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McKinsey take on “The art of strategy”

January 31, 2014

In an interesting article,  Angus Dawson and Chris Bradley of McKinsey discuss how “doing strategy” has evolved into a more multi-disciplinary approach to decision-making.  They suggest that traditional frameworks for strategic thinking have added greater “empirics” – analytical rigour – and also now consider the psychology and learning styles of the organisation. The steps in strategy development are:

  • Diagnosis: why you exist
  • Forecast
  • Search: decision options
  • Strategic choice – which option?
  • Finish: commit to action, set tangible goals, communicate and move resources

This last step is often focussed on the least, yet is the fundamental point of the whole thing. Your strategy is what you do, not what you write in a plan.

They also explore the social dynamics of strategy. It is at root a social process which has to deal with people’s inherent biases and beliefs. If it doesn’t get that deep into the psyche then it won’t survive the lengthy period of implementation.

From their analysis of companies’ success, they suggest that a critical factor is positioning the company against the right trends, catching the right waves and betting on the right market – rather than simply trying to build market share in a current position.

Certainly it seems to me that regarding strategy as a social process in the organisation  is a valuable insight, too often overlooked in the midst of overly prescriptive analytical approaches.  And so the need to generate commitment, drive and action is vital. It’s more of a change management process than analysis.

But I’m less convinced by the authors’ reliance on forecasting and identifying trends.  One thing we know about the future is that we don’t know what it will be. By all means have a “base case” forecast using identified trends, but a good strategy will also have reviewed a  wide range of “weak signals” and considered the implications of “wild cards” or “black swans”.  Creating the agility to respond to a range of scenarios which diverge from a “base case” is the critical success factor – organisational design and an adaptive culture will defeat the most detailed analytically sound forecasting methodology.  For more ideas along these lines have a look at “Beyond Crisis” by Gill Ringland, Oliver Sparrow and Patricia Lustig.

(written by Huw Williams)

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