Chris Bradley, Martin Hirt, and Sven Smit

To deliver the message that people will not be punished simply because a high-risk plan did not pan out, we suggest developing an “unbalanced scorecard” for incentive plans that has two distinct halves. On the left is a common set of rolling financials with a focus on two or three (such as growth and return on investment) that connect to the economic-profit goals of the … [ Read more ]

Chris Bradley, Martin Hirt, and Sven Smit

The best way to create [a rolling strategic plan] is to hold regular strategy conversations with your top team, perhaps as a fixed part of your monthly management meeting. To make those check-ins productive, you should maintain a “live” list of the most important strategic issues, a roster of planned big moves, and a pipeline of initiatives for executing them. At each meeting, executives can … [ Read more ]

Chris Bradley, Martin Hirt, and Sven Smit

It is nearly impossible to make the big moves that successful strategies require if resources are thinly spread across all businesses and operations. Our data show that you are far more likely to achieve a major performance improvement when one or two businesses break out than when every business improves in lockstep. You have to identify those breakout opportunities as early as possible and feed … [ Read more ]

Chris Bradley, Martin Hirt, and Sven Smit

Messy, fast-changing strategic uncertainties abound in today’s business environment. The yearly planning cycle and the linear world of three- to five-year plans are a poor fit with these dynamic realities. Instead, you need a rolling plan that you can update as needed.

In our experience, the best way to create such a plan is to hold regular strategy conversations with your top team, perhaps as a … [ Read more ]

Chris Bradley, Martin Hirt, Sven Smit

It’s essential to track assumptions over time. A few short weeks after the plan is developed, the detailed assumptions go into a fog of memory. The variance to budget gets tracked very carefully, but the underlying assumptions—such as uptake rates, market growth, or inflation rates—are not assessed as carefully. Rather, decide what you can today, with the information you have, and build explicit trigger points … [ Read more ]

Chris Bradley, Martin Hirt, Sven Smit

We found that your industry’s performance is responsible for almost half of your position on the [economic profit] power curve. Industry impact is so substantial, in fact, that you would be better off as an average company in a great industry than a great company in an average industry. But here is the kicker: mobility on the curve is possible—but rare. The odds of a … [ Read more ]

Chris Bradley, Martin Hirt, Sven Smit

At some level, it is easy for the CEO to deal with uncertainty by playing the portfolio game of spreading investment like peanut butter around numerous businesses, knowing that not every bet has to pay off for the total plan to work. The problem is that a portfolio game on the corporate level becomes a matter of all-in commitment for an individual-business-unit leader. We have … [ Read more ]

Chris Bradley, Martin Hirt, Sven Smit

Uncertainty is not only everywhere in and around strategy—it is the very reason we need strategy. Without uncertainty, we would just need a plan to go from A to B.

Chris Bradley, Martin Hirt, Sven Smit

Business strategy, at its heart, is about beating the market; that is, defying the power of “perfect” markets to push economic surplus to zero. Economic profit—the total profit after the cost of capital is subtracted—measures the success of that defiance by showing what is left after the forces of competition have played out.

How to Confront Uncertainty in Your Strategy

Lack of certainty about the future is the very reason you need a strategy. Instead, embrace probability.

Strategy to Beat the Odds

We identified ten performance levers and, importantly, how strongly you have to pull them to make a real difference in your strategy’s success. We divided these levers into three categories: endowment, trends, and moves. Your endowment is what you start with, and the variables that matter most are your revenue (size), debt level (leverage), and past investment in R&D (innovation). Trends are the winds that … [ Read more ]

An Incumbent’s Guide to Digital Disruption

No matter how strong their ingoing balance sheets and market share—and sometimes because of those very factors—incumbents can’t seem to hold back the digital disruption tide. The champions of disruption are far more often the attackers than the established incumbent. The good news for incumbents is that many industries are still in the early days of digital disruption. Print media, travel, and lodging provide valuable … [ Read more ]

Mastering the Building Blocks of Strategy

Increase your likelihood of developing effective strategies through an approach that’s thorough, action-oriented, and comfortable with debate and ambiguity.

The Strategic Yardstick You Can’t Afford to Ignore

A systematic scan of the economic-profit performance of nearly 3,000 global companies yields fresh insight about where and how to compete.

Have you tested your strategy lately?

Ten timeless tests can help you kick the tires on your strategy, and kick up the level of strategic dialogue throughout your company.

Chris Bradley, Martin Hirt, and Sven Smit

80 percent of the variance in revenue growth is explained by choices about where to compete, leaving only 20 percent explained by choices about how to compete. Unfortunately, this is the exact opposite of the allocation of time and effort in a typical strategy-development process. Companies should be shifting their attention greatly toward the “where” and should strive to outposition competitors by regularly reallocating resources … [ Read more ]