Have you tested your strategy lately?

January 1, 2011 by Chris Bradley, Martin Hirt and Sven Smit McKinsey & Co.

Ten timeless tests can help you kick the tyres on your strategy and kick up the level of strategic dialogue throughout your company.

Summary 

This article claims that many strategies fail to meet these tests and offers some advice on how to improve the quality of strategic thinking and decision making. The ten tests are:

  1. Will your strategy beat the market? This test requires identifying and exploiting a source of competitive advantage that is scarce and durable.
  2. Does your strategy tap a true source of advantage? This test involves distinguishing between positional advantages (based on market structure) and special capabilities (based on unique resources or competencies).
  3. Is your strategy granular about where to compete? This test emphasizes the need to segment the market finely and allocate resources accordingly, rather than relying on broad averages or organisational boundaries.
  4. Does your strategy put you ahead of trends? This test challenges the assumption that the future will resemble the past and urges managers to look for weak signals of change and anticipate their implications.
  5. Does your strategy rest on privileged insights? This test encourages the development of proprietary insights that are not widely shared or easily replicated, rather than relying on common data and analysis.
  6. Does your strategy embrace uncertainty? This test involves characterising the level and type of uncertainty faced by the company and applying appropriate tools such as scenarios and options to cope with it.
  7. Does your strategy balance commitment and flexibility? This test involves making the right trade-offs between committing to long-term investments and retaining the flexibility to adapt to changing conditions.
  8. Is your strategy contaminated by bias? This test warns against the cognitive biases that can distort strategic thinking, such as over-optimism, anchoring, loss aversion, confirmation bias and herding.
  9. Is there conviction to act on your strategy? This test stresses the importance of creating a shared belief in the strategy among the top team and the wider organisation and fostering a culture of challenge and dissent.
  10. Have you translated your strategy into an action plan? This test requires defining the shifts in business model, organisation, and capabilities needed to execute the strategy, and ensuring alignment of resources and processes with the strategic objectives.
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