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McKinsey: Testing Your Strategy

From McKinsey Quarterly: Ten timeless tests can help you kick the tires on your strategy, and kick up the level of strategic dialogue throughout your company.  Before you tell me you're tired of test-taking, results show that most companies' strategies pass fewer than four of the ten tests.

Test #1 is Will your strategy beat the market?
"All companies operate in markets surrounded by customers, suppliers, competitors, substitutes, and potential entrants, all seeking to advance their own positions...The best companies are emulated by those in the middle of the pack, and the worst exit or undergo significant reform. As each player responds to and learns from the actions of others, best practice becomes commonplace rather than a market-beating strategy. Good strategies emphasize difference—versus your direct competitors, versus potential substitutes, and versus potential entrants."
Key to McKinsey's analysis is this: markets drive a reversion to mean performance.  So if you're LIKE everybody else, benchmarking against everybody else, copying everybody else, why should you expect to peform BETTER than everybody else? 

Strategy is about winning through differences, not enjoying the warmth of some cliff-jumping herd.

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