Check Your Business Strategy with the McKinsey Strategy Stress Test!

Does your business strategy point the right way?

It is easy to call some approach a business strategy. But what is a strategy, and how do you know your strategy is sound? McKinsey has developed a strategy stress test, and Hans Lodder turns that test into a practical checklist. But remember the words of late Winston Churchill: "However beautiful the strategy, you should occasionally look at the results."

The McKinsey Quarterley recently published the article: Have you tested your strategy lately?. This strategy test is a real strategy stress test! For the sake of clarity let me cite here the definition of strategy: Strategy is defined as 'a long term plan of action designed to achieve a particular goal'. More specifically a business strategy is defined as 'the art and science of enabling an organization to achieve its objective'.

Now the meaning of strategy is clarified I will summarize the 10 tests forming the strategy stress test from the McKinsey Quarterley article:

The 10 tests are:

  1. Test 1: Will your strategy beat the market?
    State your robust and responsive competitive advantage.
  2. Test 2: Does your strategy tap a true source of advantage?
    State your sustaining competitive advantage.
  3. Test 3: Is your strategy granular about where to compete?
    State your 30 to 50 market segments.
  4. Test 4: Does your strategy put you ahead of trends?
    State the 10 year trends you observed.
  5. Test 5: Does your strategy rest on privileged insights?
    State your insights, based on non-public resources.
  6. Test 6: Does your strategy embrace uncertainty?
    Quantify 3 factors that significantly influence the outcome.
  7. Test 7: Does your strategy balance commitment and flexibility?
    State the latest moments in time you must commit yourself to significant investments.
  8. Test 8: Is your strategy contaminated by bias?
    State the moment you defined your objective decision criteria (at the start, or later), and state at least 2 different strategies (alternative strategies: possibility of choice).
  9. Test 9: Is there conviction to act on your strategy?
    State your strategy decision activities.
  10. Test 10: Have you translated your strategy into an action plan?
    State your Soll situation, your Ist situation, and how you will travel from Ist to Soll.

Applying this remarkable set of strategy tests will highly increase your success rate of your strategy and its implementation. McKinsey recalls also in its article the ways your decision making can be influenced. It can be biased by:

  • Overoptimism
    The tendency to hope for the best and believe too much in our own forecasts and abilities.
  • Anchoring
    Tying valuation of something to an arbitrary reference point.
  • Loss aversion
    Putting too much emphasis on avoiding downsides and so eschewing risks worth taking.
  • The confirmation bias
    Over-weighting information that validates your opinions.
  • Herding
    Taking comfort in following the crowd.
  • The champion bias
    Assigning to an idea merit that is based on the person proposing it.

I picked the subject of strategy, because it is easy to claim having a sound strategy. Or that you have a new strategy. But will it bring you a sustaining advantage?
The stress test demonstrates that the devil is in the details. The the risks of a faulty strategy are great. Sooner or later a faulty strategy could severely impact your company. You might miss an important growth opportunity. Or the continuity of your company might be endangered.

Results2Match can help you with these strategy evaluation services:

  • Growth strategy check.
    Your insurance for an optimal success rate for sustaining growth!
  • Continuity strategy check.
    Optimize your company survival chances!
  • Strategy implementation evaluation.
    Make sure that your strategy is linked to performance!

Contact Hans Lodder now for more information!

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