Strategy Beyond The Hockey Stick
People, Probabilities, and Big Moves to Beat the Odds
The CEO of Netflix, Reed Hastings, has said:
“Companies rarely die from moving too fast, they frequently die from moving too slowly.”
What is the dreaded hockey stick? It’s a “business plan,” a graph that shows revenue and profit heading straight for the sky a few years out. But these hockey sticks rarely work out.
This book is written by consultants at McKinsey who propose a new model for evaluating business strategies: The Power Curve, which is based on the economic profits of thousands of companies thus giving a fresh “outside view” on the universe of strategy. Once you plot all the economic profits in an ordered line, you find they demonstrate a power-law – the tails of the curve rise (and fall) at exponential rates, with long flatlands in the middle. This is called the Power Curve. The goal of strategy needs to be to move to the right on the Power Curve.
Strategy plays out in a world of probabilities, not certainties. To make decisions on strategy, you need to know what the odds truly are, to be able to calibrate goals and budget/compensation appropriately. You can shift the odds of strategy by capitalizing on your endowment, riding the right trends, and most importantly, making a few big moves.
We are at the brink of a very different and much more exciting era in strategy. By understanding these concepts, we can better understand both our own business strategies and that of our clients.
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Episode 02 / 08-12-2020
Global Reading Club Podcast - #2 Strategy Beyond The Hockey Stick
The three McKinsey authors propose a new model for evaluating business strategies. From their analysis of revenue and profit growth of thousands of companies around the world, they discovered, what they called the ‘Power Curve’. A ‘Power Curve’ happens after a period of travelling the flatland. The upswing of growth happens mostly because of trends and making ‘A Big Enough Move’. This finding gives a fresh “outside view” on the universe of a business strategy. We are at the brink of a very different and much more exciting era in strategy. By understanding these concepts, you will be able to look in a fresh way to your own business strategy.
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