Harvard professor of business administration Robert Simons believes that each organization has its own distinctive answers for success in strategic planning. Simons melds his extensive knowledge of business strategy, organization design and management control systems into a tightly focused, concise guide that illuminates the “seven strategy questions” everyone in your company should ask regularly and be able to answer. While this concise handbook may simplify in its quest to streamline, Recommended to small business owners and corporate leaders as a powerful resource for uncovering the critical insights necessary for effective strategic planning.

1. Executive Summary of the book
Robert Simons
“Stress –Test Your Strategy”
A simple approach to better execution
by Ramki
ramaddster@gmail.com

2. About the Author
Robert Simons is the Charles M. Williams Professor
of Business Administration at Harvard Business
School. During the last 27 years, Simons has taught
accounting, management control, and strategy
implementation courses in both the Harvard MBA
and Executive Education Programs. During
2010/2011 he is teaching a second-year MBA
course, "Designing Organizations for Performance,"
a module in the CEO program, and "Driving
Corporate Performance," a program for financial
executives and general managers. A new book
based on this work, Seven Strategy Questions : A
simple approach for better execution, was published
in 2010 by Harvard Business Press

3. Prelude
An economic downturn can quickly expose the shortcomings of your business strategy. But can you
identify its weak points in good times as well? And can you focus on those weak points that really matter
?
A stress- test an assessment of how a system function under severe or unexpected pressure- can help
you home in on the most important issues to address, whatever the economic climate. By asking tough
questions about your business, you can identify confusion, inefficiency and weakness in your strategy
and its implementation.
As Peter Drucker once warned “ The most serious mistakes are not being made as a result of wrong
answers. The truly dangerous thing is asking the wrong questions. “ For the past 25 years I have
researched the drivers of successful strategy execution in a variety of companies. Through this work I
have identified 7 questions that all executives should ask – an be able to answer. Master this list, and you
will keep the fundamentals of your strategy execution on track .
The questions may seem obvious, but the choices they represent can be tough, and their full
implementations are not always clear.
 The first two questions compel to set priorities
 The next two assess your ability to focus on those priorities by designating critical performance
variables & constraints
 Questions five and six investigate whether you are using right techniques that will enhance creative
tension & commitment
 The final question deals with your ability to adapt your strategy over time.

4. Strategic Questions & Their Implementation Imperatives
 Running your business is hard work. To prosper, you need to
ask the right questions.
 These “seven strategy questions” will help you gauge the
health and prospects of your organization.
 Use the answers to generate workable insights about the best
strategies to pursue.
 Each question relates to an “implementation imperative” that
is fundamental to business success

5. Question 1
Who is your primary customer

6. Primary Customer
 Choosing your primary
customer is a make or break
decision
 This determines the
resource allocation
 Allocation of all resources to
meet & exceed expectations
of the primary customer
needs.

7. McDonald’s
 32,000 restaurants, 60
million customers, 117
countries , 1.7 million
employees
 75 % of the outlets are
operated by
independent persons
 Over 50 years-
greatest retail
expansion in the
history

8. McDonald’s
 Key success factors
 A clear choice of primary customer
 An understanding of when that choice needed to change
 In ’80s & ‘90s they considered its primary customers to be
not the people who ate , but multistate real estate
developers & franchise owners
 Focus was on real estate developers & franchise owners-
result 1700 new stores in a year
 In 2003 to satisfy varying taste across geography
reallocated resources from centralized corporate
functions to regional managers – encouraging local
menus & stores amentias

9. McDonald’s
 Geographical focus
 In UK – they serve
porridge for breakfast
 In Portugal it offers soups
 In France they offer
burgers with topped with
French fries
 Customer satisfaction scores
rose each year from 2005 to
2009
 Gains in the stock price

10. Home Depot
 In the year 2000 Bob Nardelli CEO moved out from consumer
business and shifted significant resources away from the consumer
business & moved to contractors
 Professional contractors did not fill the role
 Trying to accommodate multiple customers lead to trouble
 Laid off customer service employees
 Consumer satisfaction suffered the biggest drop of any US retailer
ever.
 New CEO –Frank Blake came in
refocus the business to consumers

11. Question 2
How do your core values prioritize
shareholders, employees & customers ?

12. Core values- prioritize shareholders, employees & customers
 Core value should reflect the relative importance of
all the stakeholders
 Value statements that list aspirational behaviors
aren’t enough . They must indicate whose interests
come first when difficult trade-offs come in.
 Some companies customers come first & in others it
is shareholders. There is nothing right & wrong
 Making one & communicating it effectively is
important

13. Merck
 Merck’s costly decision to withdraw Vioxx- its blockbuster Cox-
2 pain suppressant from the market
 In Sept 04 the clinical study indicated that this drug causes
high number of heart attacks & strokes after 18 months of
continuous usage
 CEO- Gilmartin had 3 options
 Merck could carry the study through to its planned
conclusion to gather more data
 It could ask FDA to approve a “ black box” label warning
doctors & patients about the discovered risk
 To take the drug out of the market foregoing US $ 2.5
billion annual revenue
 On 30th Sept the CEO took a withdrawal decision of the drug
from the market – Putting customer first

14. Pfizer
 Pfizer puts the shareholders first when faced with a similar
situation
 Celebrex- the Cox -2 inhibitor Pfizer acquired when it bought
Pharmacia – sometimes caused cardiovascular problems.
 Decision was taken to continue manufacturing of the drug
 Responsible action of adding a black box warning that allowed
doctors and patients to a make fully informed decisions.
 Shareholders thus avoided losing billions of dollar of profits

15. South-West Airlines
 South west CEO Her Kelleher argued
 If employees are treated well, they will treat the
customers well
 If the customers are treated well , they will come back
 If they come back there is more revenue and
shareholders will be happy
 To drive home this point – Kelleher regularly appeared in
national newspapers ads under the caption “ Employees
first, Customers second , Shareholders third

16. Question 3
What critical performance variables are you
tracking ?

17. Critical performance variables -Tracking
 Companies create performance score cards with 30,40 or
more variables.
 It is a myth that adding measures results in a more complete-
and therefore better scorecard
 Too many measures in the scorecard drive out innovation.
 Late ‘90s Citibank had problems by trying to track too much
data , then they introduced new scorecard in the consumer
bank.
 Apart from traditional key financial measurements , the card
included new metrics for strategy implementation & customer
satisfaction

18. Few Examples
Amazon
 Inconveniences to buyers tops the list of factors that could
cause strategy to fail.
 Executives there focus relentlessly on making purchasing as
easy as possible.
 They concentrate on revenue per click and revenue per page
turn & not on long lists of measures
Nordstrom
 Customer loyalty is key – Sales per hour, Revenue / sq. feet
Marriot
 The crucial metrics are associate satisfaction, guest
satisfaction, revenue and revenue per available room

19. Question-4
What strategic boundaries have you set ?

20. Strategic boundaries
 Every strategy carries the risk than an individual’s actions
will push the business off course
 The risk intensifies when managers feel pressure to hit
growth & profit targets
 Two ways to control – tell people what to do or tell them
what not to do
 Telling people what to do assures that the people won’t
make mistakes by engaging in unauthorized activities –
Prudent approach
 If innovation & entrepreneurial thinking are important – hire
creative people and give them the freedom to exercise their
creativity

21. Apple
 Steve Jobs followed this principle when he declared that
Apple would not develop PDA.
 Without such discipline the company wouldn’t have had the
resources to develop the iPod.
 “ People think focus means saying yes to the thing you’ve
got to focus on “ but
 “That’s not what it means all. It means saying no to the
hundred other good ideas
 Setting clear boundaries also helps organizations avoid the
waster & risk that inevitably accompany undisciplined
growth
 Boundaries are powered by punishment , not rewards

22. Question-5
How are you generating creative tension ?

23. Generating creative tension
 Primary responsibility of the business leader is to make
outside market pressures felt inside the business
 Posing challenges will motivate the employees
 Bigger the business more insulated are people from the
market pressures & more imperative it becomes
 Some aspects that can generate creative tension
 Assigning stretch goals
 Ranking according to performance
 Setting spans of accountability that are greater than spans of
control
 Allocating costs
 Creating cross-unit teams & matrix accountability

24. Assigning Stretch Goals
 Common way to motivate people is to set
stretch goals
 Challenge goals or big hairy audacious goals
 Incremental improvements not enough
 Doing something different – differentiation

25. Ranking according to performance
 Rank employees on the
basis of demonstrated
performance
 Rankings affect who is
promoted & who is asked
to leave
 Challenge –is to prevent
the competition
becoming negative &
destructive

26. Setting spans of accountability that are greater than
spans of control
 For people to innovate try holding them accountable for
measures that are broader than the resources they
control
 This will foster entrepreneurial behavior
Tom Siebel – Siebel systems
 He based his manager’s bonuses on
customer satisfactions measures, even
though no one manager controlled all the
resources needed to make a customer
happy
 His action forced the managers to innovate
their way to success

27. Allocating cost
 The way the corporate overheads costs are charged
can stimulate creative tension
 Jamie Dimon – CEO JP Morgan chase
 Everything from legal to marketing expenses – to the
parts of the business that use them
 Obvious goal is to generate accurate cost data
 The more important one is to motivate managers to
become actively involved in the process of value creation
by corporate office

28. Creating cross- Unit teams & Matrix accountability
 Forcing employees to think outside the
box – is to assign them a second box
 New perspectives emerge when people
are forced out of their routines
 Cross unit team process serve as
emissaries for their for home team and
also leads to new ideas & innovations
 Matrix design in which every employee
has two bosses - functional reporting &
administrative reporting

29. Question-6
How committed are your employees to
helping each other ?

30. Commitment to help each other
 Employees must work together towards shared
goals
 To create the high levels of commitment , leaders
must build an organization that has the following
attributes
 Pride in purpose
 Group Identification
 Trust
 Fairness

31. Pride in purpose
 If employees are proud of
their organization’s
mission, they will assume
shared responsibility for its
success.
 Companies –Tagline
 Marine Corps slogan “ Semper Fidelis “ ( Always
faithful”) is echoed
 Merck’s – Putting patients first
 Amazon – “Earths most customer centric company

32. Group Identification
 Belonging to an elite
organization is source of pride
for employees
 South-west airlines
 Employees take pride in a rigorous selection process
– 2% of 1,00,000 annual applicants
 Employees from different departments are
encouraged to interview job candidates & veto those
they feel would not be a good fit.
 People who are hired know they are part of an elite
team whose members go above & beyond to help
each other

33. Trust
 Trust is vital for people to work
collaboratively
 When employees trust each other
they are making themselves
vulnerable – to put their reputation
on the line to support each other
 Nucor
 Leading steel company -Employees are encouraged
to propose innovations to improve efficiency
 The company shares the resulting savings with its
employees apart from increasing production targets
 This policy has built trust among the workers

34. Fairness
 To embrace the vision of shared
success perception of fairness &
equity above the self interest is
important
 Need to be fair and also appear to
be fair
 IBM- CEO – Sam Palmisano
 He asked the board to reallocate half of his bonus to
the executives who would be leading his new team
based strategy

35. Question-7
What strategic uncertainties keep you
awake at night ?

36. Strategic uncertainties
 At the root of every failed strategy is a set of assumptions about
the future that eventually proved false
 Today’s strategy won’t work tomorrow
 Products will become obsolete, Customers taste will change.
 Technology will render the business model uncompetitive
 Today’s success will be tomorrow’s old news
 The question is not if , but when ?
 To adapt successfully you must constantly monitor the
uncertainties that could invalidate the assumptions
underpinning your current strategy
 Everyone watches what boss watches & if you want your
employees to focus on specific issues, focus on those issues
yourself

37. What is important ?
 Most powerful way to signal what is important is to use
business control system as interactive tools
 Pay close & visible attention to the data they produce & use
them to generate questions that will activate the search for
information & decision through out the business
 Goldman Sachs – Uses P & L system interactively and this
enabled them to avoid the mortgage backed securities debacle
that brought most of its competitors to their knees
 Depending on the business & the system you choose to use
interactively could be a Profit plan, A new business booking
system, Project management, Performance measurement
system & a face to face interaction among the operating
managers with focus dialogues on Strategic uncertainties
generates action plans.

38. A Checklist for Executing Strategy
 Executing strategy successfully requires making tough often
uncomfortable choices based on simple logic & clear principles.
 But we frequently avoid making choices in the mistaken belief
that we can have it all.
 Instead of focusing vital few customers or one primary customer
we have many kinds of customers, instead of instilling core
values, we develop lists of desired behaviors.
 Instead of focusing on few critical measures, we build
overloaded scorecards.
 Route success
 Engage in on-going face-to-face debate with the people around your with
emerging data , unspoken assumptions, difficult choices & ultimately
action plans
 Everyone should be able to give clear & consistent answers to the &
questions posed

40.  “One-size-fits-all solutions to complex business problems” will never produce the
results you want for your company.
 Use “seven strategy questions” to ensure the successful execution of your
strategy & to engage your employees in company decisions.
 Each one relates to an “implementation imperative” critical to your strategic
success:
 How can you best serve your primary customers by prioritizing your use of
resources?
 Do your core values accurately address the needs of your shareholders & your
employees as well as your customers?
 Are you tracking employees’ achievements by using performance variables &
appropriate metrics that are critical to your company?
 Have you set boundaries for your employees to protect your firm from strategic
risks?
 What mechanisms are in place to stimulate innovation and spark “creative
tension”?
 Are your employees dedicated to cooperative collaboration?
 What strategic uncertainties worry you most? What are you doing about them?
Take away from the book

41. The seven strategy questions will be most effective
when you raise them in face-to face encounters,
provided you encourage participation throughout
your company, limit discussion to what is right and
not who is right, and remember to ask, “What are
you going to do about it?”

42. Happy Reading, Learning & Application
Mail your comments to
ramaddster@gmail.com