Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Strategy Execution: The 10 Strategy Tests

55 views

Published on

This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here:
https://flevy.com/browse/flevypro/strategy-execution-the-10-strategy-tests-3785

DOCUMENT DESCRIPTION
The mainstay of a successful strategy is creation of Competitive Advantage. However, for most organizations Competitive Advantage is a moving target, which is hard to pin down. A global executive study pinpoints a possible cause: just 53% of executives characterized their companies' strategies as underscoring the development of differential advantage over rivals. The rest declared their strategies as merely matching industry best practices and delivering operational imperatives.

This presentation provides a detailed account of 10 strategy tests that were validated in the global study. The research encompassed online survey of executives from across the world, to test whether their companies' business unit strategies pass 10 tests that constitute a good strategy.

The main test questioned the potential of a company strategy to overcome rivals by creating Competitive Advantage, while the rest of the 9 tests investigated the efficacy of the strategy and how it positions the company in the market.

Conducting an in-depth review of the strengths and weaknesses of a company's past strategies through these 10 tests may help leaders uncover the ones relevant to their situations.

The slide deck also includes some slide templates for you to use in your own business presentations.

Published in: Business
  • Hi everyone, You can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the-10-strategy-tests-3785
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • Be the first to like this

Strategy Execution: The 10 Strategy Tests

  1. 1. This is an exclusive document to the FlevyPro community - http://flevy.com/pro Framework Primer Strategy Execution: The 10 Strategy Tests Presentation created by 1 2 3 4 5 6 7 8 9 10
  2. 2. 2This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Templates Overview Strategy Survey Results What Organizations Do Well Impact on Financial Performance Strategy Development Process The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  3. 3. 3This document is an exclusive document available to FlevyPro members - http://flevy.com/pro This deck highlights 10 strategy tests that organizations can incorporate in their strategy development process to outpace rivals Presentation Overview An in-depth review of the strengths and weaknesses of a company’s past strategies through these 10 tests may help leaders uncover the ones relevant to their situations. The mainstay of a successful strategy is creation of Competitive Advantage. However, for most organizations Competitive Advantage is a moving target, which is hard to pin down. A global executive study pinpoints a possible cause: just 53% of executives characterized their companies’ strategies as underscoring the development of differential advantage over rivals. The rest declared their strategies as merely matching industry best practices and delivering operational imperatives. This presentation provides a detailed account of 10 strategy tests that were validated in the global study. The research encompassed online survey of executives from across the world, to test whether their companies’ business unit strategies pass 10 tests that constitute a good strategy. The main test questioned the potential of a company strategy to overcome rivals by creating Competitive Advantage, while the rest of the 9 tests investigated the efficacy of the strategy and how it positions the company in the market. The slide deck also includes some slide templates for you to use in your own business presentations. The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  4. 4. 4This document is an exclusive document available to FlevyPro members - http://flevy.com/pro A McKinsey survey of global executives reveal that most organizations are not developing strategies that focus on building a Competitive Advantage The companies that focus on these tests are in a better position to develop market- beating strategies. Strategy Survey – Overview Source: Putting Strategies to the Test, McKinsey, 2011 The mainstay of a successful strategy is creation of Competitive Advantage. However, for most organizations, Competitive Advantage is an objective that is hard to pin down. A global study by McKinsey pinpoints a possible cause: just 53% of executives characterized their companies’ strategies as underscoring the development of differential advantage over rivals. The rest declared their strategies as merely matching industry best practices and delivering operational imperatives. The research encompassed online survey of executives from across the world who went through a series of questions to test if their companies’ business unit strategies pass 10 tests that constitute a good strategy. The overall sample size was 2,135 executives from various parts of the world, representing a range of industries, regions, tenures, functions, and company sizes. The main test questioned their strategy’s potential to overcome the rivals by creating Competitive Advantage. The rest of the 9 tests validated the efficacy of their strategy, assessing how the strategy positions the company in the market, the insights and data incorporated to develop the strategy, and the robustness of their implementation plans. The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  5. 5. 5This document is an exclusive document available to FlevyPro members - http://flevy.com/pro The 10 strategy tests tested the companies on the basis of their strategies’ potential to create competitive edge The 10 strategy tests can serve as a litmus test to verify the effectiveness of a business strategy taking into account the market, competitors, future trends, and decision making. Strategy Survey – 10 Strategy Tests The 10 strategy tests in the strategy survey inquired the executives to rank their companies’ strategies in creating a wining market position, the basis of their companies’ strategy formulation, and their implementation planning. Our strategy consists of decisions based on vigorous debate about alternatives. Our strategy balances some major commitments with flexibility to make future choices. 1 Our strategy highlights creating relative advantage over competitors. Our strategy incorporates a detailed understanding of our Competitive Advantages. Our strategy defines opportunities based on detailed market segments. Our strategy results in a concrete set of actions to reallocate resources. The 10 tests included: Our strategy arises from management’s strong belief in basic assumptions that underpin it. Our strategy is mainly built to win in future market conditions based on major trends. Our strategy takes into account unavoidable uncertainties about the future. Our strategy relies on novel data and insights not available to competitors. 2 3 4 5 6 7 8 9 10 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  6. 6. 6This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Templates Overview Strategy Survey Results What Organizations Do Well Impact on Financial Performance Strategy Development Process The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  7. 7. 7This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Although a company’s strategy can succeed even though it fails most of these tests, but they can stress-test their strategies through these tests Passing a test meant executives selected a given test statement as the one that most closely described their companies’ strategies. Results – Overview The results from the respondents’ assessment of whether their company’s typical business unit strategies can pass these 10 tests revealed that: About 50% of respondents were of the view that their companies pass only 1 to 3 of the 10 tests. Fifteen percent executives believed that their company strategies cannot pass a single test. Only 2% of respondents stated that their companies pass 9 or all 10 tests. Around 25% participants believed that their companies were able to clear 4-6 tests. Executives in India indicated that their companies pass more tests more frequently than do executives in China, Europe, or North America. Companies’ typical business unit strategies… Pass no tests Pass 1-3 tests Pass 4-6 tests Pass 7-10 tests Source: Putting Strategies to the Test, McKinsey, 2011 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  8. 8. 8This document is an exclusive document available to FlevyPro members - http://flevy.com/pro A total of 45% executives believed that their strategy balanced major commitments with flexibility Indian and Chinese executives ranked their companies’ strategies higher (43% and 40% respectively) on “following future market conditions and major trends”. Results – Regional Breakdown The results based on regions revealed the following: Emphasizes creating relative advantage over competitors. Incorporates a detailed understanding of our competitive advantages. Defines opportunities based on detailed market segments. Results in a concrete set of actions to reallocate resources. Consists of decisions based on vigorous debate about alternatives. Arises from management’s strong belief in the basic assumptions that underpin it. Is mainly built to win in future market conditions based on major trends. Takes into account unavoidable uncertainties about the future. N. America n = 623 Europe n = 701 China n = 65 India n = 206 51% Indian, 37% Chinese, 49% North American, and 44% Europeans believed that their strategy balanced major commitments with flexibility. Overall just about 14% of the executives told that their companies’ strategies were based on novel data and insights not available to their competitors. ̶ Region-wise, this was stated by 20% of Indian executives, 18% of Chinese, 14% North American, and 13% European executives. Chinese executives graded their companies’ strategies higher (43%) than those in the other regions (34% globally) on the basic test of pinpointing relative advantage. ̶ The Chinese, however, ranked themselves lower (37%) in balancing commitments and flexibility to make choices in the future. Relies on novel data and insights not available to competitors. Total n = 2,135 By region Balances some major commitments with flexibility to make future choices. Our strategy … Source: Putting Strategies to the Test, McKinsey, 2011 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  9. 9. 9This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Templates Overview Strategy Survey Results What Organizations Do Well Impact on Financial Performance Strategy Development Process The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  10. 10. 10This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Most executives considered that their strategy balances some major commitments with flexibility to make future choices About 59% of the executives believed their strategy to incorporate a detailed understanding of their Competitive Advantages. What Organizations Do Well – Overview The respondents’ answers in response to the question of “my company’s strategy is consistent more with which test” were: Source: Putting Strategies to the Test, McKinsey, 2011 Is based on concrete plans that lock in key choices now. Is based on a broad, untested understanding of our competition. Is loosely linked to our resource reallocation processes. Defines markets broadly, based primarily on our organizational structure. Consists of decisions based on justifying one preferred solution. Reflects management’s focus on analysis and documents based on understanding its rationale. Emphasizes matching industry best practices and delivering operational imperatives. Is mainly built to win in current market conditions. Is based on one most likely future. Relies more on widely available data and insights. Our strategy … Balances some major commitments with flexibility to make future choices. Incorporates a detailed understanding of our competitive advantages. Results in a concrete set of actions to reallocate resources. Defines opportunities based on detailed market segments. Consists of decisions based on vigorous debate about alternatives. Arises from management’s strong belief in the basic assumptions that underpin it. Emphasizes creating relative advantage over competitors. Is mainly built to win in future market conditions based on major trends. Takes into account unavoidable uncertainties about the future. Relies on novel data and insights not available to competitors. Strategy’s consistency with 10 tests Less More Test describes my company’s strategy … Least closely Somewhat closely Closely Most closely The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  11. 11. 11This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Another 59% of executives from the study considered that their strategy results in a concrete set of actions to reallocate resources Overall, very few executives believed that their strategy relies on novel data and insights not available to competitors. What Organizations Do Well – Key Insights Key insights from the test “what our organization does well” revealed: 70% of executives reported that their strategies provide a mix of commitments and flexibility. Just about 29% respondents thought their strategy to be based on concrete plans that lock in key choices immediately. Companies developed strategies as a portfolio of different strategic actions: Big bets to gain Competitive Advantage. No regret moves that will pay off whatever happens. Real options that involve relatively low costs now but can be elevated to a higher level of commitment as conditions change. 1 2 3 Source: Putting Strategies to the Test, McKinsey, 2011 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  12. 12. 12This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Templates Overview Strategy Survey Results What Organizations Do Well Impact on Financial Performance Strategy Development Process The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  13. 13. 13This document is an exclusive document available to FlevyPro members - http://flevy.com/pro There was slight correlation between passing a test and executives declaring a test to be instrumental to their financial performance There was stark variation found among executives from different industries in their rating the top 3 drivers of financial performance. Impact on Financial Performance – Overview When bifurcated based on industry, the survey participants’ response on the question: “which aspects of strategy have had the greatest positive effect on your company’s financial performance” was: Source: Putting Strategies to the Test, McKinsey, 2011 Most frequently ranked Second most frequently ranked Third most frequently ranked Business, legal, or professional services n = 396 Energy n = 84 High tech, telecomm n = 274 Health care, social services n = 81 Total n = 2,135 Manufacturing n = 276 By industry Flexibility 41% Relative advantage 40% Reallocation of resources 36% Flexibility 54% Relative advantage 42% Understanding our advantage 34% Future market conditions 46% Relative advantage 38% Understanding our advantage 38% Flexibility 49% Belief in basic assumptions 48% Relative advantage 34% Relative advantage 48% Future market conditions 42% Belief in basic assumptions 39% Relative advantage 43% Market segmentation 40% Belief in basic assumptions 40% Balances major commitments with flexibility Our strategy … Defines opportunities based on detailed market segments Results in concrete actions to reallocate resources Is built to win in future market conditions Emphasizes the creation of relative advantage Incorporates a detailed understanding of our advantage Arises from management’s belief in its basic assumptions The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  14. 14. 14This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Healthcare and social services executives rated “flexibility” and “belief in their basic assumptions” to have the highest impact on performance Executives from the manufacturing industry ranked “relative advantage” (43%) and “market segmentation” (40%) as the top contributors to bottom line. Impact on Financial Performance – Key Insights Key insights from the test pertaining to the aspects of the strategy that had the most effect on the bottom line revealed: Overall, a majority of the executives selected “flexibility to make choices in future” at the top and most companies passed this test. “Novel insights and data as the basis of strategy” test was rated least critical to financial performance and passed least frequently. There were differences evident among executives of various industries regarding evaluating the tests’ impact on financial performance: More executives (46%) in the energy sector—than any other industry—mentioned a focus on trends has a positive effect on their financial performance. 1 2 3 About 50% executives in the health care and social sectors stressed the importance of management having a strong belief in the strategy’s underlying assumptions. Source: Putting Strategies to the Test, McKinsey, 2011 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  15. 15. 15This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Templates Overview Strategy Survey Results What Organizations Do Well Impact on Financial Performance Strategy Development Process The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  16. 16. 16This document is an exclusive document available to FlevyPro members - http://flevy.com/pro The strategy survey also asked what causes organizations to make decisions about strategy Some 38% of the executives thought that during the regular planning cycle their strategy results in a concrete set of actions to reassign resources. Strategy Development Process – Overview Here is the breakdown of respondents’ responses to the test of using planning practices for decision making: % of respondents Source: Putting Strategies to the Test, McKinsey, 2011 During the regular planning cycle, n = 943 As issues arise, n = 699Use of planning practices consistent with passing tests, by trigger for decision making Our strategy … Balances some major commitments with flexibility to make future choices. Arises from management’s strong belief in the basic assumptions that underpin it. Incorporates a detailed understanding of our competitive advantages. Emphasizes creating relative advantage over competitors. Results in a concrete set of actions to reallocate resources. Is mainly built to win in future market conditions based on major trends. Defines opportunities based on detailed market segments. Takes into account unavoidable uncertainties about the future. Consists of decisions based on vigorous debate about alternatives. Relies on novel data and insights not available to competitors. The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  17. 17. 17This document is an exclusive document available to FlevyPro members - http://flevy.com/pro The study revealed that not too many companies develop their strategies based on a concrete process The shorter planning cycle trend intensifies the need to focus on the attributes of strategy that drive Competitive Advantage, and prompt pre-testing of the strategies. Strategy Development Process – Key Insights Financial crises and recession expose weaknesses in strategies and force many companies to consider alternatives which they often shelve in growth periods. These executives were more likely to say their companies understand Competitive Advantage, incorporate trends, and allocate resources effectively. 44% of respondents declared that their companies hold a regular planning cycle. 1 35% of respondents, on the contrary, mentioned that their companies make decisions as the need arise. These executives were more likely to say their companies manage uncertainty well, include flexibility to make choices in future, and create relative advantage over competitors. 2 A majority of the study respondents—56%—reported that their companies now make strategic decisions more frequently than before. This trend of speedy decision making can cause some companies to fail in conducting a thorough evaluation of each decision. The results further uncovered: Source: Putting Strategies to the Test, McKinsey, 2011 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  18. 18. 18This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Templates Overview Strategy Survey Results What Organizations Do Well Impact on Financial Performance Strategy Development Process The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  19. 19. 19This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Insert headline Insert bumper. 10 Strategy Tests – TEMPLATE Our strategy consists of decisions based on vigorous debate about alternatives. Our strategy balances some major commitments with flexibility to make future choices. 1 Our strategy highlights creating relative advantage over competitors. Our strategy incorporates a detailed understanding of our Competitive Advantages. Our strategy defines opportunities based on detailed market segments. Our strategy results in a concrete set of actions to reallocate resources. Our strategy arises from management’s strong belief in basic assumptions that underpin it. Our strategy is mainly built to win in future market conditions based on major trends. Our strategy takes into account unavoidable uncertainties about the future. Our strategy relies on novel data and insights not available to competitors. 2 3 4 5 6 7 8 9 10 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  20. 20. 20This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Insert headline Insert bumper. 10 Strategy Tests – TEMPLATE ALTERNATE Our strategy consists of decisions based on vigorous debate about alternatives. Our strategy balances some major commitments with flexibility to make future choices. 1 6 Our strategy highlights creating relative advantage over competitors. 2 Our strategy incorporates a detailed understanding of our Competitive Advantages. 3 Our strategy defines opportunities based on detailed market segments. 4 Our strategy results in a concrete set of actions to reallocate resources. 5 Our strategy arises from management’s strong belief in basic assumptions that underpin it. 7 Our strategy is mainly built to win in future market conditions based on major trends. 8 Our strategy takes into account unavoidable uncertainties about the future. 9 Our strategy relies on novel data and insights not available to competitors. 10 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  21. 21. 21This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Download 100s of similar frameworks from the FlevyPro Library: https://flevy.com/pro/library/frameworks The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  22. 22. 22This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Need more frameworks? Download our Complete Business Frameworks Reference Guide, a 350+ slide compilation of 50+ frameworks, on Flevy The Complete Business Frameworks Reference Guide is a best selling document on Flevy. It is 350+ slides--covering 50+ common management consulting frameworks and methodologies. A summary is provided for each business framework. The frameworks in this deck span across Corporate Strategy, Sales, Marketing, Operations, Organization, Change Management, and Finance. This reference guide is great for those who need a refresher on common frameworks, as well as be introduced and learn new useful frameworks. You can find this document here: http://flevy.com/browse/business-document/complete- consulting-frameworks-toolkit-644 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  23. 23. 23This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Flevy (www.flevy.com) is the marketplace for premium documents. These documents can range from Business Frameworks to Financial Models to PowerPoint Templates. Flevy was founded under the principle that companies waste a lot of time and money recreating the same foundational business documents. Our vision is for Flevy to become a comprehensive knowledge base of business documents. All organizations, from startups to large enterprises, can use Flevy— whether it's to jumpstart projects, to find reference or comparison materials, or just to learn. Contact Us Please contact us with any questions you may have about our company. • General Inquiries support@flevy.com • Media/PR press@flevy.com • Billing billing@flevy.com The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/strategy-execution-the 10 strategy-tests-3785
  24. 24. 1 Flevy (www.flevy.com) is the marketplace for premium documents. These documents can range from Business Frameworks to Financial Models to PowerPoint Templates. Flevy was founded under the principle that companies waste a lot of time and money recreating the same foundational business documents. Our vision is for Flevy to become a comprehensive knowledge base of business documents. All organizations, from startups to large enterprises, can use Flevy— whether it's to jumpstart projects, to find reference or comparison materials, or just to learn. Contact Us Please contact us with any questions you may have about our company. • General Inquiries support@flevy.com • Media/PR press@flevy.com • Billing billing@flevy.com

×