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Business Strategy Tools

The Management Pocketbooks Pocket Correspondence Course

Pocketblog has gone back to basics. This is part of an extended management course.

Over the years, Pocketblog has covered some important business strategy thinkers, so we will start by reviewing what we have.

Good Strategy/Bad Strategy

This is the name of Richard Rumelt’s book and it neatly frames any discussion of business strategy by defining what your outcome needs to look like. Take a look at ‘What makes good business strategy?

The Balanced Scorecard

In one of the all-time classic Harvard Business Review articles, Robert Kaplan and David Norton set out to ensure that our business strategies are balanced across a range of different areas of the business. The tool they introduced is nearly ubiquitous in the upper reaches of the management world, and no manager can get away without at least a passing familiarity with the Balanced Scorecard. Take a look at ’Balance is Everything’.

The McKinsey 7S Model

One of my own favourite tools is also about balance, but this time about ensuring all the elements of your business strategy and planning are all aligned. It was developed by consultants at top US firm, McKinsey: Tom Peters and Robert Waterman. The seven S model reminds us that shared values, style, skills, staff, structure, systems, and strategy must all be consistent with one another. Take a look at ‘On Competition: Internal Forces and the 7-S Model’.

The Awesome Michael Porter

Over the years, three blogs have featured the thinking of business strategy specialist, Michael Porter.

‘On Competition: Five Forces’ briefly introduced two of his principal ideas: the five forces model and his three generic business strategies that flow from them.

‘On Competition, again: Porter’s Five Forces’ took a deeper look at the five forces model.

‘On Competition – The Far End of the Value Chain’ focused on the three generic business strategies and his concept of the value chain. Here, I speculated that some businesses have found a fourth, very successful business strategy.

By the way, a recent entry in the Pocketblog Correspondence course returned to the idea of the value chain. Take a look at ‘The Value Chain’.

The Boston Consulting Group Matrix

Having finished reviewing the archives, let’s take a look at one business strategy tool. This is designed to help us answer a very simple question:

‘We have a number of products (or services) but limited resources to invest in their development and marketing. Which products (or services) should we focus our investment on?’

The folk at Boston Consulting Group who developed the tool suggested that two considerations are paramount in making our judgements:

  1. What is our market share?
    Do we have a dominant market position with this product/service, or a modest share. This dictates the base from which investment can grow or maintain our position.
  2. What is the growth potential of the market?
    Is this product in a growing, static or declining market? Clearly static and declining markets offer far less opportunity to recoup investments.

The result was a simple matrix that plots these two conditions against one-another and identifies four generic strategies. You can click on the image to enlarge it.

The Boston Consulting Group (BCG) Business Strategy Matrix

The Matrix gives us four strategies, three compelling labels for our products/services and one label that is, frankly, honest but lame.


Place your biggest investment bets on the products which dominate markets with high growth potential. If you are Samsung, you will be investing highly in mobile telephone products because the market continues to expand and you already have a dominant position.


Do not invest – arguably, disinvest – in products which have a small share of a static or declining market. There is not much to win and you are not placed to take much of it.

Cash Cows

What do you do if you are a dominant player in a static or declining market? BCG suggested it is like having invested in a cow: you should look after it and milk it while it is healthy. This is how I read the men’s razor market. If you are one of the big players in your region (Gillette, Wilkinson Sword, Bic, for example, here in the UK), then you have a lot of investment in products and marketing, and a strong, valuable revenue stream. Over investment can gain little, as the market will never expand until men grow two heads or we need to shave more of ourselves. But if you don’t invest, you will lose the benefit of your position to your rivals. So, what do we see? Incremental investment in new – but hardly innovative – products. When I started shaving, two blades was new. Now we are up to five. By the time I no longer need to shave (about thirty years or so, I guess) I predict an eight bladed razor will be common.

Question Marks

What to call these pesky products… Does the label attach to the products or the challenge BCG found in labelling them with a cute title? Set aside that curious linguistic conundrum and we face the most difficult challenge of all. Your market is growing, so there is a big prize for the skilled/lucky investor. But your market position is weak, so you have a low chance of success against bigger rival products. Like many good tools, the BCG matrix does not give you all the answers. But it does bring your choices into stark relief.

Further Reading

From the Management Pocketbooks series:

  1. The Strategy Pocketbook
  2. Business Planning Pocketbook
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Joan Woodward: Technology drives Structure

In the  1950s, a revolution was underway in management thinking. Classical ‘scientific’ management theory had been discarded by the humanists, and now a new generation of researchers were challenging humanistic approaches.

Their conclusions led to ‘contingency theory’ – the idea that the best approach to management is contingent on the situation. Among them, working from the southern English backwater of SE Essex Technical College was a forgotten leader in the field of management studies: Joan Woodward.

Joan Woodward

Very Short Biography

Joan Woodward was born in 1916. She was originally a classicist, but changed direction and got her first academic post in the Department  of Social Sciences, at Liverpool University, where she worked from 1948-1953. There she started her work in industrial relations, which she expanded when she moved to South East Essex Technical College (now part of the University of East London).

It was here that Woodward did her most significant research, from within the Human Relations Research Unit. The purpose of her research was to enhance the performance of commerce and industry using the techniques of social science. She did this by examining, in detail, the organisational structures of 100 British manufacturing companies in the SE Essex area (east of London and north of the Thames).

She stayed there until 1957, when she secured a post at the far more prestigious Imperial college. She remained there until her untimely death, from breast cancer, in 1971. Woodward became the second female professor at the College when she was appointed Professor of Industrial Sociology in 1970.

Woodward summarised her research in her 1970 book, ‘Industrial Organization: Theory and Practice‘.

Woodward’s Findings

Today, the idea that there is no ‘best’ organisational structure, but that the right one ‘depends’ on many factors is taken as so obvious as needing no explanation. This was not at all the case in the 1950s. So, when Woodward published her first findings in 1958, they seemed revolutionary.

Among the 100 manufacturers she studied, she found wide differences in the way they were organised:

  • Management structures, levels in the hierarchy and spans of control
  • How work was allocated
  • Definitions of responsibilities
  • Levels of accountability
  • Skill levels of the workers

Her analysis led her to categorise the organisational structures and discover they were driven by the production methods and technology in use. These in turn, were driven by the products the manufacturer created, and the demands of their markets.

She categorised three types of structure with approximately equal representation in her sample (8 were not classified).

  • Group 1: Small Batch and Unit Production
  • Group 2: Large Batch and Mass Production
  • Group 3: Process (continuous) Production

Each had different structural characteristics, which we don’t need to examine here, because the technologies have changed a lot in the last 70 years. The principle remains relevant: that the systems your organisation creates are critical to successful organisational design. This is a different aspect to the idea of contingency, to the more familiar Situational Leadership models. It is also an idea (the need for structure to reconcile to systems) that finds its modern articulation in the McKinsey 7S model.

Woodward’s later work started to break down the control approaches that companies take. They identified two independent dimensions of control:

This ranges from the highly individualistic direct approach (often present in start-ups led by charismatic entrepreneurs) to bureaucratic styles of impersonal leadership, all the way to automated control of work that we now see in large, computerised warehouse operations.

At the fragmented end, every part of the organisation finds its own solutions (and ‘re-invents the wheel’ in 1990s jargon). We now see far more centrally controlled systems than Woodward did, facilitated by modern technology and mediated by business school teaching that this is more efficient. However, a select group of businesses are finding that this level of rigidity results in customer unfriendly outcomes that have led them to reject it and restore a measure of localism in their control systems.


So, was Joan Woodward ahead of her time? I don’t think so. I think she was exactly of her time. But this should not detract firstly, from the importance, at the time, of her work, and secondly, of the achievement of a woman, in the 1950s and 60s, who led her field.


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Tom Peters: Provocateur

Pick your favourite epithet: Tom Peters has been described as a gadfly, a showman, a curmudgeon, , an agent of chaos, and a guru (even an uber-guru). He is all of these and more. Whatever his contribution to management thinking, Tom Peters certainly has been influential, becoming a multi-millionaire on book sales alone.

Tom PetersBrief Biography

Tom Peters was born in 1942 and grew up in Baltimore. He went to Cornell University on a US Navy scholarship, where he earned a bachelor’s degree in Civil Engineering. He then served for four years in the US Navy, including a tour in Vietnam and one at the Pentagon. Following that, he went to Stanford University, gaining a PhD in Organisational Behaviour, in 1973.

In 1974, he joined US management consulting firm McKinsey, where he quickly became a partner in 1977. The firm specialised (and still does) in corporate strategy, but Peters soon discerned that their offering was poorly rooted in what was actually happening in large US corporations. He took on a major research project.

When he left McKinsey in 1981, he (along with co-author, Robert Waterman) used some of that research as the basis of his first book: ‘In Search of Excellence’. This drew lessons from what they then viewed as ‘America’s best-run corporations’. The book became a multi-million dollar best-seller, and created a reputation that Peters went on to capitalise upon fully. He pursues his business interests through The Tom Peters Company.

A series of books have followed, each one supplanting the last, as Peters senses and responds to the changes in the business environment. We’ll look at his ideas through four of them, but a fuller list includes:

In Search of Excellence

In studying 43 organisations – among the biggest (and, at the time, what they thought were the best) in America, Peters and Waterman drew some simple conclusions about what made them the best. These organisations included P+G, HP, GE, IBM, J+J, and some others that were not best represented by initials! Among the conclusions that they drew were that excellence comes from doing the basics, but doing them extraordinarily well.

Other conclusions were that the best organisations:

  • had a strong bias towards action and implementation
  • paid close attention to their customers
  • had a great concern for their people
  • celebrated trial and error experimentation, rather than didactic implementation of a nice theory
  • believed management was about managing the corporation’s values
  • stuck to their core competences: ‘sticking to the knitting’

At the heart of this was a rather nice model that the authors developed while at McKinsey: The 7S Model. This started an anti-rationalist trend that has grown in Peters’ thinking – moving away from data-driven and numerical models of business strategy and behaviour (that his engineering background might lead us to expect) to a more strongly humanistic and subsequently near-random view of how organisations should work. In simple terms, the 7S model asserts that organisations need to fully integrate shared goals with strategy, systems, style (culture), staff, skills, and structure.

None of their conclusions seemed revolutionary. Indeed, this was the strength of the book – a huge body of evidence supporting good common sense. The authors have always acknowledged this.


Sadly, it was not long before evidence emerged that some of ‘America’s best run corporations’ were not, in fact, doing so well. Happily for Peters and Waterman, though, the book had already sold millions – and continued to sell well. But Peters felt the need for a response. This came, in book form, in 1987, with…

Thriving on Chaos

Why were the lessons of In Search of Excellence not always predictive of success? Because the rules of business have changed. We are in a time, Peters said, of uncertainty and accelerating change – what we now call a VUCA world (Volatile, Uncertain, Complex, and Ambiguous). This led him to state, memorably:

‘There are no excellent companies’

In a changing world, companies need to change – sticking to the knitting will not give you the flexibility you need to survive. This is a point that is being made afresh by the subject of last week’s Pocketblog, Nilofer Merchant.

Despite this, Peters still believed the core of In search of Excellence was valid, but that we need to add new thinking:

  • Constant innovation
  • An obsession with being totally responsive to our customer
  • Leadership that embraces – no, loves – change
  • An orientation towards partnership

The rules had changed, and it was not long before Peters was on the track of the new master-rules for success. In 1992, he introduced his new thinking, with…

Liberation Management

Don’t just respond to customers, build your organisation around creating, maintaining and growing your relationships with customers. The future, said Peters, will be all about flexibility and interconnected social networks. Corporations will need to be agile, forming and re-forming teams and structures rapidly. And what is the unit of exchange in these organisations? Knowledge. Not only is it the primary capital of the new economy, but it is the currency that buys ideas and innovation.

Liberation management was a very clear start of a shift in Peters’ thinking towards informal, radical, crazy business thinking, that reached its zenith (some would say nadir) with…


This startling book is the acme of later Tom Peters style. It completes the journey from a dull academic thesis, to a highly readable but conventional first book, to innovative ideas presented in a folksy, simple way, to the soundbite driven 50List books, to this mix of text, images, soundbites and shouts. It rehearses many of his earlier ideas and presents them in a startling and repetitive way. By turns, the book is provocative, insightful and infuriating. At places, I found it literally unreadable. Look at the Amazon reviews – for such a prominent author, they are, to say the least, unusual.

So what is there to say of Peters?

Peters makes his money writing, lecturing and speaking. His seminars and platform performances are barnstormers and he has topped the corporate circuit for many years, as other figures have come and gone. He is often accused of pandering to the masses of business managers and leaders who flock to hear him. But two things are undoubtedly true of Peters:

Firstly, he is adept at sniffing the wind
His perception of what is going on in corporate America is acute and he is adept at spotting the trends and building a reasoned case that he communicates in a didactic – sometimes ranting – style

Secondly, he makes people think
His simple style is certainly engaging and his ideas are thought-provoking. Agree with him or not, you can hardly help engaging. And this is what many  thousands of executives do, every year. And that makes him influential.

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Richard Tanner Pascale: The Honda Effect

… or Experiment, Adapt, and Learn

Richard Tanner Pascale is known as a subtle thinker who refuses to be seduced by easy models and trite explanations, preferring to take an enquiring view of the complexities of organisational challenges.

His two big contributions flow, first, from his association with the McKinsey 7S Model, and later from his championing of the concept of complex adaptive systems as a powerful metaphor for organisations.

Richard Tanner Pascale

Brief Biography

Richard Pascale keeps much of his life private – there is little I can find of his early life, between his birth, in 1938, and his education at Harvard Business School. In the late 1970s, he and fellow academic Anthony Athos collaborated with McKinsey consultants Robert Waterman and Tom Peters in the creation of the 7S model, which later became a central component of his and Athos’ book, ‘The Art of Japanese Management’. He spent 20 years at Stanford University n their Graduate School of Business and then became an independent consultant. He is now also an Associate Fellow of Said Business School, Oxford University.

Early Work

The McKinsey 7S model offered seven inner-related aspects of a business and became an important part of both Athos and Pascale’s book, and of Peters and Waterman’s: ‘In Search of Excellence’. Whilst Peters and Waterman focused on examples of US success, taking a fairly reductionist view of what it takes to succeed, Pascale and Athos focused on Japanese business and highlighted the importance of the ‘soft S factors’ rather than the ‘hard S factors’.

Soft S Factors

  • Style of management
  • Staffing policies
  • Skills
  • Shared Values

Hard S Factors

  • Strategy
  • Structure
  • Systems

In this book, he also started to identify how Japanese businesses were able to respond successfully to complex and ambiguous situations, where rational analysis was unable to create a clear solution. Instead of jumping to a final resolution of a problem, he advocated accepting the uncertainties and proceeding on the basis of an initial assessment, and then using the new information you gain as the basis of tweaking your approach. This leads to a step-wise, incremental approach, rather than a bold, decisive strategy.

In many ways, therefore, he was advocating an approach akin to the Deming (or Schewart) Cycle, or the OODA and CECA Loops.

Work on Agility

The Boston Consulting Group (BCG) had taken an interest in why Honda had been so successful in launching a business in the US, but it was Pascale’s response in a 1984 edition of California Management Review that stimulated debate and raised awareness of Pascale’s ideas. Whilst BCG attributed their success to a long term investment strategy and gritty perseverance, Pascale saw things very differently. After interviewing Honda executives, he saw a series of failures and setbacks, followed by learning and adaptation. He perceived Honda’s approach as one of experimenting and reflecting.

Pascale adamantly rejects the western approach of oversimplifying, decrying management and strategy fads, and disassociating himself from common terms like expert or guru. Instead, he prefers a process of testing and questioning, reflecting and learning, and adapting. He has constantly returned to the theme of agility as the core competence of an organisation in a complex and changing world.  He concluded:

  • Agility is a key source of competitive advantage
  • Organisational culture and attitude to uncertainty and change, rather than processes are what lend it agility
  • Four things determine how agile an organisation will be:
    1. Power: the power employees have to influence events
    2. Identity: the extent to which individuals identify with their organisation
    3. Contention: how creatively is conflict managed
    4. Learning: how the organisation handles new experiences and ideas

In item three, the four elements can lead to stagnation, so Pascale went further, in a Harvard Business Review article (Nov-Dec 1997) called ‘Changing the way we Change’. He listed  seven mental disciplines that drive agility:

  1. Building an intricate understanding of your business
  2. Encouraging uncompromising straight talk
  3. Managing from the future
  4. Harnessing setbacks
  5. Promoting inventive accountability
  6. Understanding quid pro quos
  7. Creating relentless discomfort with the status quo

Pascale views complexity and ambiguity as the drivers of change, and that constant change as the key to success. ‘If it ain’t broke: don’t fix it’ is a truism. Pascale would say:

‘If it ain’t broke: go break it’.

Complex Adaptive Systems

More recently, he has been thinking carefully about the science of complex adaptive systems and drawing somewhat fruitful analogies with organisations. The problem I see is that this has become one of the fads he has derided, and been subject to much over-literal interpretation by lesser thinkers. His Sloane Management review article ‘Surfing the edge of Chaos’ and his subsequent book, also called ‘Surfing the Edge of Chaos‘ showcase his thinking in this interesting area. However, as intellectually stimulating as it is; it is hard to see how directly managers can apply the ideas.

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On Competition: Internal Forces and the 7-S Model

Tom Peters is a maverick thinker with a provocative style and use of language.  We introduced his work in October 2011.  However, far earlier in his career, while he was still at international consulting firm McKinsey, he co-developed a tool that rapidly fell into the mainstream.

Like last week’s Five Forces Model, the McKinsey 7-S model is provocative in a conservative sort of a way: it can provoke deep insights into your organisation, but is far from revolutionary.  It is radical in the true* sense of the work, rather than in the ‘way out’ sense it has come to adopt.

* Radical, from radix, meaning root.  As in radish.

The Origins of the 7-S Model

The 7-S model was created by Tom Peters and Robert Waterman (and, I am sure I read once, somewhere, another colleague, un-credited in the book) and was published widely in their business best-seller, ‘In Search Of Excellence: Lessons from America’s Best-Run Companies’.  The authors do credit Anthony Athos and Richard Pascale for their help in developing the model.

They acknowledge its ‘obviousness’ but rightly, I think, assert its great utility.  In last week’s Pocketblog, I suggested that Porter’s Five Forces Model needed an additional element to account for the forces within a business.  I think this is a great model for that purpose.  It also serves very well for non-profit organisations in the public and charitable sectors.

The Seven Ss

Okay, the authors also recognise that, at times, they needed a shoe horn to force the model into Seven Ss, rather than, say 4 Ss and a few other letters.  But it works very well, and the alliterative nature makes it memorable and therefore more useful.


The fundamental tenet of the model is that, for an organisation to succeed, it must bring seven dimensions into good alignment.  Gaps and mis-alignments will be sources of failure or, at least, internal tensions and therefore performance challenges. Let’s illustrate this with an admired company.

Shared Values

At the heart of the model is the need for shared values.  Apple’s whole business is aligned around the values of design and user experience.


Led by  Steve Jobs, the business had a style that combined ruthless attention to detail, with an entrepreneurial flair that encouraged ideas.  People have been free to innovate – as long as they met Jobs’ exacting standards.


Consequently, Apple is able to attract the very best staff, and is very demanding of them.


Staff come with passion and a lot of skills, but Apple invests massively to keep staff at the peak of product knowledge and technical excellence.


I can only speculate about the business structure, but I would expect it to echo the style – loose in the sense that alliances and collaborations are promoted in the development arena, but tight around the operational details, like supply chain and retail.


Apple’s procurement and supply chain systems have become legendary as they have built capacity for launching and supplying huge new market-dominating products.


Under Jobs, the strategy was to focus on a small number of products and to make them innovative and excellent – enabling the business to capture a huge market share relative to its size, and build a loyal customer following.

The 7-s model is represented by seven inter-connected circles arranged with six spaced around the seventh (Shared Values) in the centre.  This networked ‘Atomium-like’ image illustrates well, the network nature of these dimensions and their inter-relatedness.  There is also a big © symbol attached to it so, notwithstanding the numerous reproductions in derivative books and websites, we’ll settle for our alternative representation and a picture of Brussels’ Atomium!


The Atomium
by o palsson

Rights granted under Creative Commons Licence

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