The Strategy
CrisisInsights from theStrategy Profiler

What’s the stateof strategy?
Does strategy still matter? Or is it
an expensive, irrelevant, timeconsuming exercise? In a timeof volatility and disruption,
can organizations afford tocommit resources to long-term
strategic planning?
And on the other hand… if
companies abandon strategy,
what do they lose? What’s thereal cost when organizations failto develop and execute a
winning strategy?
How confident are leaders about
their company’s strategy? What
are they most concerned about?
To find out the answers to theseand other questions, Strategy&
developed the Strategy Profiler, aneasy-to-use online tool that helps
executives assess how well theircompany is positioned for success.
What did we learn?

Strategy isin crisis

1

Many businessleaders today
question the value ofstrategy—they say
it’s too slow or
impractical to be ofvalue in this fastchanging businessenvironment.
Many business leaders today

4 | The Strategy Crisis

Strategy
in crisis

question the value ofstrategy—they say it’s too
slow or impractical to be ofvalue in this fast-changing
business environment.

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Companies don’t address their mostimportant strategic questions

Glossary
Strategy:

43%

Only
of leaders say their companies are“very clear” about how they add
value for their customers

37%

Only
feel their value
proposition is“very relevant”

21%

A fullsay their company has no list of
strategic priorities

20%

In onlyof companies is there
agreement on what
capabilities are mostimportant to winning

According to Alfred Chandler (1962),* “strategy isthe determination of the basic long-term goals ofan enterprise, and the adoption of courses ofaction and the allocation of resources necessary
for carrying out these goals.”
In our view, strategy needs to answer thefundamental questions of “Who are we as acompany?” and “Why do we exist?” and while
doing so, must address the following three
dimensions: (1) the company’s way to play or thevalue it is creating for customers, (2) thecapabilities that are required to create value, and(3) the products and services it offers.

Capabilities:
A capability is a combination of processes, tools,
people, and structures that allows a company toachieve a specific outcome. A few differentiating
capabilities are at the heart of most companies’
success. These are key strengths of the businessthat customers value and competitors can’t beat.
They’re not a long list of generic activities, but a
few very specific things that allow thesecompanies to deliver on their way to play better
than anyone else.

Coherence:
Coherence is the tight match between the threemajor components of a company’s strategy: its
way to play, its differentiating capabilities, and its
portfolio of products and services. A perfectly
coherent company has one unique value
proposition (way to play) it offers to the market,
one set of differentiating capabilities that enable
this way to play, and a range of products andservices that are all aligned to its way to play andthat thrive in its capabilities system. Being
perfectly coherent is unrealistic for most large
companies—what matters is relative coherencecompared with your competitors. Coherence,
according to our research, is what enables
companies to deliver on their strategy, because it
connects the company’s strategic direction to
the limited and well-defined set of capabilities
that enable it.
* Source: Alfred Chandler, Strategy and Structure: Chaptersin the History of Industrial Enterprise (Doubleday, 1962)

6 | The Strategy Crisis

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Leaders lack confidence in their own
company’s strategy

37%

Only
of respondents say their company has awell-defined strategy—a clear sense ofwhere it’s heading

The researchconcludes thatnearly four in 10
companies (38%)
are “adrift”—lacking
a valid direction thatguides where thecompany is going.

35%

Only
think their strategy willlead the company
to success

37%

Only
feel they provide a uniqueadvantage to theircustomers in mostof their businesses

26%

Only
are confident their company isshaping its industry—creating
demand rather than following
customer trends and competition

8 | The Strategy Crisis

Methodology
The Strategy Profiler report includes the survey results of more than 6,000
corporate leaders and senior managers. More than one-third (35 percent) ofrespondents are in the C-suite. The online survey asks 24 questions on the
topic of strategy development and execution. Using respondents’ answers, thetool determines the company’s coherence score—a measure of how aligned its
key strategic dimensions are—and the company’s archetype, which indicatesthe major hurdles it needs to overcome. The Profiler can be found atwww.strategyandcoherence.com.
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Leaders struggle to make the connection
between strategy and the things theirorganization does every day—their capabilities

20%

Only
of leaders say there’s agreement in thecompany on which capabilities are key
for success, with people across theorganization being aware and bought in

16%

Only
say they have a thoroughly managed
program in place to build and scale up theorganization’s most important capabilities

13%

Only
say that the few most important capabilities
are reflected in the company’s management
processes (reflected in budgets, leaders
taking on responsibility for building thosecapabilities, and management team reviewing
progress in building them)
10 | The Strategy Crisis

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Why the lack of strategic
focus? Leaders pay too
much attention to external
factors and too little tobuilding their company’s
advantage
Given market volatility—many leaders
feel their industry is going to be turned
upside down—leaders feel pressure to
respond fast.
They often believe that strategy is aluxury they can’t afford. In the face ofdisruption, many companies launch
numerous initiatives and chase growth
where they find it, without building longterm advantage. Others are reluctant tomake big strategic bets that would allow
them to differentiate. And some leaders
avoid strategy altogether because
they’re convinced it’s too abstract
or bureaucratic.

Many leaders mistakenly think that…
… disruptions need to be addressed quickly. Long-termplanning is a luxury they can’t afford.
… they need to deliver performance in the short term—thinking about the long term won’t help them with that.
… strategy is too theoretical—it’s “thinking,” not“doing”— and it takes too much organizational effort.

12 | The Strategy Crisis

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More often than not,disruption gets the blame

There are four common myths about disruption

MYTH
Disruption is something
new and unprecedented

1

Fact is: Disruption has always been a force in thebusiness environment. The automobile disrupted
the horse-drawn carriage, and the buggy whip
industry failed—because it didn’t have a strategy,
it didn’t adapt.

MYTH
Disruption hits every industry—
and it’s getting faster

Fact is: Some industries are being highly disrupted,
but in others disruption is a much smaller factor. And
overall, there hasn’t been a change in the pace ofdisruption over the past decade.

MYTH

MYTH
Business disruption equals
technology disruption

2

Fact is: There is no question we are living in a time of
unparalleled technology changes. But not every newtechnology shakes up the profit pools of an industry.
Technology disruption and business disruption
are two different things, and it’s important tounderstand when technology can be leveraged
for competitive advantage.

14 | The Strategy Crisis

3

Everyone is in danger of being disrupted
and agility is the only remedy

4Fact is: The companies most in danger of being
disrupted are those that don’t have a real advantage.
Just think about taxis in many cities: Were they
consistently customer-friendly? Did they always
provide a unique experience? After GPS made it easy
for everyone to find their way in crowded cities, there
wasn’t much left in terms of advantage, and theindustry was ripe for disruption.

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Strategy isin crisis

2

Many businessleaders today
question the value ofstrategy—they say
it’s too slow or
impractical to be ofvalue in this fastchanging businessenvironment.
The failure to commit to and

16 | The Strategy Crisis

The valueof strategy

execute strategy has realconsequences: Performance
suffers when companies get
strategy wrong. Companies
with strong strategy, however,tend to outperform.

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In these turbulent times, companies needstrategy locked down as never before. Just
“existing”—launching initiative after initiative
to seek growth where it can be found, or
chasing quarterly targets—won’t work.
Companies need to make tough choices
about how they’re going to compete and whatallows them to win. They need to build a realadvantage, rooted in the few things thecompany does better than anyone else—itsdifferentiating capabilities. This requires
leaders to make big decisions about where toinvest and stick to those decisions over time.
That is strategy.

18 | The Strategy Crisis

Companies needa strategy thatworks, one thatallows them to getahead of change
and create thechange they want
to see rather thancompete in amarket that others
have shaped totheir advantage.

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Companies that get strategy right…
… grow faster% companies growing faster than industry average
48%

They are three times
as likely to report
above-average
growth15%
Incoherent
companies

Coherent
companies… are more profitable% companies more profitable than industry average
47%

Getting strategy right pays off
Faster-than-average growth and profitability werestrongly in evidence at companies where executives
said they: have clearly stated how they add value
for customers.
 have clearly defined their differentiating
capabilities—the few things they need to do better
than anyone else in order to win with their strategy.
 focus their organization on building out thosecapabilities to world-class level.
 compete in only those businesses where they are
set up to win.
20 | The Strategy Crisis

They are twice as
likely to report aboveaverage profits

22%
Incoherent
companies

Coherent
companies… make better deals
Annual total shareholder returns (TSR) vs. market index+14.2%
points4.4%
Capabilitiesdriven deals(leverage orenhancement)

Limited-fit
deals

-9.8%

Capabilities-driven
deals generate annual
TSR that are 14.2
percentage points
higher than those ofdeals with limited
capabilities fit.** Source: “Deals That Win,” by J. Neely, John Jullens, and Joerg Krings(strategy+business, July 2015).

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Strategy isin crisis3

How to makestrategy work:
getting started

Many businessleaders today
question the value ofstrategy—they say
it’s too slow or
impractical to be ofvalue in this fastchanging businessenvironment.
Leaders who want to make22 | The Strategy Crisis

their strategy work should notjust pay attention to market
trends and competitors, but
focus on building theircompany’s advantage.

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Strategy archetypes
Our research has shown that theway companies approach strategy
fits one of six patterns: We callthese the strategy archetypes.

The essential first step making acompany’s strategy work is to
identify what value the company
is going to offer to customers
considering where the market isheaded and considering thethings the company is alreadygreat at doing. Then, leaders
should determine the few
capabilities that will allow theircompany to excel at its value
proposition. Finally, companies
need to commit to living theirstrategy every day and ensuringthat it permeates every aspectof their day-to-day operations.
The Strategy Profiler identifies
six “archetypes,” types ofcompanies that face a common
set of challenges when it comesto developing and executing awinning strategy.

24 | The Strategy Crisis

The
Contender

The Supercompetitor

The
Restless

The Stretched
The Untapped

To make real
strides toward
an effective
strategy, it’s
essential toknow yourorganization’s“state of play.”

The Adrift
Your archetype helps determine the steps you should take to get yourstrategy to work. Find out which archetype fits your company bytaking the Strategy Profiler (www.strategyandcoherence.com), thenconsider the following recommendations.
Strategy& | 25

The Supercompetitor is a customer favorite andseemingly unstoppable force in the industry
Supercompetitor companies• have a powerful value proposition andthe differentiating capabilities thatallow them to excel at that value
proposition; they have aligned theirportfolio of products and services so
it leverages and supports those twoelements.
• focus day in and day out on
executing that strategy and building
out their competitive advantage in themarketplace.
• use their coherence to shape theirown future by applying theircapabilities to a broader range ofchallenges. These companies are notjust playing the game of businesswell—they’re changing the rules.

The Contender is on the path to success andrequires continuous focus and commitment tofully get there
Contender companies• have a winning strategy, butthey struggle to fully executeand build the advantage thatwill lead to sustained success.
• often have trouble finding therequired funds to execute theirstrategy. Building differentiating
capabilities is difficult andexpensive, and many think theirfinancial situation does notallow them to make the boldmoves that are required.

Examples of supercompetitors: Amazon,Apple, Danaher, IKEA, Walmart
What the Contender can do:
Take a strategic look at costs: What resources are spent oncapabilities that are not at the heart of your identity? Are
you trying to do too much in those areas? Are you building
functional excellence in areas where it’s not needed?
Take a Fit for Growth* approach to free up significant funds
from areas that aren’t differentiating and reinvest those
funds in what truly matters to your strategy.

* Fit for Growth is a registered service mark of PwC Strategy& LLC in the United States.
For more information, see the Fit for Growth microsite.

26 | The Strategy Crisis

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The Restless needs to focus and channel its energy

Restless companies• have difficulty focusing because theirfear of missing out means they follow
too many directions and chase too
many opportunities.
• often struggle to translate theirstrategy into a narrow set of strategic
priorities, resulting in a long list ofopportunities to pursue andcapabilities to build.

What the Restless can do:
Identify the very few things that truly make a difference forcustomers and that your company is able to do better thananyone else. Then double down on execution: Translate thestrategy into what it means for every part of theorganization; define clear deliverables, time lines, andresponsibilities; monitor progress in executing the strategy.

28 | The Strategy Crisis

The Stretched needs to tackle some fundamental
issues that prevent it from realizing its aspirations
Stretched companies• often have a portfolio that is so
broad that they can’t agree oncompany-wide priorities. Theirbusinesses are so diverse that
there’s no common way in which
they add value for customers.
Their functions and business units
may be busy building capabilities,
but those efforts probably aren’tvery effective and haven’t helped
them build a real company-wide
advantage.
• may have defined a coherent
identity for the company, but that
identity is so far from thecompany’s current status thatthey can’t successfully execute it.

What the Stretched can do:
Assess the value proposition and differentiating capabilities
in each business. Which of these are connected to yourcore business? Make those businesses coherent first.
If you’ve already defined a coherent identity but havereached too far, assess which value propositions are likely
to win in the future and what capabilities each requires.
Combine that with an identification of your company’s
strengths to select an attractive value proposition that iswithin reach from where your company is today.

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The Untapped has had some success but has
not built the advantage to sustain it
Untapped companies• may have launched good products,
built deep relationships, or enjoyeda protected status, but don’t have a
coherent strategy and therefore run
the risk of losing their competitive
advantage to new and more
focused competitors.

What the Untapped can do:
Assess whether, by applying your great execution trackrecord to a more coherent strategy, you could build on yoursuccess and truly dominate the market. You are doing
many things right, but may need to take this next step.

30 | The Strategy Crisis

The Adrift lacks a clear direction that could guide
it to success
Adrift companies• lack a clear and relevant strategy,
which makes the present a
matter of survival and offers thelooming prospect of adisadvantaged future.
• are often not clear about how
they’re adding value tocustomers, or market trends havemade their value proposition
increasingly irrelevant.

What the Adrift can do:
Identify what truly drives advantage in this
hypercompetitive world. Determine where the market isheading, which value propositions are likely to succeed five
years down the road, and what capabilities are required towin with each of those value propositions. Identify your own
company’s strengths, then select an attractive value
proposition that is within reach from where you are today.

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Strategy isin crisis

4

Many businessleaders today
question the value ofstrategy—they say
it’s too slow or
impractical to be ofvalue in this fastchanging businessenvironment.
To build a strategy that32 | The Strategy Crisis

Additional
resources

works, consider thesebooks and tools.

Strategy& | 33

The Strategy Profiler

Strategy That Works
Is your company adrift, restless,or on the way to becoming a
supercompetitor?

Based on original research, ourbook Strategy That Worksreveals five practices used bytoday’s winning companies forclosing the strategy-to-execution
gap. Packed with tools
executives can use to help build
these five practices into theirorganization, it is a powerful
guide to connecting where
enterprises aim to go and what
they can accomplish.

Find out in a few minutes how
well your company is positioned
for success. This short survey will
help you identify potential areas
for improvement based on yourunique starting position.
Take the Profiler at
www.strategyandcoherence.com

The Capabilities
Assessment Tool

The Essential
Advantage
Is your company aligned on the
few things that really matter to its
success? How good is yourcompany at those mostimportant capabilities?

“

The Capabilities Assessment Toolcan help you identify, build, andmonitor the capabilities that areat the heart of your success. We
can help you customize the tool
so it optimally fits your company.
Learn more atwww.strategyand.pwc.com/cds/
capabilities-assessment

34 | The Strategy Crisis

Learn more atwww.strategyand.pwc.com/
strategythatworks

The conventional wisdom about
strategy may be leading yourcompany astray. In The
Essential Advantage: How to
Win with a Capabilities-Driven
Strategy, Paul Leinwand andCesare Mainardi maintain thatsuccess in any market accrues
to firms with a coherence
premium—a tight match
between their strategic direction
and the capabilities that makethem unique.
Learn more at
www.theessentialadvantage.com
Strategy& | 35

Key contacts

36 | The Strategy Crisis

DeAnne Aguirre (US)

Chris Manning (ANZSEA)PwC USdeanne.aguirre@pwc.com

PwC Australia
chris.manning@pwc.com

Marie Carr (US)Andre Medeiros (Europe)

PwC US
marie.carr@pwc.com

PwC UK
andre.m.medeiros@pwc.com

Ariel Fleichman (South America)

Joachim Rotering (Europe)

PwC Argentina
ariel.fleichman@strategyand.pwc.com

PwC Strategy& Germany
joachim.rotering@pwc.com

Per Hannover (Northern Europe)

George Sarraf (Middle East)PwC Sweden
per.hannover@pwc.com

Strategy& Middle East
george.sarraf@strategyand.pwc.com

Paul Leinwand (US)

Huchu Xu (China)

PwC US
paul.leinwand@pwc.com

PwC China
huchu.xu@cn.pwc.com

Strategy& | 37

Strategy& is a global
strategy consulting
business uniquely
positioned to help
deliver your best future:
one that is built on
differentiation from theinside out and tailored
exactly to you.

As a part of PwC, every
day we’re building thewinning systems that areat the heart of growth. We
combine our powerfulforesight with this tangibleknow-how, technology,
and scale to help you
create a better, moretransformative strategy
from day one.

As the only at-scale
strategy business that’s
part of a global
professional services
network, we embed ourstrategy capabilities withfrontline teams acrossPwC to show you where
you need to go, thechoices you’ll need tomake to get there, andhow to get it right.

The result is an authentic
strategy process powerfulenough to capture possibility,
while pragmatic enough toensure effective delivery. It’s
the strategy that gets anorganization through thechanges of today and drives
results that redefine
tomorrow. It’s the strategy
that turns vision into reality.
It’s strategy, made real.

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