Time to Test Your Strategy?

If you have an interest in strategy, I highly recommend subscribing to the "McKinsey Quarterly" e-newsletter.  It doesn't cost anything to sign up, and the well-researched articles keep you up to date on the latest in strategic planning trends and thought leadership.  The research tends to be conducted with, and geared toward, larger company CEOs and executives.  But the information has real application for anyone trying to lead a business of any size through today's uncertain markets.

The January edition contains a great article, entitled "Have You Tested Your Strategy Lately?" that outlines 10 tests for evaluating your strategy.  It also provides some very interesting feedback from senior executives who rated how their strategies match up against the tests.

In its survey of 2,100 executives, McKinsey reports that 65% said their strategies passed three or fewer of the tests listed in the article.  Twenty-five percent said their strategies passed four to six of the tests, and only 10% said that their strategies passed seven to 10.

The article acknowledges that there's no magic number for how many tests your strategy should pass.  Passing most of them doesn't guarantee success.  And passing only a few doesn't mean your strategy is doomed to failure.  But applying the tests to your strategy accomplishes two very important goals. One, it provides a framework and a measuring stick for several key strategy metrics that often get overlooked.  Two, it serves as an excellent starting point for raising the level of discussion around your firm's strategy.

Too often, once a strategy gets written the discussion tends to taper off as people go back to business as usual.  Applying these tests to your strategy helps to keep the plan alive and relevant while bringing up several key points that might otherwise never see the light of day.

All 10 of the tests are sure to generate worthwhile discussion. But four in particular align with topics that I frequently address in this blog.

Test #4: Does your strategy put you ahead of trends?

In many companies, strategic planning involves little more than incrementally ratcheting up the goals from the previous year.  In other words, doing the same things as last year, only doing a little more of them and doing them a little better. But in today's markets, the big winners are those companies that successfully create disruptive (rather than incremental) change.  Doing so requires getting ahead of the curve rather than following just behind it.  If your strategy puts you in the middle of emerging trends in your industry, you could be vulnerable to competitors creating change and innovation at the leading edge.

Test #6: Does your strategy embrace uncertainty?

Change occurs at a frightening pace these days, which means every strategy should be crafted with an uncertain, rather than static or predictable, world in mind.  To embrace uncertainty, start by shortening your time frame.  Today's strategic plans should look out 12 to 18 months at maximum.  Anything further and you're just guessing.  At the same time, don't assume your strategy will unfold exactly as written.  Plan for changes to occur, both expected and unexpected, by considering multiple scenarios when crafting your strategy.

Test #8: Is your strategy contaminated by bias?

The biggest danger to most strategies consists of lack of awareness regarding your own attitudes, beliefs, and assumptions about how the world works.  What do you know to be true about your customers?  Your markets?  Your industry?  What are you constantly telling yourself and each other that "must be so" about how to add value to your customers? Unless you check these "thought bubbles" on a regular basis, your entire strategy may well rest on outdated or worse – false – facts and opinions. When a strategy no longer aligns with the wants and needs of its customers, it has already become obsolete.

Test #10: Have you translated your strategy into an action plan?

I call this the "Marine barracks inspection test."  If a drill sergeant ran his white-gloved finger across your strategic plan, would it come away clean or would there be a thick residue of dust from sitting on the shelf?  Strategies don't unfold by themselves.  They need detailed action plans that translate high-level goals into specific actions, behaviors, and incremental objectives for the people who will implement the plan.  Good strategies almost always ask people to do things differently.  Unless you provide clear action steps, people tend to get stuck in doing things the way they have always done them.  You shouldn't use the "and then a miracle occurs" approach for turning your strategic plan into reality!

In today's markets, you may not get the chance for a do-over if your strategy misses the mark.  Putting your strategy to these tests will definitely improve your chances of getting it right the first time.