Rumelt’s Good Strategy/Bad Strategy and the Nvidia example

Years before the AI gold rush made it a household name, Richard Rumelt’s classic, "Good Strategy/Bad Strategy," pinpointed Nvidia as a textbook example of brilliant strategy.

I was recently reading this masterpiece, and this example, from a book written way back in 2011, struck me as incredibly fascinating. It's a powerful reminder that the fundamentals of good strategy are timeless.

So, what did Nvidia do right? Rumelt’s core concept is the "kernel" of a good strategy:

A Diagnosis: A clear understanding of the challenge.

A Guiding Policy: The overall approach to tackle the challenge.

Coherent Actions: Specific, coordinated steps that support the guiding policy.

Nvidia’s strategy was a masterclass in this framework. Their diagnosis was that general-purpose CPUs were inefficient for the massively parallel computations required by graphics. Instead of competing head-on with giants like Intel, their guiding policy was to dominate this specialized niche of graphics processing.

This led to coherent actions. They poured R&D into creating powerful GPUs, built a software ecosystem (like CUDA), and focused relentlessly on the gaming and professional visualization markets. They didn't try to be everything to everyone.

What's fascinating is that this focused strategy ran in parallel with the relentless drumbeat of Moore's Law. For decades, this created a vast reservoir of latent computational power. The current AI explosion is, in many ways, the story of humanity suddenly learning how to harness this immense surplus, and Nvidia, thanks to its long-game strategy, was perfectly positioned to provide the tools to do it.

This approach really resonates with my own way of working. It’s not just for business; it’s about personal effectiveness. By diagnosing the real challenge in a task, setting a clear policy for how to approach it, and aligning all my actions, I can cut through the noise and achieve much more. It's about finding that crucial focal point and applying concentrated effort.

It’s a fantastic lesson in the power of clear thinking. What seems like an overnight success is often the result of a brilliant, long-term strategy.