Good Strategy/Bad Strategy - Rumelt, Richard  ## Metadata - Author: **Rumelt, Richard** - Full Title: Good Strategy/Bad Strategy - Category: #books ## Highlights - Within a year, things changed radically at Apple. Although many observers had expected Jobs to rev up the development of advanced products, or engineer a deal with Sun, he did neither. What he did was both obvious and, at the same time, unexpected. He shrunk Apple to a scale and scope suitable to the reality of its being a niche producer in the highly competitive personal computer business. He cut Apple back to a core that could survive. ([View Highlight](https://read.readwise.io/read/01jcytm1ejaj6122mx1ma50yv0)) - 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. ([View Highlight](https://read.readwise.io/read/01jcytvthen3skhdf6vh571ca9)) - A good strategy draws power from focusing minds, energy, and action. That focus, channeled at the right moment onto a pivotal objective, can produce a cascade of favorable outcomes. I call this source of power*leverage* ([View Highlight](https://read.readwise.io/read/01jd5gf051pabxwhht1ecx0211)) ## New highlights added February 1, 2025 at 8:25 PM - The power of Jobs’s strategy came from directly tackling the fundamental problem with a focused and coordinated set of actions. He did not announce ambitious revenue or profit goals; he did not indulge in messianic visions of the future. And he did not just cut in a blind ax-wielding frenzy—he redesigned the whole business logic around a simplified product line sold through a limited set of outlets. ([View Highlight](https://read.readwise.io/read/01jk2bw3chhfczqsspex9wejz2)) - Much of my work with MBA students and companies involves helping them uncover the hidden power in situations. As part of this process I often teach a case about Wal-Mart’s founding and rise, ending in 1986 with Sam Walton as the richest person in the United States.[1](#filepos848874) In a subsequent session I will follow up by discussing the modern Wal-Mart, pushing into urban areas, stretching out to Europe, and becoming the largest corporation on the planet in terms of revenue. But the older case portrays a simpler, leaner Wal-Mart—a youthful challenger rather than the behemoth it has become. Hard as it is to believe today, Wal-Mart was once David, not Goliath. ([View Highlight](https://read.readwise.io/read/01jk2cytr8ep9zsebgkekdf8pc)) - First used in grocery supermarkets, bar-code scanners at retail checkout stations are now ubiquitous. Mass merchandisers began to use them in the early 1980s. Most retailers saw the bar-code scanner as a way of eliminating the cost of constantly changing the price stickers on items. But Wal-Mart went further, developing its own satellite-based information systems. Then it used this data to manage its inbound logistics system and traded it with suppliers in return for discounts. ([View Highlight](https://read.readwise.io/read/01jk2eapbfheb25raypry6h63s)) ## New highlights added February 2, 2025 at 8:25 AM - I turn back the whiteboard and stand right next to the boxed principle: “A full-line discount store needs a population base of at least 100,000.” I repeat his phrase, “The Wal-Mart store needs to be part of the network,” while drawing a circle around the word “store.” Then I wait. With luck, someone will get it. As one student tries to articulate the discovery, others get it, and I sense a small avalanche of “ahas,” like a pot of corn kernels suddenly popping. It isn’t the store; it is the*network* of 150 stores. And the data flows and the management flows and a distribution hub. The network replaced the store. A regional network of 150 stores serves a population of millions!*Walton didn’t break the conventional wisdom; he broke the old definition of a store*. If no one gets it right away, I drop hints until they do. ([View Highlight](https://read.readwise.io/read/01jk2erfzahvwhy8qgtgz409rv)) - Most crucially, the network, not the store, became Wal-Mart’s basic unit of management. ([View Highlight](https://read.readwise.io/read/01jk2es5qbvgj3brar8vvhzn48)) - Strategy involves focus and, therefore, choice. And choice means setting aside some goals in favor of others. When this hard work is not done, weak amorphous strategy is the result. ([View Highlight](https://read.readwise.io/read/01jk2f4962xnyhj8dys9vhp140)) - 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. When a strategy works, we tend to remember what was accomplished, not the possibilities that were painfully set aside. ([View Highlight](https://read.readwise.io/read/01jk2fbx67ev4p3tk9fjv9x1tx)) - 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*. A good strategy may consist of more than the kernel, but if the kernel is absent or misshapen, then there is a serious problem. Once you apprehend this kernel, it is much easier to create, describe, and evaluate a strategy. The kernel is not based on any one concept of advantage. It does not require one to sort through legalistic gibberish about the differences between visions, missions, goals, strategies, objectives, and tactics. It does not split strategies into corporate, business, and product levels. It is very straightforward. The kernel of a strategy contains three elements: > 1. 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. > 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. ([View Highlight](https://read.readwise.io/read/01jk2fdq89947h9bsjg665r29a)) - For a doctor, the challenge appears as a set of signs and symptoms together with a history. The doctor makes a clinical diagnosis, naming a disease or pathology. The therapeutic approach chosen is the doctor’s guiding policy. The doctor’s specific prescriptions for diet, therapy, and medication are the set of coherent actions to be taken. ([View Highlight](https://read.readwise.io/read/01jk2fgkp8rtkffd9kk9wd2qxv))