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Does your strategy pass the test?

20-Oct-2011

As you know, we recommend that your strategy be reviewed and updated on a quarterly basis.  Of course, that assumes you went through a disciplined thought process have a real strategy to start with!

Now put your strategy through this 10 part pressure test devised by McKinsey - who maintain that most companies can barely pass more than 3 of these tests. Hopefully you can score better?

Here is our take on the test:

Will your strategy beat the market?

Perform a thorough industry analysis (at least once per year) to get a clear picture of how the competitive forces in your industry are likely to play out. To beat industry average growth rates you will need a meaningful point of difference that can’t be easily copied or nullified.  Mindlessly copying your competitor’s innovations is not a strategy – it is a recipe for mediocrity. Do you really have a winning strategy?

Do you have a sustainable competitive advantage?

How will you make money in the future?  Do you have a unique strategic position – a concept that you “own” in the minds of your target customers?  Do you have special capabilities that can’t be easily copied?  Remember that nothing lasts forever.  

Are you focused on the bulls-eye?

Push for the narrowest possible segmentation of your target market. Clearly defining and understanding your ideal target market customer is one of the most powerful things a company can do to improve its strategy.

Does your strategy put you ahead of trends?

Many strategies place too much weight on current trends. But as Peter Drucker said, it is not the trends, but “the changes in the trends” that leaders must keep on top of.  These changes creep up so slowly that most companies fail to respond until it is too late to mount an effective response, let take advantage of it.  They delay taking action; held back by sunk costs, an unwillingness to cannibalize a legacy business, or an attachment to yesterday’s formula for success.

Always look to the edges. How are your early adopter customers acting?  What are the small, innovative new entrants doing?  What innovations could change the entire industry?

Does your data give you privileged insights?

It is easy to be overwhelmed with data – the key is to make sense of it all and obtain actionable insights.  Don’t rely on the same data your competitors use.  Do you really understand your customers? Companies who go out of their way to experience the world from their customer’s perspective will develop better strategies.

Does your strategy embrace uncertainty?

Prioritize all your current threats (things that could derail your strategy) as part of your SWOT analysis, and consider what action you would take if these worst case scenarios came to fruition.  Could you handle it?  Do you have a plan B ready to roll out?

Does your strategy require commitment and tradeoffs?

Hedging your bets is not a strategy.  A full commitment to defined course of action is the only path to sustainable competitive advantage. This requires tradeoffs – you can’t be all things to all people. What are you not going to do?

Is your strategy contaminated by bias?

I have written before about the biases that lead to poor decisions and how to overcome them here and here.

Is your leadership team fully committed?

Many good strategies fail to be executed because of a lack of commitment among the leadership team, where just one or two nonbelievers can strangle a strategic change at birth.

Have you translated your strategy into a strategic execution plan?

Clearly define where you are going, and make sure everyone knows the specific actions they need to take to play their part. Business Execution Software makes this easy.  Ensure your budget and resource allocation is aligned with your strategy. Strategy comes first!  Effort spent aligning the budget with the strategy will pay off many times over.

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Spencer Penhart commented on 01-Nov-2011 05:54 PM

Stephen- this is exceptional, as usual your work is fantastic. Thanks for sharing!

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