Takeaways: Good Strategy / Bad Strategy (Rumelt), Part 4

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We’re (nearly) at the end of Part I , “Good and Bad Strategy” (to be followed by Part II, “Sources of Power”, and Part III, “Thinking like a Strategist”). I may take a break from GS/BS after this, though Rumelt really drives home the nuance and components that make a good strategy… good in this read.

For now, here are today’s takeaways:


He kicks this off with the “elements of the kernel of a good strategy”, which I’ll write here because he refers to these elements 100x in the rest of the chapter.

  1. “A diagnosis that defines or explains the nature of the challenge. A good diagnosis simplifies the complexities of a situation by identifying certain aspects as critical.”

  2. “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.”

  3. “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.”

Imagine if a startup founder led the annual company kickoff for 2021 and their strategy was just “grow revenue, sell more, spend less, be happy”. Hard to argue that these are good things, but does it describe a challenge, or attempt to structure the challenge in a guiding way? Where’s the why and how here? Rumelt would say “this is not a strategy.”

  • Takeaway #1: Diagnosis is exploring complex situations to answer ‘what’s going on here?’ A diagnosis is a judgement about the meanings of facts.”

  • Takeaway #2: “Every diagnostic viewpoint suggests a range of things that might be done and sets aside other classes of actions as less relevant to the challenge.”

  • Takeaway #3: “The diagnosis should replace the overwhelming complexity of reality with a simpler story.”

  • Takeaway #4: “Your diagnosis can change (and may need to) over time. This will result in a cascading strategic shift.”

⭐ In the world of healthcare IT (riveting as it may be), the US healthcare market is immature and is driven by irrational consumer behavior, for-profit decisions. We have a clinical research-backed online behavioral health product that works really well.

⭐ Now imagine the challenge of improving behavioral health across hospital systems, direct-to-employer, resellers, direct-to-consumer, and health networks all at once? Complex doesn’t begin to describe any one of these individually, but the reality of investing in all of them at once is mind-boggling. So let’s play with Rumelt’s elements of “good strategy” here. The diagnosis is what? [time passes, and much bloviation was deleted].

⭐ An advantage of our platform is that it’s supported by a real behavioral coach, but it’s an async, patient-driven process. If you’ve every received CBT, you know it’s not a one-and-done process).

PK’2 diagnosis attempt #1: We’re healthy food, and our competitors are “sleep and meditation” junk food. Create a positive health environment and combat junk health.

Based on this simple diagnosis, we unlock action on consumer access, economics, cultivation of expertise, consumer education & marketing, policy, behavioral health issues (i.e. classifying behavioral health). Thanks, Rumelt!

  • Takeaway #5: “The guiding policy directs and constrains action without fully defining its content.”

  • Takeaway #6: “The guiding policy…calls out a way to be competitive”

That last one blew my mind a bit. When I used to think about “guiding policies”, I couldn’t deeply explain why they were good or bad. They were a “sensible guardrail” which moved us to the next part of a strategic exercise. Rumelt has attaching purpose and meaning for me here and I love it.

Guiding principles are reminiscent of tenets in Amazon’s 6-pagers. Here’s an example of a tenet:

Reduce developer friction: We want to focus on educating developers through in-depth technical content and tool documentation instead of relying solely on community knowledge transfer.”

  • Takeaway #7: “A guiding policy creates advantage by anticipating the actions and reactions of others…”

  • Takeaway #8: “[A guiding policy creates advantage] by reducing the complexity and the ambiguity in a situation…”

  • Takeaway #9: “[A guiding policy creates advantage] by exploiting the leverage inherent on concentrating effort on a pivotal or decisive aspect of the situation…”

  • Takeaway #10: “[A guiding policy creates advantage] by creating actions and policies that are coherent, each building on the other rather than canceling one another out.”

So dense I had to break it into bits. Each on their own is structurally sound, but all together, it’s a powerhouse for you and your company. Let me try my hand at a guiding policy for my company.

⭐ PK2’s guiding policy attempt #1: Make patient data as portable and accessible as we are allowed. Patient privacy standards are mature and the standards ecosystem is mature enough that interoperability should never slow down distribution, and without infringing on individual privacy, we should deeply understand the CX of our system and systems we integrate with.

I wouldn’t expect a Nobel in literature for it, but I think I’m in the ball park.

🔖 Bookmark! Coherent action, and how we multiply our impact.


The book again is Good Strategy / Bad Strategy: The Difference and Why it Matters by Richard Rumelt, and Thank you for reading Takeaways!

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