A book that I’ve read recently is Strategy Beyond the Hockey Sticks, written by Chris Bradley, Martin Hint and Sven Smith, consultants at McKinsey. This book covers the social side of strategy development and the common pitfalls executives experience.
It introduces new ways to think about strategy primarily centered around bringing an outside view of your competitive landscape, and evaluating strategy in the theme of big moves.
Perhaps the most insightful element of the book is the encouragement to take an outside view. It’s something that as investors we often do, for example in my previous posts here when I look at industries as a whole. But when you’re in a business, you barely look past one or two competitors - at best.
The authors encourage executives to take a look at a range of companies both inside and outside their industry. This of course, is much more doable with data analytics and the power to churn through financial data.
Of course, taking an outside view is pointless if you don’t know what you’re looking for. This where the authors have identified three categories of moves and attributes that lead to business success, these are endowment, trends and moves.
All companies have elements of Endowment and Trends, two main concepts the authors claim lead to business success.
Endowment is the starting point for your company, it considers:
- Current debt levels
- Size of company
- Level of investment in research and development.
The next component is trends. Trends are two fold:
- Industry trends
- Exposure to growth economies.
The industry trend, unsurprisingly is the biggest component to a business success. Through an outside view, this book encourages you to look critically at your industry and perhaps make moves to a better industry if needed.
A criticism I have of this book is the applicability of trends. Trends are the single biggest lever in developing a successful company. That being said, truly successful companies have successfully either changed their industry through innovation or moved industries through transformation.
Five big moves
The final category are the big moves, these comprise of five big moves:
- Programmatic acquisitions
- Dynamic allocation of resources
- Strong capital expenditure
- Improvements in Differentiation
I won’t go into much detail of each of these, there are many great blog posts out there summarising and analysing the book - McKinsey even have this great video summarising the book. But ultimately I do encourage you to read the book. Instead, over the next series of posts, I’ll aim to get a wide view of multiple industries and main levers these elements to real-world stock data.