Ten timeless tests can help you kick the tires on your strategy, and kick up the level of strategic dialogue throughout your company.
“What’s the next new thing in strategy?” a senior executive recently asked Phil Rosenzweig, a professor at IMD, in Switzerland. His response was surprising for someone whose career is devoted to advancing the state of the art of strategy: “With all respect, I think that’s the wrong question. There’s always new stuff out there, and most of it’s not very good. Rather than looking for the next musing, it’s probably better to be thorough about what we know is true and make sure we do that well.”
Let’s face it: the basic principles that make for good strategy often get obscured. Sometimes the explanation is a quest for the next new thing – natural in a field that emerged through the steady accumulation of frameworks promising to unlock the secret of competitive advantage. In other cases, the culprit is torrents of data, reams of analysis, and piles of documents that can be more distracting than enlightening.
Ultimately, strategy is a way of thinking, not a procedural exercise or a set of frameworks. To stimulate that thinking and the dialogue that goes along with it, we developed a set of tests aimed at helping executives assess the strength of their strategies. We focused on testing the strategy itself (in other words, the output of the strategy-development process), rather than the frameworks, tools, and approaches that generate strategies, for two reasons. First, companies develop strategy in many different ways, often idiosyncratic to their organizations, people, and markets. Second, many strategies emerge over time rather than from a process of deliberate formulation.
There are ten tests on our list, and not all are created equal. The first – “will it beat the market?” – is comprehensive. The remaining nine disaggregate
the picture of a market-beating strategy, though it’s certainly possible for a strategy to succeed without “passing” all nine of them. This list may sound more complicated than the three Cs or the five forces of strategy.4 But detailed pressure testing, in our experience, helps pinpoint more precisely where the strategy needs work, while generating a deeper and more fruitful strategic dialogue.
Those conversations matter, but they often are loose and disjointed. We heard that, loud and clear, over the past two years in workshops where we explored our tests with more than 700 senior strategists around the world. Furthermore, a recent McKinsey Quarterly survey of 2,135 executives indicates that few strategies pass more than three of the tests (Exhibit 1). In contrast, the reflections of a range of current and former strategy practitioners (see “How we do it: Strategic tests from four senior executives”) suggest that the tests described here help formalize something that the best strategists do quite intuitively.