Shu-Ha-Ri is not a martial art. It is a Japanese method for transmitting and art or skill. It has been used for lots of things in addition to martial arts. Its worth looking up, there are quite a few articles about it that google can find.
Shu is the first step. Here you learn kata. Kata is a sequence that is to be learned and practiced exactly. (this is the part, the only part, that many people took in the Japanese martial arts training. I suspect because, its all they got to in their training in Japan, before returning back home.) These sequences are created to teach the basics of the movement, the principles and core ideas of the art being taught.
Ha is the next stage. This is where the student needs to create variations to the kata. Let me repeat that... many folks miss this very important point. The student is encouraged by the instructor to add variation to the kata. The instructor is involved and helps the student to create and evaluate their divergences from the kata. The idea is for the student to express the same principles and ideas, in new ways, while still demonstrating an understanding for the core basics.
Ri is the final stage. In this stage,the kata is thrown away. The student now has an understanding of all the core principles and ideas and has mastered the skills. The student is now free to express those things however they want. This does not mean that they necessarily abandon doing the kata from the Shu stage. If they are to teach, they need to still do that kata. However, when they do that kata, it has much more in it. They can then create their own kata or methods of training. The idea is for them to continue onwards, using the core principles, ideas and skills to help them expand on that art as far as they wish to take it.
What we commonly see from traditional martial arts schools, where they do kata... is completely opposite. Variation is frowned on. Exploration is frowned on. Questions are frowned on. But, the full method actually follows the way music is taught very successfully.
In fact, I would say that even boxing and MMA use very similar systems, just with different names, if named at all. When a new student starts... he is taught drills and exercises to be done exactly. As they learn the skills, they start to adapt. A good coach will help the student adapt the techniques to their abilities. The student will eventually put his own drills together and combinations and find new ways to apply the what he has learned.
Saying kata sucks because kata, by itself, never produced a good fighter is both accurate and the same as saying jumping rope sucks because it, by itself, never produced a good boxer. Both of those exercises can be used to make great fighters and boxers, if used properly in conjunction with a complete system of training.