Good Strategy, Bad Strategy summary

It’s natural for each strategy to look different, since each is tailored to meet one specific need. However, there is one essential component to every successful strategy: the kernel.

The kernel is composed of three parts: the first two are the diagnosis and the guiding policy.

Most people don’t like to choose between two things – they’d rather just have both. Unfortunately, this is rarely possible – when forming a strategy, the choice of one thing over another is simply unavoidable.

A good strategy demands that you prioritize what’s most important and focus your resources there – trying to have it all will leave you struggling.

Once you have a strategy,how do you use it to gain an advantage over your competitors?

In short, you need to ensure that your strategy offers you leverage over your competitors, i.e., that you anticipate opportunities before your competitors have a chance to act.

By now you might be thinking that you’ve fleshed out a good strategy for your business. There is still some important work to be done! You should ask yourself: do I have the resources for this, and does it reflect my current situation?

A good strategy is composed of actions that are based on your current situation and all fit together to maximize your advantage.

The world of business is one that is constantly changing; it’s lucrative to develop strategies that take advantage of these shifts, but how do you make it happen?

In many cases, the biggest effects of changes will be so obvious that they can’t offer you any clear advantages. However, with these effects come many other opportunities if you look for the less obvious second-order effects.

Now that you understand the nuts and bolts of a strategy, it's time to ask yourself how a strategy turns visions into realities.

In most cases they do this by maximizing competitive advantage – namely the ability to produce more value at lower costs than competitors.

So you now know about the components of a good strategy and how they can and have been used in real-life scenarios, but how can you become an effective strategist?

You must first start making strategic hypotheses – educated estimations of how a given situation works or could work, which help when you contemplate your strategy.

Statistically, you’re five times more likely to have a car accident if you’re talking on a cell phone while driving – roughly the same as if you’re drunk. However, though many people are aware of this fact, when faced with a decision they tend to think: “It won’t happen to me, I am a good driver.”

This phenomenon is called the inside view – the tendency to ignore lessons others have learned in a similar situation and to believe that our specific situation is somehow different.

The key message in this book:

Luckily we can all learn how to become good strategists. By understanding what makes a solid strategy and by finding the hidden power of a given situation, be it leveraging, maximizing your resources or anticipating change, you too can become an effective strategist.