Strategy Beyond the Hockey StickPeople, Probabilities, and Big Moves to Beat the Odds
Beat the odds with a bold strategy We’ve all seen hockey stick business plans before. A future where results sail confidently upward, but with a dip coinciding with next year’s budget. CEOs usually rely on their experience and business smarts to figure out which of those hockey sticks are real, and which are fake. But all too often getting to a “yes,” competing for resources, and striving to claim credit, cloud the hard decisions. Another strategy framework? No thanks, we already have plenty of those, and they don’t fix the real problem: the social dynamics in your strategy room. Mining the data from thousands of large companies, McKinsey Partners Chris Bradley, Martin Hirt and Sven Smit open the windows of that room, and bring an “outside view.” They found three discrete groups of companies: the bottom quintile with massive economic losses; the long, flat, middle 60 percent with practically no economic profit; and the top 20 percent to whom all the value accrues. Some companies do achieve real hockey stick performance: but just 1-in-12 jump from the middle tier to the top over a ten year period. This does not happen by magic—there is an empirically-backed science to improve your odds of success by capitalizing on your endowment, riding the right trends, and most importantly, making a few big moves. To make these big moves happen, you’re going to have to break through inertia, gamesmanship and risk aversion. You’re going to have to mitigate human biases and manage group dynamics. Eight practical shifts can help you do this, and unlock bigger, bolder, better strategies. This is not another by-the-book approach to strategy. It’s not another trudge through frameworks or small-scale case studies promising a secret formula for success. It’s an irreverent, fact-driven, and humorous take on the real world of strategic decision making.
Introduction: Welcome to the Strategy Room 1 You are not alone 2 The villain is the social side of strategy 4 Where is the outside view? 6 Making big moves happen 8 The journey ahead of us 9 1. Games in the Strategy Room—and Why People Play Them 13 The social side of strategy, in action 15 The dreaded hockey stick 17 Can we handle the truth? 20 Playing the inside game 21 Send in the guru 22 The wrong problem for human brains 23 The biased mind 25 Now add social dynamics to the mix 27 When the inside view remains unchecked 31 2. Opening the Windows of Your Strategy Room 37 The right yardstick 40 Your business lives on a Power Curve 42 What we see on the map 44 Why you are where you are 49 A fresh perspective with the outside view 53 3. Hockey Stick Dreams, Hairy Back Realities 57 The rise of the hairy back 58 Getting to yes 60 A haircut from finance 60 Bold forecasts 62 Timid plans 68 Corporate peanut butter 70 Shooting for the known 70 Real hockey sticks 72 4. What are the Odds? 75 The knowable probability of success 77 Flight paths of the upwardly mobile 80 A tale of three companies 83 Where are the odds in the strategy room? 85 The push for certainty 87 You are your numbers 89 5. How to Find the Real Hockey Stick 93 What’s different this time? 94 Check the facts 95 The odds that matter: Yours 96 The 10 variables that make the difference 99 Endowment 100 Trends 101 Moves 102 It all matters 103 The mobility dashboard 105 Know the odds 109 Is that all? 110 6. The Writing is on the Wall 115 A very different conversation about strategy 118 Tennis or badminton? 119 Industries are escalators 120 Change your industry or change industries 123 Consider changing locations, too 124 Go micro 125 The need for privileged insights 127 Acting on the writing on the wall 128 The four stages of a disruptive trend 130 Stage one: Signals amid the noise 132 Stage two: Change takes hold 134 Stage three: The inevitable transformation 136 The hardest stage 136 Stage four: Adapting to the new normal 139 7. Making the Right (big) Moves 143 Big moves are essential 146 Corning’s story 150 Programmatic M&A and divestitures 150 Active resource re-allocation 152 To re-allocate, you have to de-allocate 156 Strong capital programs 156 Caution on capex 158 Distinctive productivity improvement 158 Running fast and getting nowhere 159 Differentiation improvement 162 Are you playing to your advantage? 165 Big moves make for good strategy 166 8. Eight Shifts to Unlock Strategy 173 From annual planning ... to strategy as a journey 175 From getting to “yes” ... to debating real alternatives 177 From peanut butter ... to picking your 1-in-10s 181 From approving budgets ... to making big moves 184 From budget inertia ... to liquid resources 188 From sandbagging ... to open risk portfolios 190 From “you are your numbers” ... to a holistic performance view 193 From long-range planning ... to forcing the first step 196 The package deal 198 Epilogue: New Life in the Strategy Room 201 Acknowledgments 205 Appendix 207 About our sample and method 207 A note on economic profi t and total returns to shareholders 209 How the odds look different from the top or bottom 209 Life at the top 211 Life at the bottom 211 Notes 215 Index 227
SVEN SMIT is a Senior Partner in Amsterdam. He leads McKinsey Western Europe and, before that, led McKinsey's Strategy Practice. He is the co-author of the bestselling book Granularity of Growth. MARTIN HIRT is a Senior Partner in Greater China. He leads McKinsey's Global Strategy & Corporate Finance Practice. CHRIS BRADLEY is a Partner in Sydney. He leads McKinsey's Business Strategy service line.
Strategy Beyond the Hockey Stick is about unlocking big moves—because that is what it takes to beat the odds in business. Anchored in empirical evidence from thousands of companies, it reveals what really matters—and what does not—for exceptional performance. Despite their best intentions, business leaders often get bogged down by human biases and social dynamics that get in the way of clear strategy and strong execution. Just about anyone proposing a strategy comes in with a confident "hockey stick" projection. But how do you distinguish the true breakthrough plans from the fakes—and then carry through the tough choices needed to make good on those promises? Strategy Beyond the Hockey Stick provides you with practical advice on how to change these dynamics in your strategy room and make the right strategic moves. Chris Bradley, Sven Smit, and Martin Hirt are all leaders in McKinsey's Strategy Practice. They have worked together over the last decade on a mission to advance the state of the art in strategic management, while serving corporate leaders around the world to help them beat the odds.
PRAISE FOR STRATEGY BEYOND THE HOCKEY STICK "A different kind of book—I couldn't put it down. Inspiring new insights on the facts of what it takes to move a company's performance, combined with practical advice on how to deal with real-life dynamics in management teams." —JANE FRASER, CEO, Citigroup Latin America "A refreshing new look at what drives corporate performance. Even in fast-growing Internet businesses, people and their interactions are at the core of developing and executing strategies. The ideas shared in this book inspire fresh thinking and bold actions." —MARTIN LAU, President, Tencent Technology "This book is fundamental—I have seen hockey sticks in business plans more than I like to admit. The principles laid out here, with compelling data, are a great way around the social pitfalls in strategy development." —FRANS VAN HOUTEN, CEO, Royal Philips N.V. "Sustaining institutions long-term often means determining what must evolve. Strategy Beyond the Hockey Stick provides a roadmap for strategic evolution and a toolkit for identifying big moves that will take already strong organizations to the next level of performance." —WENDELL WEEKS, Chairman and CEO, Corning Incorporated "Every once in a while, a genuinely fresh approach to business strategy appears. Strategy Beyond the Hockey Stick delivers exactly that. Its analysis of the human elements in strategy-making—social, psychological, and political—cuts to the heart of why most strategies are banal and fail to focus action. If you want to break out of the rut, get this book." —PROF. RICHARD RUMELT, UCLA Anderson School of Management "The great contribution of this book is that it joins the 'hard data' side to the equally crucial—and largely ignored—arena of social dynamics and human leadership. It is this rare combo of the 'hard' and the 'soft' that makes Strategy Beyond the Hockey Stick so distinctive." —PROF. ROBERT KEGAN, Harvard Graduate School of Education
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