Olivia: Alright Jackson, I have a challenge for you. Describe the last corporate “strategy meeting” you were in, but you can only use one sentence. Jackson: Oh, that’s easy. A group of well-dressed people agreed to be “more awesome” next quarter, and then there was a balloon release. Olivia: (Laughs) That is painfully accurate. And it’s the exact reason we need to talk about the book Good Strategy / Bad Strategy: The Difference and Why It Matters by Richard P. Rumelt. He has zero tolerance for balloon releases as a substitute for a plan. Jackson: I’m already on board. A book that cuts through the corporate nonsense? Sign me up. What makes this Rumelt guy the authority on this? Olivia: Well, here’s the fascinating part that explains his whole perspective. Before he was a famous strategy professor at UCLA and Harvard, he was a systems design engineer at NASA’s Jet Propulsion Laboratory in the 60s. Jackson: Wait, for real? JPL? So he was literally a rocket scientist. Olivia: Exactly. He’s trained to ask, "But how does this thing actually work? What are the physics?" He brings that same engineering rigor to strategy, which is why he’s so allergic to what he calls "fluff." Jackson: Okay, an engineer’s take on business strategy. I love it. So what does he call that "more awesome" plan with the balloons? He must have a name for it. Olivia: He does. He calls it "Bad Strategy." And he argues it's not just a harmless waste of time; it's an actively destructive force in most organizations.

Jackson: Actively destructive? That sounds dramatic. I thought it was just boring. How can a bad meeting destroy a company? Olivia: Because it creates the illusion of action while avoiding the real, hard work. Rumelt points out four key hallmarks of bad strategy. The first one is my favorite: Fluff. Jackson: Fluff. I know fluff. It’s the native language of my inbox. Olivia: It’s that pseudo-scientific jargon that sounds impressive but means nothing. Rumelt gives this incredible example from a major bank whose strategy memo declared their goal was "customer-centric intermediation." Jackson: Wow. That’s a masterpiece of nothingness. What does that even mean? Olivia: It means "we’re a bank." That’s it. It’s dressing up the obvious in a fancy suit. The second hallmark, and this is the big one, is the failure to face the challenge. Bad strategy papers over the actual problem. Jackson: Right, because acknowledging the problem is hard. It might mean someone has to take responsibility. Olivia: Precisely. It’s much easier to set a bunch of ambitious goals, which is his third hallmark: mistaking goals for strategy. He tells this story about a CEO who organized a massive "strategy retreat" for two hundred managers. Jackson: I think I’ve been to this retreat. Was there a trust fall? Olivia: (Laughs) Probably. They had a professionally produced movie about their products, the CEO gave a rousing speech about their "strategic" goals—global leadership, high shareholder return, growth—and they had breakout sessions. It ended with a big, symbolic balloon release. Jackson: Of course it did. Let me guess the outcome: nothing changed. Olivia: Absolutely nothing. Because there was no diagnosis of their actual problems. There was no coherent plan. It was just a list of desires. It’s like saying your strategy for climbing Mount Everest is to "reach the summit." That’s the goal, not the strategy. The strategy is how you’ll deal with the low oxygen, the freezing temperatures, and the treacherous icefalls. Jackson: That makes so much sense. It’s the difference between a wish and a plan. But this feels like it can go from just being ineffective to being truly dangerous, right? Olivia: Absolutely. That’s the fourth hallmark: bad strategic objectives. These are objectives that are either a "dog's dinner"—a long, incoherent list of things to do—or they are "blue sky" objectives that are completely disconnected from reality. He points to Lehman Brothers in 2006. The housing market was showing serious signs of strain. Their strategy? Jackson: Let me guess. "Achieve market leadership through aggressive growth"? Olivia: You’re a natural. Their strategy was to grow faster than the industry by increasing their "risk appetite." They started taking on deals their competitors were rejecting. They didn't diagnose the challenge—a teetering market—they just set a goal of "growth." Two years later, they collapsed and took the global economy with them. That's the real cost of bad strategy. Jackson: Whoa. So it’s not just about boring meetings. It’s about a fundamental failure to engage with reality. It’s choosing to believe in the balloons instead of looking at the cracks in the foundation. Olivia: Exactly. And that’s why the book is so widely acclaimed. It gives people the language to call out the fluff and demand something real. It’s a tool for clear thinking.

Jackson: Okay, we have thoroughly roasted bad strategy. I feel seen, I feel validated. But if strategy isn't a goal, a vision, or a bunch of buzzwords, what is it? What’s the alternative? Olivia: This is where Rumelt’s engineering brain shines. He argues that all good strategies share a fundamental, logical structure. He calls it the "Kernel." And it’s deceptively simple. It has just three parts. Jackson: Only three? I’ve seen strategy decks with 50 slides. Olivia: And that’s the problem. The Kernel cuts through all of that. The first part is a Diagnosis. You have to figure out what’s really going on. What is the critical challenge holding you back? Not a list of ten problems, but the one or two pivotal issues. Jackson: So it’s not just identifying a problem, it’s identifying the right problem. The linchpin. Olivia: Precisely. The second part is the Guiding Policy. This is your overall approach for dealing with the diagnosis. It’s not a detailed plan; it’s the guardrails. It says, "Given this challenge, we are going to generally move in this direction and not that one." It rules out a whole universe of other actions. Jackson: Okay, so it’s like a doctor saying, "The diagnosis is a bacterial infection. Our guiding policy will be to attack it with antibiotics, not with surgery or physical therapy." Olivia: Perfect analogy. And that leads to the third part of the Kernel: a set of Coherent Actions. These are the specific, coordinated steps you take to carry out the guiding policy. They aren't just a random to-do list; each action should reinforce the others and directly support the policy. Jackson: Diagnosis, Guiding Policy, Coherent Actions. It does sound simple. Almost too simple. Does it actually work in the real world? Olivia: This is the best part. Let’s look at one of the most famous business turnarounds in history: Apple in 1997. When Steve Jobs came back, Apple was weeks from bankruptcy. They were a mess. Jackson: I remember that. They were making dozens of different products, including printers and something called the Newton. It was chaos. Olivia: Total chaos. So let's apply the Kernel. What was Jobs's Diagnosis? Jackson: That Apple was dying from a lack of focus. It was too complex, its product line was a confusing mess, and it was trying to compete with Windows on every front and failing. Olivia: Exactly. A clear, brutal diagnosis. So, what was his Guiding Policy? Jackson: Simplify. Radically simplify everything. Focus on making a few incredible products for their core creative customers and forget everything else. Olivia: That was the guardrail. "We will only do things that lead to a simpler, more focused company." And now, the Coherent Actions. What did he actually do? Jackson: Oh man, he was ruthless. He cut the product line by 70%. He killed the Newton. He outsourced manufacturing to make it more efficient. He launched the online store to sell directly to consumers. He even made that shocking deal with his arch-rival, Microsoft, to get a $150 million investment to stabilize the company. Olivia: And notice how every single one of those actions was coherent. They all served the guiding policy of simplification and focus, which in turn addressed the diagnosis of complexity. He wasn't just doing a bunch of random "good ideas." He was executing a single, coherent strategy. Jackson: And it’s so powerful because it seems obvious in hindsight. But at the time, people must have thought he was insane. Taking money from Microsoft? Killing off products? Olivia: That’s Rumelt’s core point! Good strategy is often unexpected precisely because it requires making hard choices. Most organizations are incapable of that kind of focus. They want to please every department, pursue every opportunity. They can't say "no." Jobs's genius wasn't just having the vision for the iMac; it was having the strategic discipline to clear out all the junk to make room for it. Jackson: Wow. So the strategy wasn't "Let's innovate." The strategy was a diagnosis of the sickness, a policy for the cure, and the coherent actions of the treatment. The innovation was the result of the good strategy, not the strategy itself. Olivia: You’ve got it. And that’s a distinction that most leaders, even today, completely miss. They chase innovation or growth as the goal, but Rumelt shows that those are the fruits of a well-designed, well-executed strategy.

Jackson: It’s fascinating. The whole book seems to be a rebellion against complexity for its own sake. All the jargon, the 10-point plans, the elaborate mission statements… it’s all a defense mechanism to avoid the terrifying simplicity of making a real choice. Olivia: That’s a brilliant way to put it. It’s "strategy theater." It looks and sounds like strategy, but it’s hollow. The real work is in the diagnosis. It’s in having the courage to say, "This is the actual problem, and it's ugly." And then having the discipline to create a guiding policy that forces you to say 'no' to a hundred other appealing things. Jackson: And that’s why it’s so rare. Because saying 'no' is politically difficult. It creates conflict. A bad strategy of "let's do everything" gets universal buy-in because nobody's pet project gets cut. Olivia: Rumelt says that universal buy-in is often a sign of bad strategy. If everyone agrees easily, it probably means no hard choices were made. A good strategy, like the one at Apple, creates tension. It forces the organization to align around a difficult but coherent path. Jackson: So, for anyone listening who is a leader, or aspires to be one, the big takeaway isn't to go find a better template for a strategy deck. Olivia: Not at all. The takeaway is to start asking better questions. Instead of "What are our goals for next year?" try asking, "What is the single biggest obstacle preventing our progress?" And then, "What is our overarching approach to overcoming it?" And finally, "What are the two or three coordinated actions that will make the biggest difference right now?" Jackson: It really makes you look at your own work, or your company, and ask a hard question: Do we have a real strategy, or just a list of wishes and a budget for balloons? Olivia: A question worth asking. It’s the difference between hoping for a better future and actually engineering one. Jackson: And that feels like a very JPL, rocket-scientist way to think. I like it. Olivia: This is Aibrary, signing off.