Book Review: Good Strategy/Bad Strategy

Author Richard P. Rumelt offers three simple steps to developing a strategy for your business.

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Kelly Kollar

The book: Good Strategy/Bad Strategy: The Difference and Why It Matters, by Richard P. Rumelt; Crown Business.

The big idea: Many CEOs rely on mission statements, lists of goals, and resource plans to steer their companies. Those are not strategies. Strategy consists of three steps: figuring out the nature of the business challenge, designing a guiding policy that produces an advantage, and creating a set of coordinated actions to carry out that policy. If you are serious about your business, then you must have a serious strategy.

The backstory: Rumelt, a professor at the UCLA Anderson School of Management, has consulted with organizations vast and tiny. He moves in heady circles, chatting with Steve Jobs about Apple's turnaround, discussing the relationship between brand and profits with Ford's Jacques Nasser, and studying scenario planning with Shell's Pierre Wack.

If you read nothing else: The whole middle section, about sources of power, is valuable—particularly the explication of the limitations and nuances of competitive advantage. Case studies sprinkled throughout are illuminating. Check out the account of Rumelt's investigation of Nvidia, a 3-D chip designer, and his consulting work for Denton's, a family-owned garden-supply chain.

Rigor rating: 8 (1=Who Moved My Cheese?; 10=Good to Great). Much of the book draws on Rumelt's consulting gigs or on cases he has taught. The rest is meticulously sourced.

Leigh Buchanan is an editor at large for Inc. Magazine. A former editor at Harvard Business Review and founding editor of WebMaster magazine, she writes regular columns on leadership and workplace culture. @LeighEBuchanan