Most people talk about strategy. Very few can explain it.
Good Strategy / Bad Strategy by Richard Rumelt is one of the better books on strategy because it actually explains what the word means in a practical business sense.
Strategy is one of those terms that gets thrown around constantly. Everyone talks about it, but a lot of the time when you dig deeper, what people really mean is goals, ambition, or just being busy. This book cuts through that pretty quickly.
Rumelt explains that good strategy starts with understanding the real problem first. From there, it is about making clear decisions on what matters most and backing those decisions with aligned actions. Simple in theory, but surprisingly uncommon in practice.
One of the more useful parts of the book is how he breaks down bad strategy. Vague direction, generic vision statements, trying to do everything at once, and confusing ambition with an actual plan. You see it often in business. Plenty of movement, plenty of activity, but no real clarity around what is actually being solved.
That is what makes this book valuable. It forces you to think properly about the challenge in front of you and whether your actions genuinely align with the outcome you are chasing.
Definitely worth the read if you want a clearer understanding of what strategy should actually look like inside a business.
Frequently Asked Questions
What is the difference between good strategy and bad strategy?
Good strategy starts with a clear diagnosis of the real problem, followed by deliberate decisions about what matters most, and actions that are genuinely aligned with solving that problem. Bad strategy, by contrast, is characterised by vague direction, generic vision statements, and a tendency to confuse ambition or activity with an actual plan.
Why do so many businesses struggle with strategy?
Because the word itself is widely misused. In many businesses, what passes for strategy is really just a set of goals or a list of things to get done. Without a clear understanding of the core challenge being solved, there is no real strategy — just movement. Rumelt's book is useful precisely because it draws that distinction clearly.
What does good strategy actually look like in practice?
Good strategy has three core elements. First, a clear diagnosis of the real problem or challenge facing the business. Second, a guiding policy that defines the approach to addressing that challenge. Third, a set of coordinated actions that back that policy. It is focused, deliberate, and specific — not broad or aspirational.
What are the warning signs of bad strategy?
Common indicators include vague or generic direction, vision statements that sound impressive but say very little, trying to pursue too many priorities at once, and treating goals or ambition as if they were a plan. If a business cannot clearly articulate what problem it is solving and why its current actions address that problem, it is likely operating without a real strategy.
Why is it important to understand the real problem before setting strategy?
Because actions built on a misdiagnosis will not solve the actual challenge, regardless of how well they are executed. Rumelt argues that identifying the true nature of the problem is the starting point for any sound strategy. Skipping that step is one of the most common reasons business strategies fail to deliver results.
How is this book relevant to business owners and advisors?
It provides a practical and honest framework for evaluating whether a business is genuinely strategic or simply active. For business owners, it is a useful prompt to step back and ask whether their decisions and priorities are truly aligned with the outcomes they want to achieve. For advisors, it offers a clear language for conversations about direction, focus, and execution.
What book would you recommend for understanding business strategy?
Good Strategy / Bad Strategy by Richard Rumelt is one of the more practical and grounded books on the subject. It avoids the abstract and gets directly to what strategy means in a real business context, and perhaps more valuably, what it does not mean.