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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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Tom Peters & Robert Waterman: In Search of Excellence

Management literature is chock-full of books about the best companies and how to emulate them. Arguably the best of all these books is Tom Peters’ and Robert Waterman’s In Search of Excellence.

After 35 years, the book remains in print and, while some of its exemplars have not proved to show such enduring excellence, the ideas persist.

Tom Peters & Robert Waterman - In Search of Excellence
Tom Peters & Robert Waterman – In Search of Excellence

Tom Peters

We have covered Tom Peters in some depth in an earlier Pocketblog. He was born in 1942 and went to Cornell University on a US Navy scholarship. He earned a bachelor’s degree in Civil Engineering and served for four years in the US Navy. Following that, he got a PhD in Organisational Behaviour from Stanford University.

In 1974, he joined US management consulting firm McKinsey in their San Fransisco office, quickly becoming a partner. There, he took on a major research project looking at the organisational and implementation aspects of companies, while colleagues in the New York office got the plum research project around strategy.

As Peter’s project matured, long-serving McKinsey colleague, Robert Waterman, became involved, and their work morphed into the McKinsey 7S Model and then into the book, In Search of Excellence.

Robert Waterman

Robert Waterman grew up in the US during the war and attended the Colorado School of Mines, where he graduated in 1958 with a Bachelor’s degree in Geophysics. He then went on to gain an MBA from Stanford University in 1961.

He joined McKinsey in 1964 and remained with the firm until 1985, leaving as a senior director and a member of the Firm’s Executive Committee. He working in Australia and the San Francisco office. It was in the latter that he met and started to work with Tom Peters on the project that would become the book, In Search of Excellence.

When Peters was fired from McKinsey for an article that was read as denigrating strategy in favour of operations and implementation, Waterman remained with the firm. Peters was granted 50 per cent of the royalties of the book the two were working on. McKinsey retained the 50per cent share for Waterman’s half.

Eventually, this hard line rankled and Waterman left the firm. He co-founded energy firm AES, and served on a number of corporate boards. Increasingly his non-executive roles focus on not-for-profits.

The McKinsey 7S Model

In researching ‘cool’ companies, Peter began to assemble a humanistic set of criteria for what made them work well. He was working against the paradigm of rigid strategic planning and financial focus. This theme would be picked up again ten years later by Kaplan and Norton.

Working with Waterman and Julien Phillips, they synthesised his findings into seven mutually interacting areas of business focus that need to be addressed and co-ordinated.

McKinsey 7-S Framework
McKinsey 7-S Framework

We have written more fully about this framework in an earlier article.

In Search of Excellence

In Search of Excellence evolved from unstructured research into a two-day, 700-slide seminar that Peters gave in Germany, to Siemens. Invited to do the same for PepsiCo, Peters was requested to trim down and focus his presentation. The result was eight key lessons he drew from his research.

These eight lessons were to become the core eight chapters of In Search of Excellence:

  1. A bias for action
    ‘Getting on with doing the job’. Rapid decision-making unhampered by bureaucracy. This has since morphed into the concept of ‘Agility’.
  2. Close to the customer
    Trying to serve each customer as an individual. This has since become business orthodoxy.
  3. Autonomy and entrepreneurship
    Each part of the business acts as an entrepreneurial centre, rather than as a part of a machine. This creates greater innovation. Now, of course, entrepreneurialism is part of the zeitgeist.
  4. Productivity through people
    Individual contributors are the source of quality. Peters and Waterman were fundamentally in the humanist management tradition.
  5. Hands-on, value-driven
    The 7-S framework started with shared vales. These need to guide everyday practice.
  6. Stick to the knitting
    Stay with the business that you know; your core competencies. Diversification carries big risks.
  7. Simple form, lean staff
    Some of the best companies have small headquarters and simple process. What company or public authority has escaped the ‘Lean’ revolution?
  8. Simultaneous loose-tight properties
    Centralised values, but autonomous operational choices combine the stability of a large organisation with the adaptability of a small one. Many start-ups are seeing the same challenge as they grow, from the opposite direction to Peters’ and Waterman’s large corporations.

After the Search

Both Peters and Waterman followed up the book with their own takes on what next and, in particular, addressing the shortcomings of their earlier research. But apart from one fascinating interview, I don’t think they have worked together since the two or three years of touring, following the release of their book.

That’s a shame. Two remarkable minds came together and, arguably, each did their best work in collaboration with the other.

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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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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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