Ten Tests of Strategy by McKinsey – Asrar Qureshi’s Blog Post #1136

Ten Tests of Strategy by McKinsey – Asrar Qureshi’s Blog Post #1136

Dear Colleagues! This is Asrar Qureshi’s Blog Post #1136 for Pharma Veterans. Pharma Veterans Blogs are published by Asrar Qureshi on its dedicated site https://pharmaveterans.com. Please email to pharmaveterans2017@gmail.com  for publishing your contributions here.

Credit: Mikhail Nilov

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Preamble

Strategy making is a necessity but in certain corporates, it becomes a favorite pastime among senior managers. There are uncountable strategy meetings, workshops, working groups etc. The strategies that emerge are many a times repeat of the old ones with different words and emphasis on ‘more of the same’. For example, last year we spent one hundred million on customer services, this year we should spend 200 million. Very rarely, new ground is broken.

Strategy is a roadmap of the future and must be separated from tactical plan. The frameworks for developing strategy are different. When a strategy is formulated, it is considered that the job is done. McKinsey suggests that before the strategy is put into practice, it should be tested to see if it will stand the pressures of internal stakeholders, market, and competitors. They have designed a set of provocative questions to assess the quality and robustness of strategy. They have set the bar high intentionally to reveal a strategy’s weaknesses and blind spots.

The following document is not exhaustive; it is rather indicative. I encourage strategy enthusiasts to dive more deeply into each test for its application in real life.

10 Timeless Tests to Ensure Your Strategy Truly Wins

Are you confident your strategy will outperform the market — not just match or survive it? McKinsey’s “10 Timeless Tests” provide a rich framework to rigorously pressure-test your plan. Most organizations pass fewer than 4 out of 10 — and only about 2% pass 9 or more 

Let’s walk through each test, its importance, and practical steps for leaders serious about building winning strategies.

Will Your Strategy Beat the Market?

Beating the market means earning sustained returns above your cost of capital, which requires possessing—and protecting—an enduring competitive edge. But markets drive returns toward the mean, so you need real differentiators.

What to do:

Calculate economic profit relative to peers.

Identify structural imperfections—like niches or regulatory barriers which you can exploit.

Monitor key metrics (e.g., ROI, margin premium) vs. sector trends.

Does Your Strategy Tap a True Source of Advantage?

Superficial advantages vanish. Real advantage comes from control over scarce markets or segments, and unique skills or assets competitors cannot easily replicate.

What to do:

List your firm’s structural and capability advantages.

Test whether they’re valuable, rare, and sustainable.

Bundle capabilities, like Aldi’s lean operations, to make copying difficult. [Aldi is a German multinational discount supermarket chain for offering low prices on groceries and household goods. It operates over 12,000 stores in 18 countries]

Is Your Strategy Detailed Enough About Where to Compete?

Broad strokes lead to diluted effort. The right segmentation enables targeted impact — research shows 80% of growth variance is rooted in where you compete.

What to do:

Divide your markets into 30–50 finely chosen segments (e.g., city-level, micro-demographics).

Carry out segment-level analysis on growth potential, share, and profitability.

Reallocate resources to the most attractive segments.

Does Your Strategy Put the Enterprise Ahead of Trends and Discontinuities?

Waiting to react means it's too late. Trends, such as, digital disruption, demographic shifts, ESG, unfold gradually but hit hard.

What to do:

Scan fringe innovations, consumer shifts, and new entrants.

Model their potential financial impact (what-if scenarios).

Identify tipping points at which you’d pivot or invest differently.

Does Your Strategy Embed Privileged Insights and Foresight?

Data is widely available; unique insight gives you an edge. McKinsey calls this “privileged insight”.

What to do:

Spot weak signals in customer behavior or emerging markets.

Conduct field visits, horizon scanning, and expert interviews.

Base decisions on proprietary insights, not just public data.

Is Uncertainty properly defined and accounted for?

Strategy involves choosing now for an unpredictable future. Recognizing uncertainty avoids being blindsided.

What to do:

Map major uncertainties and assign them to scenario levels.

Narrow outcomes where possible.

Run scenario planning for ambiguous or high-impact risks.

Does Your Strategy Balance Commitment-rich Choices with Flexibility and Learning?

High commitment brings scale; too much locks you in. It’s about the right mix of commitment vs optionality.

What to do:

Identify "big bets" that define your future.

Include no-regret moves (e.g., cost-reduction, capability development).

Build “real options” — small, modular investments that can be scaled later.

Have You Evaluated Alternatives Without Bias or False Inference?

Biases like over-optimism, anchoring, loss aversion, herding, and confirmation bias can derail real strategic thinking.

What to do:

Use premortems to expose flaws.

Frame decisions with counterfactuals (“what if we’re wrong?”).

Seek devil’s advocates and diverse perspectives.

Do You Have Conviction to Act?

A brilliant strategy is useless without commitment. Without buy-in from key decision-makers, it remains aspirational.

What to do:

Assess sponsorship by board, CEO, and LT.

Translate strategy into specific metrics, roles, and timelines.

Cross-check resource allocation and incentives against strategic priorities.

Have You Translated Your Strategy into Clear Actions and Reallocation of Resources?

Vague strategy = vague outcomes. Actions and resource shifts reveal true intent..

What to do:

Map initiatives to specific investments, milestones, and accountable owners.

Keep score: ensure budgets and staffing reflect strategic priorities.

Monitor execution rigorously, adjust as needed.

Why These Tests Matter -- And How to Use Them

McKinsey executives emphasize that traditional tools (Porter’s 5 Forces, 3 Cs) offer context—but fail to pressure-test your strategy in today’s fast-paced environment. These 10 tests are about toughening your thinking and increasing your odds.

Implementation Tips:

• Run strategy workshops around each test.

• Scorecard your strategy on each dimension and publish results.

• Revisit quarterly, not annually—to stay adaptive.

• Use for M&A evaluation, annual planning, and transformation efforts.

Sum Up

In an era of volatility, strategy isn't “set and forget.” These 10 tests help leadership teams engage in deeper, more disciplined dialogue. Uncovering blind spots and ensuring strategic choices actually build durable, differentiated advantage.

Strategy that passes these tests isn't just safe, it’s battle-ready.

Concluded.

Disclaimers: Pictures in these blogs are taken from free resources at Pexels, Pixabay, Unsplash, and Google. Credit is given where available. If a copyright claim is lodged, we shall remove the picture with appropriate regrets.

For most blogs, I research from several sources which are open to public. Their links are mentioned under references. There is no intent to infringe upon anyone’s copyrights. If, any claim is lodged, it will be acknowledged and recognized duly.

Reference:

https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/how-strategy-champions-win?stcr=74EEB270C66847169215DA3A60A4E34B&cid=other-eml-alt-mip-mck&hlkid=b5cc87fc69cb4edaa5f9b3dfee0558ba&hctky=15999472&hdpid=97656f33-cf75-42e7-8c82-d10620742af8