Crafting a Good Strategy: Diagnosis, Guiding Policy, and Coherent Action

Strategy is a design for overcoming a high-stakes challenge.

It is a mixture of policy and action aimed at a specific problem or opportunity, not a broad vision statement.

Why: The word originates from the Greek Stratigos—leaders elected to deal with pressing issues like invasions or plagues—so strategy is inherently about tackling real challenges.

"Strategy is a design for overcoming a high-stakes challenge. It's a mixture of policy and action designed to deal with a challenge."

Every good strategy contains three tightly linked elements: diagnosis, guiding policy, and coherent action.

Diagnosis frames the challenge; guiding policy sets the approach; coherent action lists the coordinated steps to implement that approach.

Why: Missing any one element turns the document into wishful thinking rather than a workable strategy.

"All three elements have to be there… If 1 and 3 is missing something, it's not really a strategy, it's something else."

A diagnosis is a focused explanation of what makes the challenge hard.

It selects which parts of reality to pay attention to and proposes hypotheses about how things connect.

Why: Without a clear diagnosis, teams default to generic goals like “grow faster” instead of addressing root causes.

"Diagnosis is an understanding of the situation that you're in… What's the nature of reality that you deal with?"

A guiding policy is a short, explicit choice of what you will and will not do.

It must be singular—17 priorities are not a policy; they are a lottery list.

Why: Focus is the fundamental source of power; dilution across many fronts guarantees mediocrity.

"The guiding policy is sort of at that level of what do we really have to do here? How do we, what are we doing and what are we not doing…"

Actions must be concrete, mutually reinforcing, and directly tied to the diagnosis and policy.

They should not contradict each other (e.g., cut oil use while importing more oil) and should spell out who does what by when.

Why: Execution fails when actions are vague or conflict; coherence turns intent into results.

"The most important part of a strategy… is the coherent action. You have to do something."

Bad strategy is characterized by fluff, failure to face the problem, and mistaking goals for strategy.

Examples include vision statements, value lists, or performance targets presented as strategy without diagnosis or actions.

Why: Such documents feel good but provide no roadmap, leaving organizations rudderless.

"Bad strategy… is a set of goals… ambitions are not a strategy."

Effective strategy exploits an asymmetry—something you have that competitors do not.

Sources include reputation, relationships, proprietary data, network effects, speed, or specialized knowledge.

Why: In competitive arenas, symmetry yields 50-50 odds; asymmetry tilts the field in your favor.

"For a strategy, you need to exploit an asymmetry of some kind… That's the beginning of power."

Concentrate resources on the fewest pivotal actions that unlock the biggest gains.

Each additional “yes” risks turning a nascent good strategy into a bad one by diffusing effort.

Why: Like a magnifying glass focusing sunlight, concentrated force achieves ignition where scattered light does not.

"Each time you say yes, you risk turning a nascent good strategy into a bad strategy."