A framework for creating and auditing strategy, distilled from Richard Rumelt's Good Strategy Bad Strategy: The Difference and Why It Matters. Good strategy has a simple underlying logic — an honest diagnosis of the critical challenge, a guiding policy for overcoming it, and coherent actions that carry the policy out. Use this skill to detect the four hallmarks of bad strategy and to replace goal lists and vision decks with a working kernel.

Strategy is coherent action backed by an honest diagnosis — not goals, vision, or wishful thinking. A goal ("20% growth") names an ambition; a strategy explains how the ambition will be achieved given the actual obstacles. Bad strategy is not the absence of strategy but an active substitute for it: buzzword fluff, refusal to name the challenge, and laundry lists of initiatives. The heart of strategy work is choice — concentrating effort and resources on the one or two pivotal objectives whose accomplishment unlocks everything else.

Goal: 10/10. Score strategies, plans, and strategy documents by walking the eight rows of the Quick Diagnostic and counting how many pass. Report the current score and the specific changes needed to reach 10/10. The bands below name what each tier looks like; the row count keeps the rating reproducible run to run.

Core concept: Every good strategy shares the same structure: a diagnosis that defines and simplifies the critical challenge, a guiding policy — the overall approach chosen to overcome the diagnosed obstacles — and coherent actions: coordinated, resource-backed steps that carry out the policy. A document missing any of the three is not yet a strategy.

Why it works: A diagnosis replaces the overwhelming complexity of reality with a simpler story that highlights what is critical, often by analogy to a known pattern. The guiding policy channels effort by ruling out vast realms of possible action — like guardrails, it directs without dictating every move. Coherent actions turn intent into coordinated force; most plans fail by jumping straight from ambition to a list of independent initiatives.

Ethical boundary: An honest diagnosis names internal causes too — never soften it to protect egos or settle politics.

See references/kernel.md when you actually draft a kernel — diagnosis craft, guiding-policy formulation, coherent-action design, a fill-in template, and two worked examples with owners and done-tests.

Core concept: Bad strategy is not the absence of strategy — it is its own species with four hallmarks: fluff (gibberish masquerading as strategic concepts), failure to face the challenge, mistaking goals for strategy, and bad strategic objectives (dog's-dinner laundry lists or blue-sky impracticalities).

Why it works: Naming the hallmarks turns a vague sense that "this deck says nothing" into specific, fixable findings. Bad strategy persists for identifiable reasons — choice is painful, templates are easy, and positive thinking feels like leadership — so detection must hunt for substitutes for choice, not just bad writing.

See references/bad-strategy.md when auditing a deck or plan — per-hallmark detection checklists, before/after rewrites, why bad strategy proliferates, and a step-by-step deck-audit procedure with a report format.

Core concept: Good strategy applies strength where it has the greatest effect, drawing on recurring sources of power: leverage (anticipation, pivot points, concentration), proximate objectives (targets close enough to actually hit), chain-link systems (quality matched across links), design (premeditated, coordinated configuration), focus, and using advantage (asymmetries protected by isolating mechanisms).

Why it works: Resources are always scarce relative to ambitions. Power comes from asymmetry — knowing something rivals don't, pressing where effort is amplified, or concentrating where they are spread thin. A strategy that names no source of power is hoping effort alone will win, which is matching strength against strength.

Ethical boundary: Build isolating mechanisms on delivered value — lock-in engineered purely to trap users eventually isolates you from them.

See references/sources-of-power.md when choosing where to apply strength — leverage, proximate objectives, chain-link systems, design, focus, and advantage, each with a when-to-use test (unlock test, addressability test, coherence check).

Core concept: Waves of change — technology shifts, deregulation, demographic change — are the attacker's best friend: they redistribute advantage and reset rules the incumbents had mastered. Incumbents are held back by three kinds of inertia (routine, culture, proxy) and by entropy — the unmanaged drift into blur and waste.

Why it works: In stable periods incumbents win on scale and accumulated advantage; in transitions their strengths become anchors — they defend legacy margins, rerun obsolete playbooks, and answer to cultures built for the old world. You don't need to predict the future, only to recognize that the present has already changed and act on it before those who can't.

Ethical boundary: Ride waves by serving the new need better — never by manufacturing fear about the old one.

See references/dynamics-inertia.md when a market is shifting or an incumbent is stuck — guideposts for spotting waves, diagnosing the three inertia types and entropy, and attacker playbooks for exploiting a rival's inertia.

Core concept: A strategy is a hypothesis about what will work, not a deduction from goals. Work like a scientist — diagnose, formulate, test against evidence, revise — and use deliberate techniques (create-destroy, the virtual panel of experts, a written first-person kernel) to defend judgment against first conclusions and herd opinion.

Why it works: The mind grabs the first plausible frame and defends it; groups converge on comfortable consensus. The market is an expensive place to discover you were wrong — cheap, disciplined destruction of your own ideas before commitment buys that learning early.

Ethical boundary: Use the virtual panel to find flaws, not to stage imagined authority blessing a foregone conclusion.

See references/case-studies.md for fully worked end-to-end examples — a SaaS annual-plan audit, a startup concentration decision, and a vision deck rewritten into a kernel.

Richard Rumelt is professor emeritus at UCLA Anderson School of Management and one of the world's most influential thinkers on strategy — McKinsey Quarterly dubbed him "the strategist's strategist," and The Economist named him among the 25 most influential living management thinkers. He distilled four decades of research and consulting into Good Strategy Bad Strategy (2011) and The Crux (2022).