Good Strategy / Bad Strategy: Lessons for the Medium-Sized Enterprise

Introduction: Strategy Beyond the Annual Offsite

The word “strategy” gets thrown around so frequently in business contexts that it often loses meaning. Nowhere is this more true than in medium-sized enterprises. These are companies too large for founder-driven instincts to carry the day, but not yet mature enough to build sophisticated strategy functions. Strategic plans are often confused with goals, wish lists, or values documents. That confusion is costly.

Richard Rumelt’s Good Strategy / Bad Strategy draws a sharp line between meaningful strategy and its superficial counterpart. His central insight: good strategy is about focus and leverage. Bad strategy is about slogans and wishful thinking. For MSE leaders caught between tactical execution and long-term scaling, this book offers an essential blueprint.

In this article, we’ll unpack Rumelt’s core principles, diagnose common strategic failures in MSEs, and offer a pragmatic path to building real strategic muscle.

What is Good Strategy?

Rumelt defines good strategy as:

“A coherent set of analyses, concepts, policies, arguments, and actions that respond to a high-stakes challenge.”

Good strategy has three essential components:

1. Diagnosis – A clear-eyed understanding of the nature of the challenge.
2. Guiding Policy – A general approach to overcome the obstacles identified in the diagnosis.
3. Coherent Actions – Coordinated steps aligned with the guiding policy.

This triad forms what Rumelt calls the kernel of good strategy. Importantly, strategy is not vision, mission, or goal-setting. It is a response to a problem.

Let’s examine how this applies to the MSE.

Common Strategic Traps in Medium-Sized Enterprises

Confusing Strategy with Ambition

MSEs often adopt strategic plans that read like a collection of KPIs or stretch goals:

• “Double revenue in three years”
• “Be a leader in customer experience”
• “Innovate faster and scale smarter”

These are not strategies—they are aspirations. Without diagnosis or guiding policy, they are disconnected from execution.

What to do instead: Use Rumelt’s kernel. First, define the actual challenge: Is growth stalling because of weak channel strategy? Is customer churn high due to product inconsistency? Then build a guiding policy around the true problem, not the vanity target.

Strategic Diffusion

As MSEs grow, so do their portfolios. What begins as a focused offering becomes a sprawl: multiple customer segments, product SKUs, geographies, and internal priorities.

The result? A bloated roadmap, chronic prioritization battles, and fragmented execution. Rumelt calls this “dog’s dinner” strategy—everything thrown in, nothing prioritized.

What to do instead: Use strategic leverage. Focus on what your company can do better than others. Cut the distractions. Identify the one or two areas where focused effort can yield disproportionate results. Strategy is about saying no.

Planning as Theater

Many MSEs hold annual strategy offsites and publish beautiful slide decks filled with SWOT matrices, pillars, and vision statements. These are distributed… and promptly ignored.

The issue isn’t intent—it’s the lack of connection to action. Rumelt says, “Bad strategy generates vacuous objectives and slogans.” Without meaningful diagnosis or clear guiding policies, these plans create the illusion of progress.

What to do instead: Build strategy documents grounded in hard choices. Not just what you will pursue, but what you will abandon. Make sure department leads align their roadmaps to the strategy kernel.

Applying the Kernel in Practice

Let’s walk through how the strategy kernel works in a real MSE context.

Example: A Mid-Market SaaS Company Facing Plateaued Growth

Diagnosis:

Customer acquisition is flat. Churn has increased in mid-market segments. Competitors have begun to offer similar features at lower price points. Internal feedback indicates a lack of differentiation.

Guiding Policy:

Focus the product team on improving depth of value for two core industries rather than pursuing horizontal feature parity. Use customer success resources to deepen adoption within existing accounts and reduce churn.

Coherent Actions:

• Reorganize product development teams to align around verticalized customer needs (e.g., healthcare, logistics).
• Sunset non-core roadmap items that dilute engineering focus.
• Expand customer onboarding program and usage analytics.
• Launch industry-specific marketing campaigns with tailored case studies.
  

This kernel is actionable, focused, and rooted in solving a specific problem.

Strategic Leverage: Doing More With Less

One of Rumelt’s most critical ideas for MSEs is leverage: applying energy where it creates outsized impact.

Strategic leverage is about finding a pivot point—an underutilized strength, an overlooked capability, a unique insight—that can reshape the game. It’s not about out-spending or out-hiring your competitors. It’s about finding your angle.

Examples in MSEs might include:

• A niche customer segment where you already dominate and can grow LTV.
• A proprietary dataset that enables new forms of value.
• An underutilized distribution channel with better margins.

Leaders must hunt for asymmetries—where effort leads to disproportionate gain.

Strategy and Organizational Alignment

Even a great strategy fails without alignment. For MSEs, the alignment challenge is particularly acute:

• They are large enough to have silos and politics.
• Yet small enough that resource constraints prevent broad initiatives.
  

Here’s how to align an MSE behind strategy:

Communication of Diagnosis

Don’t skip to solutions. Start by aligning leaders on the problem. When teams understand the stakes, alignment becomes easier. Rumelt emphasizes: “The hardest part is not choosing what to do—it’s agreeing on what the problem is.”

Guide Investment, Not Just Action

Your budget is your real strategy. Every team should be able to point to how their spend supports the guiding policy. If it doesn’t—cut it.

Cascading Coherent Actions

Push the strategy kernel down to department leads and team managers. Require every function to define its own coherent actions that ladder into the company-wide kernel.

Diagnosing the Strategic Environment

In his later work, Rumelt expands on strategic diagnosis, particularly under uncertainty. For MSEs, this is crucial. Unlike enterprises, they don’t have entire departments dedicated to scenario planning. Yet, they face rapid change.

Use these diagnostic lenses:

• Trends and inflection points – What are you assuming stays constant? What might soon change?
• Industry structure – Who really holds power in your ecosystem?
• Internal constraints – Where is your bottleneck—sales motion, hiring, delivery, capital?

Strategic diagnosis is not a spreadsheet exercise. It’s a narrative built from patterns, observation, and candor. Without it, any strategy is wishful thinking.

When Good Strategy Fails

Even well-crafted strategies can miss the mark. MSE leaders must stay aware of these risks:

• Over-reliance on initial diagnosis: Conditions change. Review strategy quarterly.
• Failure to course-correct: Don’t defend a bad bet to preserve pride. Strategy is not identity.
• Poor execution feedback loops: Ensure real-time data shows whether coherent actions are working.
  

The best MSEs treat strategy as a living system, not a one-time event.

The Leadership Imperative: Being Willing to Choose

Ultimately, Rumelt emphasizes that good strategy is a force of will. It requires confronting uncomfortable truths, making trade-offs, and disappointing stakeholders who want it all.

This is particularly hard in MSEs, where leaders wear many hats and are used to consensus cultures. But strategy is not democracy. Someone must choose.

That someone is you.

Conclusion: Strategy as a Competitive Weapon

Medium-sized enterprises sit in a uniquely precarious position. Too big to be agile, too small to absorb endless mistakes. For them, strategy is not a luxury—it’s a lifeline.

Richard Rumelt’s Good Strategy / Bad Strategy is a clarion call to lead with clarity, focus, and courage. By applying the kernel, seeking strategic leverage, and aligning action with insight, MSEs can escape the trap of planning theater and build true momentum.

In the end, good strategy is not about complexity. It is about choice—the choice to pursue what matters and let go of what doesn’t.