to face the challenge — The central problem goes unnamed. International Harvester projected rising profits in 1979 without addressing the actual issue: inefficient work organization and the worst labor relations in American industry. Rumelt: “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.”

3. Mistaking goals for strategy — Wishes dressed up as strategy. Chad Logan, CEO of a graphics arts company, set “Key Strategies” of 20% annual revenue growth and 20% profit margin. When asked how to achieve this, he quoted Jack Welch on reaching for the impossible. Rumelt: “His plan, to me, was all results and no action.”

4. Bad strategic objectives — Too many or unrealistic goals blocking each other. A Pacific Northwest city had 47 “strategies” and 178 action items — item 122 was: “Create a strategic plan.” Good strategy focuses energy on the few decisive leverage points whose achievement triggers a cascade of positive outcomes.

Good Strategy in Practice

Diagnosis as a Bottleneck Tool

Diagnosis is the strategic bottleneck in the kernel: without correct diagnosis, guiding policy and actions are ineffective. In e-commerce, the same situation — declining conversion rate — can have three different diagnoses: price too high, trust too low, or product selection too confusing. Each diagnosis leads to a fundamentally different guiding policy.

Aydoo uses Rumelt’s kernel in strategy consulting: strategic analysis begins with diagnosis — not with goals. Because as Rumelt writes: “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.”

Good Strategy Bad Strategy Is Not the Same As…

Good Strategy Bad Strategy is not the same as Strategic Planning

Rumelt’s strategy kernel is an analytical framework that identifies the central challenge and derives coherent actions, while strategic planning is often a process of vision, mission, goals, and budgets. Rumelt explicitly criticizes template strategies: filling out forms does not replace the hard work of diagnosing the actual problem.

Good Strategy Bad Strategy is not the same as OKRs or Balanced Scorecard

Rumelt’s kernel asks “What is the central challenge?” and derives actions from the diagnosis, while OKRs and the Balanced Scorecard measure and track goal achievement. Goals without diagnosis are, according to Rumelt, the third hallmark of bad strategy — “all results and no action.”

Good Strategy Bad Strategy is not the same as Visionary Leadership

Rumelt’s approach begins with sober analysis of reality (diagnosis), while visionary leadership begins with a desirable future state. Rumelt warns against positive thinking as a strategy substitute: “Believing that rays come out of your head and change the physical world […] cannot be recommended as approaches to management or strategy.”

Conclusion

Good Strategy Bad Strategy is Richard Rumelt’s definition of what strategy fundamentally is: a diagnosis of the central challenge, a guiding policy for overcoming it, and coherent actions for implementation. Rumelt’s diagnosis as strategic bottleneck identification shows that the first step of good strategy is not goal-setting but problem comprehension — “Strategy is scarcity’s child.”

The four hallmarks of bad strategy — fluff, failure to face the challenge, mistaking goals for strategy, bad strategic objectives — are a diagnostic checklist. Strategic thinking provides the thinking framework for diagnosis. Corporate strategy determines at which level the kernel is applied. And bottleneck-focused strategy operationalizes Rumelt’s core question: where is the bottleneck blocking everything else?

Sources

• Rumelt, Richard: Good Strategy Bad Strategy. Crown Business, 2011.

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Frequently Asked Questions

What is the strategy kernel according to Richard Rumelt?

The strategy kernel is Rumelt’s core structure of good strategy. It consists of three elements: a diagnosis (What is the central challenge?), a guiding policy (What approach overcomes it?), and coherent actions (What coordinated steps implement the guiding policy?). Without these three elements, there is no strategy according to Rumelt.

What is the difference between good and bad strategy?

Good strategy is coherent action backed by analysis of the actual challenge. Bad strategy replaces analysis with buzzwords, confuses goals with strategy, and avoids the hard choice of what not to do. Rumelt identifies 4 specific hallmarks of bad strategy: fluff, failure to face the challenge, mistaking goals for strategy, and bad strategic objectives.

Why do so many strategies fail?

Rumelt identifies three root causes: the inability or unwillingness to choose (strategy is scarcity’s child), template strategies (vision-mission-values forms instead of analysis), and positive wishful thinking instead of strategic work. Bad strategy is not miscalculation but active avoidance of hard work.

What does diagnosis mean in Rumelt's strategy kernel?

Diagnosis is the first step of the strategy kernel and answers the question “What’s going on here?” It simplifies complexity by identifying certain aspects as critical and others as secondary. A good diagnosis defines not only the situation but also the domain of action.

How do I recognize bad strategy in my own company?

Four warning signs: (1) Abstract buzzwords instead of concrete statements (fluff). (2) The central challenge is not named. (3) The strategy document lists goals but no measures to overcome specific obstacles. (4) The objectives are so numerous or unrealistic that they block each other.

Which companies have successfully applied Rumelt's strategy kernel?

Rumelt’s most prominent example is IBM under Lou Gerstner (1993): Gerstner changed the diagnosis from “too integrated” to “integration not leveraged” and derived a new strategy from it. Other book examples include DARPA (focused innovation funding) and Wells Fargo (cross-selling as guiding policy). In all cases, strategy begins with a precise diagnosis, not with goal-setting.

Related Articles

• Strategy — What strategy is and why companies need one
• Strategic Thinking — The thinking framework for Rumelt’s diagnosis
• Corporate Strategy — At which level the kernel is applied
• Bottleneck-Focused Strategy (EKS) — Bottleneck identification as a strategy principle
• Strategic Analysis — Analysis as the first step of strategy

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