Richard Rumelt - Strategy Quotes

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Back in the mid-1990s I was researching strategy in the global electronics industry. I interviewed 20 to 30 executives, CEOs, and division managers and asked fairly simple questions. Which company was the leader in their market? How did that company become the leader? What's their own company's strategy?

Richard Rumelt
Then, in 1998, I had the chance to talk with Steve Jobs after he'd come back and turned Apple around. I was there to help Telecom Italia try to do a deal with Apple, but after that business was completed I couldn't help asking a question. Steve, I said, this turnaround at Apple has been impressive. But everything we know about the personal-computer business says that Apple will always have a small niche position. The network externalities are just too strong to upset the de facto Wintel standard. So what are you trying to do? What's the longer-term strategy?

Richard Rumelt
Changes don't come along in nice annual packages, so the need for strategy work is episodic, not necessarily annual.

Richard Rumelt
Given that background, I was interested in what Steve Jobs might say about the future of Apple. His survival strategy for Apple, for all its skill and drama, was not going to propel Apple into the future. At that moment in time, Apple had less than 4 percent of the personal computer market. The de facto standard was Windows-Intel and there seemed to be no way for Apple to do more than just hang on to a tiny niche.

Richard Rumelt
I consider myself a mainstream researcher in the field of business policy, and the ideas I want to describe in this paper concern the foundations of a theory of business strategy that is rooted in economics. But is such a paper, whatever its merits, really appropriate at a conference entitled 'Non-traditional Approaches to Policy Research'? Surprisingly, it is. The use of economic theory to model and explicate business strategy, as it is understood within the field of business policy, is distinctly non-traditional.

Richard Rumelt
Having conflicting goals, dedicating resources to unconnected targets, and accommodating incompatible interests are the luxuries of the rich and powerful, but they make for bad strategy. Despite this, most organizations will not create focused strategies. Instead, they will generate laundry lists of desirable outcomes and, at the same time, ignore the need for genuine competence in coordinating and focusing their resources. Good strategy requires leaders who are willing and able to say no to a wide variety of actions and interests. Strategy is at least as much about what an organization does not do as it is about what it does.

Richard Rumelt
Despite the roar of voices wanting to equate strategy with ambition, leadership, vision, planning, or the economic logic of competition, strategy is none of these. The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors.

Richard Rumelt
[ Diversification strategy is] a firm's commitment to diversity per se, together with the strengths, skills or purposes that span this diversity, shown by the way in which business activities are related one to another.

Richard Rumelt
The kernel of a strategy contains three elements: a diagnosis, a guiding policy, and coherent action.

Richard Rumelt
A major advancement in the strategy field is the development of models where firm heterogeneity is an endogenous creation of economic actors.

Richard Rumelt
A strategy coordinates action to address a specific challenge. It is not defined by the pay grade of the person authorizing the action.

Richard Rumelt
Prior work has shown an association between diversification strategy and profitability. This paper replicates that association using more recent and complete data and goes on to investigate the sources of the association. Theoretical arguments are advanced which predict the association which will remain once the effects of varying industry profitability are removed. Empirical tests verify this prediction and permit the discrimination between the effects of industry and diversification strategy on profitability.

Richard Rumelt
Some of the biggest changes have been in the process of generating business strategies—what I call strategy work. Around 1980, the received wisdom was to decentralize into business units, which would each generate a strategic plan. These plans were then amalgamated up the hierarchy, in some portfolio way, for senior management. That approach has all but disappeared, and we've seen a dramatic recentralization of strategy work.

Richard Rumelt