Good Strategy Bad Strategy: The Difference and Why It Matters: Summary & Key Insights

The starting point of every effective strategy is diagnosis. Before attempting any grand plan, one must first understand the nature of the challenge. Diagnosis is the act of defining or explaining what is going on—why the situation looks as it does, what forces are at work, what barriers stand in the way. When I work with executives, I ask them to tell me not what they want to achieve, but what is blocking progress. A clear diagnosis transforms a complex landscape into manageable patterns. Without it, even the most energetic action degenerates into confusion.

Once the diagnosis is established, the next element—the guiding policy—comes into play. This is the overarching approach to dealing with the obstacles identified. A guiding policy does not outline every specific action; rather, it provides the framework that channels individual choices. It gives coherence to decisions across the organization, ensuring all efforts align around a common logic. The guiding policy must be bold yet credible, focused rather than diffuse.

The third element is coherent action. This is the set of operations, decisions, and commitments that implement the guiding policy. Coherence means that the actions reinforce each other, rather than pulling in different directions. Often, what separates good strategy from mediocrity is not the ambition of its goals but the consistency of its execution.

To illustrate, consider IBM in the early 1990s when Lou Gerstner took charge. The company was struggling with fragmentation and declining relevance. Gerstner’s diagnosis was that IBM’s problem wasn’t technology—it was the lack of coherence. His guiding policy was to make integration—the ability to deliver systems solutions, not components—the central thrust. The coherent actions that followed restructured divisions, redefined culture, and revived IBM’s strength as a solution provider. This kernel—diagnosis, guiding policy, and coherent action—became the lever by which IBM regained its power.

The kernel is deceptively simple. Yet understanding it can transform the way a leader thinks. Every good strategy begins with what is true, not what is wished. It builds from sharp insight into structure and culminates in coordinated effort. That is the heartbeat of effective strategy.

If good strategy is clear and coherent, bad strategy is its opposite—vague, bloated, and evasive. Over years of observing organizations, I have found four hallmarks of bad strategy: fluff, failure to face challenges, mistaking goals for strategy, and setting poor strategic objectives.

Fluff is the verbiage that sounds high-minded but says nothing. It often appears in glossy presentations as words like ‘synergy’, ‘vision’, or ‘leadership excellence’. It gives the illusion of thought without substance. A company drowning in fluff has replaced hard thinking with comfortable talk.

Failure to face the challenge is perhaps the deadliest error. Leaders often convince themselves that acknowledging problems will weaken morale, so they avoid confronting them. But strategy begins with the truth. When you fail to identify the true challenge, all subsequent action floats in unreality. Kodak, for example, continued to plan as though the dominance of film would persist, long after digital imaging had reshaped its world. Its strategies were essentially exercises in denial.

A third pitfall is mistaking goals for strategy. Managers frequently announce objectives—‘We will become number one in market share’, ‘We will double revenue in three years’—and call them strategies. Goals are the desired endpoints; strategy is the means of getting there. Without a causal logic connecting steps to outcomes, you have only ambition.

Finally, poor strategic objectives erode coherence. A true strategic objective tackles a specific constraint or opportunity illuminated by diagnosis. Bad objectives, in contrast, are either too broad or too fragmented, scattering effort across unrelated directions. They sound impressive but lack a thread of logic.

Bad strategy thrives because it is easier, psychologically and politically, than good strategy. It lets leaders avoid hard choices. Good strategy demands focus—it requires saying no to many things in order to concentrate on what matters most. This discipline, though uncomfortable, is the very source of power.