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Richard Rumelt is a legend in the world of strategy. He\u2019s the author of Good Strategy/Bad Strategy and The Crux: How Leaders Become Strategists, both of which are often recommended by guests on this podcast. From his early days teaching in Iran at a Harvard-sponsored business school to teaching at Harvard Business School itself to over four decades teaching at UCLA\u2019s Anderson School of Management, Richard\u2019s impact resonates globally. His strategic insights are sought after by major corporations including Microsoft, Shell, Apple, AT&T, Intel, and Commonwealth Bank and by governmental organizations such as the U.S. Army Special Operations Command. In this episode, we discuss:

\u2022 The essential components of a good strategy

\u2022 The importance of coherence in strategy

\u2022 Common pitfalls that create a bad strategy

\u2022 How \u201cpower\u201d plays into strategy, and common sources of power

\u2022 The value of knowing history when developing effective strategies

\u2022 Why a strategy should simply be called an \u201caction agenda\u201d

\u2022 The need for one decider in an organization

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Find the full transcript at: https://www.lennysnewsletter.com/p/good-strategy-bad-strategy-richard

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Where to find Richard Rumelt:

\u2022 Email: richard@generalimagination.com

\u2022 LinkedIn: https://www.linkedin.com/in/richard-rumelt-18520828/

\u2022 Website: https://thecruxbook.com/

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Where to find Lenny:

\u2022 Newsletter: https://www.lennysnewsletter.com

\u2022 X: https://twitter.com/lennysan

\u2022 LinkedIn: https://www.linkedin.com/in/lennyrachitsky/

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In this episode, we cover:

(00:00) Richard\u2019s background

(04:29) What is a strategy?

(06:23) The essential components of a good strategy (the \u201ckernel\u201d)

(15:04) An example of good strategy

(16:55) Bad strategy

(25:17) The importance of focus and power

(28:19) Identifying and utilizing power

(34:38) Types of power

(41:13) Implementing power

(48:15) The importance of historical knowledge

(55:23) How to write an action agenda

(01:02:47) The crux

(01:10:40) Challenges to executing a strategy

(01:15:44) The need for a decider

(01:20:39) Strategy for startups

(01:26:04) Richard\u2019s \u201cvalue denials\u201d exercise

(01:31:01) Closing thoughts

(01:33:57) Lightning round

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Referenced:

\u2022 China\u2019s Xi says \u2018reunification\u2019 with Taiwan is inevitable: https://www.cnbc.com/2023/12/31/chinas-xi-says-reunification-with-taiwan-is-inevitable.html

\u2022 The Crux: How Leaders Become Strategists: https://www.amazon.com/Crux-How-Leaders-Become-Strategists/dp/1541701240

\u2022 Good Strategy/Bad Strategy: The Difference and Why It Matters: https://www.amazon.com/Good-Strategy-Bad-Difference-Matters/dp/0307886239

\u2022 Fundamental Issues in Strategy: A Research Agenda: https://www.amazon.com/Fundamental-Issues-Strategy-Research-Agenda/dp/0875843433/

\u2022 Strategy, Structure, and Economic Performance: https://www.amazon.com/Strategy-Structure-Economic-Performance-Richard/dp/0875841090

\u2022 There\u2019s more than the CIA and FBI: The 17 agencies that make up the U.S. intelligence community: https://www.latimes.com/nation/la-na-17-intelligence-agencies-20170112-story.html

\u2022 Programme for International Student Assessment: https://www.oecd.org/pisa/

\u2022 Gerstner: Changing Culture at IBM\u2014Lou Gerstner Discusses Changing the Culture at IBM: https://hbswk.hbs.edu/archive/gerstner-changing-culture-at-ibm-lou-gerstner-discusses-changing-the-culture-at-ibm

\u2022 Marvin Lieberman on LinkedIn: https://www.linkedin.com/in/marvin-lieberman-2a6b72/

\u2022 S&P 500: https://www.spglobal.com/spdji/en/indices/equity/sp-500/#overview

\u2022 Battle of Tora Bora: https://en.wikipedia.org/wiki/Battle_of_Tora_Bora

\u2022 Milton Friedman: https://en.wikipedia.org/wiki/Milton_Friedman

\u2022 The Louvre: https://www.louvre.fr/en

\u2022 How does SpaceX build its Falcon 9 reusable rocket?: https://www.sciencefocus.com/space/how-does-spacex-build-its-falcon-9-reusable-rocket

\u2022 Charles Darwin: History\u2019s most famous biologist: https://www.nhm.ac.uk/discover/charles-darwin-most-famous-biologist.html

\u2022 Donald Rumsfeld: https://www.defense.gov/About/Biographies/Biography/Article/602800/

\u2022 Bush: The Decider-in-Chief: https://www.cbsnews.com/news/bush-the-decider-in-chief/

\u2022 Woodrow Wilson: https://www.whitehouse.gov/about-the-white-house/presidents/woodrow-wilson/

\u2022 How the Sinking of Lusitania Changed World War I: https://www.history.com/news/how-the-sinking-of-lusitania-changed-wwi

\u2022 Nokia: https://www.nokia.com/

\u2022 The Rise and Fall of Nokia: https://www.hbs.edu/faculty/Pages/item.aspx?num=46041

\u2022 Salesforce: https://www.salesforce.com/

\u2022 These New Windows Let the Summer Breeze In, But Block the Street Noise: https://www.smithsonianmag.com/smart-news/these-new-windows-let-the-summer-breeze-in-but-block-the-street-noise-7906121/

\u2022 Stop it! (Bob Newhart): https://www.youtube.com/watch?v=jvujypVVBAY

\u2022 The Innovator\u2019s Dilemma: The Revolutionary Book That Will Change the Way You Do Business: https://www.amazon.com/Innovators-Dilemma-Revolutionary-Change-Business/dp/0062060244

\u2022 Playing to Win: How Strategy Really Works: https://www.amazon.com/Playing-Win-Strategy-Really-Works/dp/142218739X

\u2022 Steve Jobs: https://www.amazon.com/Steve-Jobs-Walter-Isaacson/dp/1982176865

\u2022 Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company: https://www.amazon.com/Only-Paranoid-Survive-Exploit-Challenge/dp/0385483821

\u2022 Titan: The Life of John D. Rockefeller, Sr.: https://www.amazon.com/Titan-Life-John-Rockefeller-Sr/dp/1400077303/

\u2022 Yellowstone on Paramount+: https://www.paramountnetwork.com/shows/yellowstone

\u2022 Smart telescopes: https://milehighastro.com/collections/smart-telescopes

\u2022 Cassandra Clare: https://cassandraclare.com/

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Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email podcast@lennyrachitsky.com.

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Lenny may be an investor in the companies discussed.