McKinsey & Company has identified ten tests to help executives assess the strength of their strategies. The ten tests fit nicely with the first Item in the Strategic Planning category of the Baldrige Criteria, which addresses the strategy development process.

An article in McKinsey Quarterly emphasizes the importance of a rigorous strategy development process through a quote from Phil Rosenzweig, a professor at IMD in Switzerland who has devoted his career to advancing the art of strategy: “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.” (“Have you tested your strategy lately?” Chris Bradley, Martin Hirt, and Sven Smit, McKinsey Quarterly, January 2011)

According to a McKinsey Quarterly survey of 2,135 executives, few of their strategies pass more than three of these ten tests:

1. Will your strategy beat the market? “Good strategies emphasize difference—versus your direct competitors, versus potential substitutes, and versus potential entrants.”
2. Does your strategy tap a true source of advantage? “Competitive advantage stems from two sources of scarcity: positional advantages and special capabilities.”
3. Is your strategy granular about where to compete? “…80% of the variance in revenue growth is explained by choices about where to compete.”
4. Does your strategy put you ahead of trends? “Always look at the edges. How are early adopters and that small cadre of consumers who seem to be ahead of the curve acting?”
5. Does your strategy rest on privileged insights? “Developing proprietary insights isn’t easy. A search for problems can help get you started. Create a short list of questions whose answers would have major implications for the company’s strategy. Don’t forget to examine the assumptions, explicit and implicit, behind an established business model.”
6. Does your strategy embrace uncertainty? “Rigorously understanding the uncertainty you face starts with listing the variables that would influence a strategic decision and prioritizing them according to their impact.”
7. Does your strategy balance commitment and flexibility? “A market-beating strategy will focus on just a few crucial, high-commitment choices to be made now, while leaving flexibility for other such choices to be made over time.”
8. Is your strategy contaminated by bias? “Developing multiple hypotheses and potential solutions to choose among is one way to ‘de-bias’ decision making.”
9. Is there conviction to act on your strategy? “CEOs and boards should not be fooled by the warm glow they feel after a nice presentation by management. They must make sure that the whole team shares the new beliefs that support the strategy.”
10. Have you translated your strategy into an action plan? “Develop a detailed view of the shifts required to make the move, and ensure that processes and mechanisms, for which individual executives must be accountable, are in place to effect the changes. Quite simply, this is an action plan.”

The Baldrige Criteria provide a roadmap for strategy development and deployment. To read more about strategic planning, click on these articles:

• The First Critical Phase of Strategic Planning
• Challenge Your Assumptions
• Identifying Potential Blind Spots
• Revolutionary Thinking
• Where to Play and How to Win
  
• Sustainability Forces Wheel

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