Strategy

J U LY 2 0 12

s t r a t e g y

p r a c t i c e

Managing the strategy journey
Chris Bradley, Lowell Bryan, and Sven Smit

Regular strategic dialogue involving a broad group of senior executives can help companies adapt to the unexpected. Here’s one company’s story, and some principles for everyone.

Back in 2009, as the senior-management teams at many companies were just beginning toemerge from the bunkers to which they’d retreated during the peak of the financial crisis, we wrote an article1 whose premise was that pervasive, ongoing uncertainty meant companies needed to get their senior-leadership teams working together in a fundamentally different way. At the time, many companies were undertaking experiments, such as shortening their financial-planning cycles or droppingthe pretense that they could make reasonable assumptions about the future. But we suggested 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.

Since then, we have continued to evolve ourthinking about how companies should undertake strategy development in the 21st century. For starters, we uncovered strong evidence that a great many companies are generating strategies that, by their own admission, are substandard. We reached that conclusion after surveying more than 2,000 executives about a set of ten strategic tests—timeless standards that shed light on whether a particularstrategy is likely to beat the competition—and learning that only 35 percent of their strategies
1 Lowell Bryan, “Dynamic management: Better decisions in uncertain times,”

mckinseyquarterly.com, December 2009.

2

passed more than three of these.2 This unsettling statistic raised additional questions about the effectiveness of companies’ annual planning processes, which still were the most-citedtriggers for strategic decision making among survey respondents (Exhibit 1). We also have been engaged with a number of companies (in industries ranging from telecom to health care to mining to financial services) as they’ve begun to embrace more frequent strategic dialogue involving a focused group of senior executives. These companies, in effect, have started on a journey—a journey to evolvehow they set strategy and make strategic decisions. Their journey isn’t complete, and neither is ours, but we’ve learned more than enough to take stock and pass on some ideas that we hope will be useful to leaders in many more organizations. In this article, we want to focus on the big things that top teams need to do. The starting point is for them to increase the time they spend on strategytogether to at least match the time they spend

Q3 2012 Emerging Markets Exhibit 1 of 2 For more on the tests, which we have discussed and refined with more than 1,400 senior 3 strategists around the world in over 70 workshops, see Chris Bradley, Martin Hirt, and Sven Smit, “Have you tested your strategy lately?,” mckinseyquarterly.com, January 2011. For more on the survey results, see “Puttingstrategies to the test: McKinsey Global Survey results,” mckinseyquarterly.com, January 2011.

Exhibit 1 The annual planning process is frequently the primary trigger for strategic decision making.
% What is the primary trigger, if any, for your company to make decisions about business unit strategies? Don’t know 18 3 44 Our regular planning cycle Compared with five years ago, how frequent is yourcompany’s decision making about business unit strategy? Don’t know 7 7

My company has no single trigger

Less frequent

35 Issues as they arise

About the same

30

56

More frequent

Source: Jan 2010 McKinsey survey of 2,135 executives around the world, representing the full range of industries, regions, tenures, functional specialties, and company sizes

3

together on...