Have you tested your

strategy lately?
Group 4
Adyasa Mishra
Santosh Jena
Sudhanshu Sekhar
Anshupa Patel
Dhriti Gautam
Medha Sharma
 THE NEED FOR TESTING OUR STRATEGIES

▰ Strategy is a way of thinking not a procedural

exercise & frameworks
▰ Shorter planning cycles and decentralized
strategic decision making increase the utility
of common sets of tests
▰ Presenting, set of tests aimed at helping
executives assess the strength of their
strategies
▰ The 10 tests described here help formalize Number of tests rated as fully consistent with company
something that the best strategists do quite strategy, % of respondents

intuitively
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 Test 1: WILL YOUR STRATEGY BEAT THE
MARKET?

▰ An imperfection controlled by a company is ▰ Thus the question, are we beating the

a competitive advantage. market, or “just playing along”?
▰ It is important to maintain economic surplus ▰ Sometimes a divergent technique from a
to thrive. weak contender surprisingly helps them
▰ The current state at any one time is the sum to win.
product of all previous events- Winners of
today are often the accidents of past.
▰ US Tyre industry- In 1920s at its peak, there
were almost 300 competitors while by
1940s, only 4 producers controlled 70% of
the market.
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 Test 2: DOES YOUR STRATEGY TAP A TRUE
SOURCE OF ADVANTAGE?

▰ Why do you make money? ▰ Special capabilities are of two types:

▰ It answers your competitive advantage,
which stems from two sources.
▻ Positional advantages for structurally
attractive markets. Creates an
asymmetry between those inside and
those outside high walls. e.g. 2 beer
makers controlled 95% of Australia’s
market for 2 decades.
▻ Special capabilities are scarce
resources whose possession confers
unique benefits.
1. The common ones like drug patents.
2. Distinctive competencies like
Innovation or managing stakeholders.
▰ Test any claimed capability advantage
vigorously before pinning their hopes on
it.
▰ What can erode positional advantage?
▰ Which special capabilities are becoming
vulnerable?
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 Test 3: IS YOUR STRATEGY GRANULAR ABOUT
WHERE TO COMPETE?
▰ Which should be the market to compete?
▰ It influences resource allocation and thus
the likelihood of success
▰ What is the right level of granularity?
▰ Defining and understanding these segments
is important
▰ 80 percent of the variance in revenue
growth is due to choices about where to
compete
▰ The real scenario is the exact opposite
in a strategy-development process
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 Test 4: DOES YOUR STRATEGY PUT YOU AHEAD
OF TRENDS?
▰ A major innovation or change in regulation
can drive a full-scale industry transition
▰ But companies response is slow- they don’t
respond until a trend hits profits
▰ Major market transitions are an
opportunity to rethink about technology,
distribution and strategies
▰ Strategists must take trend analysis
seriously
▰ Assess their potential impact on the
financial position and articulate the
decisions
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 Test 5: DOES YOUR STRATEGY REST ON
PRIVILEGED INSIGHTS?

▰ Data today is cheap and leaves many ▰ Supermarket chain recently redesigned its
feeling comfortable with an informed store network strategy based on
strategy clustering algorithm
▰ Diverts attention from where insight ▰ Experience the world through customers
creating advantage lies perspective
▰ Develop proprietary insights by creating list
of questions which can have an impact on
company's strategy
▰ Collect field data rather than industry
reports

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 Test 6: DOES YOUR STRATEGY EMBRACE
UNCERTAINTY?

▰ Characterize what variety of uncertainty ▰ List variables that can influence a

companies face:- strategic decision
1. Level1: Offers a clear picture of future with ▰ Remove as much uncertainty
range of outcomes to support decision ▰ Apply scenario analysis to the remaining
2. Level2: Identifiable outcomes which uncertainty
company should prepare
3. Level3: Possible outcomes represented by
probability distribution
4. Level4: Features ambiguity

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 Test 7: DOES THE STRATEGY BALANCE
COMMITMENT AND FLEXIBILITY?

▰ Commitment and flexibility are in inverse
proportion to each other, hence there is a
trade-off
▰ Choice of decisions which are strategic and
expect commitment matters
Market-beating strategy
Focus on critical, high commitment choices
Strategy built as a portfolio:
▰ Big-bets
▰ No-regret moves

▰ Timing of commitment according to

▰ Real options
risk/return trade-off

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 Test 8: IS YOUR STRATEGY CONTAMINATED BY
BIAS?

Traits that affect decision making

▰ Beliefs defeated by forces beyond our ▰ Over optimism
control can lead to wrong strategies ▰ Anchoring
▰ Reasons can be fuzzy thinking or some ▰ Loss aversion
uncontrollable situations
▰ Confirmation bias
▰ Strategy depends on extrapolation into the
future, hence leading to Attribution error ▰ Herding
and Survivorship bias ▰ Champion bias

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 Cures and suggestions

▰ Developing multiple hypotheses & potential
solutions unlike current practice of
choosing one
▰ Bringing fresh eyes to the issues and
maintaining culture of change
▰ Specifying objective decision criteria in
advance & examining possibilities of mis-
happenings
Premortem assessment
▰ Imagining a negative outcome of the
decision made and designing contingency
plans
▰ Predicting mistakes and contemplating on
the reasons

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 Test 9 : IS THERE CONVICTION TO ACT ON YOUR
OWN STRATEGY
▰ Test to know the investment made for
the strategy is worth or not
▰ Good strategies fall short in
implementation because of an absence
of conviction , just one nonbelievers can
strangle strategic change
▰ To move with implementation, need a
process that questions the old
assumptions so to develop a new set of
beliefs
▰ Management must make sure that the whole
team actually shares the new beliefs that
support it
▰ visit plants and customers or tour a country
your company plans to enter, so that the
leadership team can personally meet crucial
stakeholders
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 Test 10 : HAVE YOU TRANSLATED YOUR
STRATEGY INTO AN ACTION PLAN?

▰ In implementing any new strategy, one ▰ Make sure ongoing resource allocation
has to define clearly the shift change with processes are aligned with strategy. For help
respect to company’s business model look where the best people and the most
▰ This is an action plan. Everyone needs to generous budgets are
know what to do, accountable with proper
energy
▰ Senior team should draw on the large
body of research and experience offering
solid advice on change management

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 CONCLUSION

▰ The above mentioned topics are part of strategic dialogue in organizations

▰ Though seemingly obvious, they are random, simultaneous & extremely confusing

▰ These tests might assist in identifying gaps in executives’ strategic thinking to

improve quality of strategy development process

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