Good Strategy Bad Strategy: The Difference and Why It Matters (Summary)
In 2007, a major bank proudly unveiled its 'strategy': a list of ambitious financial goals like 'achieving a 20 percent return on equity' and 'being a top-quartile performer.' What was missing? Any mention of how they would achieve this, what challenges they faced, or what they would do differently. This wasn't a strategy; it was a wishlist. And it's exactly this kind of 'bad strategy'—fluffy, feel-good nonsense—that leads companies, and even nations, to ruin.
Strategy Is Not a To-Do List; It's a Kernel.
Good strategy isn't a set of goals, but a coherent structure. It has a 'Kernel': a diagnosis that identifies the critical challenge, a guiding policy that outlines the overall approach, and a set of coherent actions that execute the policy.
When Steve Jobs returned to Apple in 1997, his strategy had a clear Kernel. The diagnosis: Apple's product line was a chaotic mess, confusing customers and draining resources. The guiding policy: radical simplification and a focus on only four best-in-class products. The coherent actions: killing 70% of projects, streamlining the OS, and launching the iconic iMac.
Bad Strategy Is Fluff and Failure to Face the Problem.
Bad strategy ignores or misrepresents the core problem. It often manifests as 'fluff'—empty, high-sounding words—or as a simple list of goals without a plan, mistaking ambition for a coherent course of action.
International Harvester, once a dominant farm equipment manufacturer, went bankrupt because its leaders refused to face their key challenge: bloated costs from militant union contracts. Instead of diagnosing and tackling this problem, their 'strategy' was a mix of slogans and financial targets, completely disconnected from the reality that was crippling their business.
Focus Your Power on a Pivotal Objective.
A good strategy identifies the one or two pivotal objectives that, if achieved, will cascade into a wave of positive outcomes. Instead of spreading resources thin, you concentrate overwhelming force on the most critical point.
In Operation Desert Storm, the US-led coalition didn't attack the Iraqi army head-on in Kuwait. They diagnosed the Iraqi command's rigidity as a key weakness. The pivotal objective became bypassing and cutting off the elite Republican Guard. The famous 'left hook' maneuver concentrated overwhelming armored force in an unexpected area, making the Iraqi frontline position irrelevant and leading to a swift victory.
Leverage Your Asymmetric Advantage.
Strategy is about discovering and exploiting advantages—finding where your strengths meet an opponent's weakness to create a disproportionate effect. Don't play your competitor's game; create your own.
Walmart's early strategy wasn't to compete with Sears in big cities. Instead, it leveraged its operational efficiency to build large, modern stores in small, overlooked rural towns where there was no competition. By the time larger rivals noticed, Walmart had built an unassailable logistics network and deep customer loyalty, an asymmetric advantage they couldn't match.
