McKinsey’s “Managing the strategy journey” says spend more time on strategy

Posted on: August 2, 2012

An interesting paper from the masters of strategy arrived earlier this month (https://www.mckinseyquarterly.com/Managing_the_strategy_journey_2991). The essence of their previous argument was that “the only way to set strategy effectively during uncertain times was to bring together, much more frequently, the members of the top team, who were uniquely positioned to surface critical issues early, debate their implications and make timely decisions”.

Their recent research showed that a great many companies are generating strategies that are substandard – 2,000 executives on ten strategic tests revealed that only 35% of their strategies passed more than three.

Basically, they argue that top teams need to spend more time on strategy – meeting two to four hours weekly or every two weeks to:

  • Revisit corporate aspirations and make big directional changes in strategy required by global forces
  • Create a rigorous management process to formulate strategic initiatives to close the gaps between current trajectory and aspirations
  • Convert initiatives into operating reality

Most of the rest of the article is then devoted to a worked example of a global bank.

They counsel to set a practical limit to the number of issues that can be pursued simultaneously at the corporate level to no more than 15 to 25. Mind you, this seems rather high from my experience – most professional firms struggle to cope with five or six! The conclusion is “to create shareholder wealth in our turbulent 21st century, companies need to spend as much time on building and executing strategies as on operating issues”.

Their model looks like this:

Idea generation

  • Frame – what are our objectives and constraints?
    • Define decision to be considered
    • Understand scope of potential solutions
    • Clarify rules that will govern work
  • Baseline – What is the reality of our performance and capabilities?
    • Understand sources of value and past performance
    • Identify major changes in market and drivers
    • Analyse available capabilities
  • Forecast – What do we expect of the future environment?
    • Identify emerging trends and implications
    • Isolate critical uncertainties
    • Develop realistic divergent scenarios

Development and selection

  • Search – What options do we have to create value?
    • Establish and refine option set
    • Assess possible competitive responses
    • Evaluate options in given scenarios
  • Choose – What packages of choices will define our strategy?
    • Decide where and how to compete
    • Determine what, if any, hedging is needed
    • Create coherent package

Execution and refinement

  • Commit – How will we deliver the changes required in the strategy?
    • Develop action plans for selected options
    • Reallocate resources to finance plans
    • Determine how to communicate changes
    • Delegate key jobs to pivotal roles
  • Evolve – How will the strategy unfold
    • Execute agreed-upon action plans
    • Track ongoing progress
    • Determine revisions to be made
    • Determine when to compete

 

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