Ieu compcnies crecte strcteies thct deliter more tclue thcn the sum oj their business unit

pcrts, but those thct do clso excel ct motin resources cnd remotin bcrriers.
The development of a corporate strategy sIouId umounL Lo more LIun LIe uggreguLIon
oI busIness unIL sLruLegIes. TIe besL corporuLe sLruLegIes, In our experIence, Iorce u muILI-
busIness compuny Lo muke cIeur cIoIces ubouL ILs porLIoIIo und LIe uIIocuLIon oI ILs resources.
YeL LIe resuILs oI u recenL McKInsey survey sIow LIuL jusL one execuLIve ouL oI hve suys
IIs or Ier corporuLIon IuIIy uddresses sLruLegy In LIIs wuy. WIuL`s more, more LIun u quurLer
oI execuLIves uL muILIbusIness compunIes suy LIeIr corporuLIons Iuck u consIsLenL process
Ior deveIopIng sLruLegy.
n LIIs survey,
1
we usked execuLIves uL muILIbusIness compunIes Iow LIey upproucI LIe
deveIopmenL oI corporuLe sLruLegy-LIe Irequency wILI wIIcI LIey revIew IL und LIe umounL oI
LIme LIey spend on IL, LIe InpuLs oI LIe process und LIe resuILIng ucLIvILIes, LIe burrIers
Lo reuIIocuLIng resources, und LIe LuIenL und oLIer munugemenL processes LIey uppIy Lo over-
come LIese burrIers.
A smuII group oI 11 respondenLs emerged wIo ruLe LIeIr compunIes` upproucIes Lo sLruLegy
deveIopmenL us very eIIecLIve und uIso suy LIeIr prohL murgIns ure IIgIer LIun LIose oI
compeLILors. ExecuLIves uL compunIes LIuL ure eIIecLIve deveIopers oI sLruLegy ure LwIce us
IIkeIy us LIeIr peers Lo suy LIeIr compunIes uppIy u dIsLIncL corporuLe sLruLegy process
1
TIe onIIne survey wus In LIe heId
Irom December ; Lo December 1;,
zo1o, und receIved responses
Irom z,1 execuLIves uround LIe
worId, represenLIng LIe IuII
runge oI IndusLrIes, regIons, Len-
ures, und IuncLIonuI specIuILIes.
OI LIose, 1,qqq respondenLs ure
uL muILIbusIness compunIes
und cun descrIbe LIeIr compunIes`
process Ior deveIopIng u corpo-
ruLe sLruLegy.
Jean-Franois Martin
Creating more value with
corporate strategy
McKInsey GIobuI Survey resuILs:
z Crectin more tclue uith corporcte strcte McKInsey GIobuI Survey resuILs
(8 percenL compured wILI 18 percenL oI uII oLIer respondenLs). urLIermore, q; percenL oI
LIese respondenLs vIew LIeIr compunIes` processes Ior deveIopIng corporuLe sLruLegy us
consIsLenL, compured wILI q percenL oI oLIers. ExecuLIves uIso suy LIese compunIes spend
more LIme deveIopIng sLruLegy, revIew sLruLegIes more IrequenLIy, und ure mucI beLLer uL
eIImInuLIng burrIers Lo ImpIemenLuLIon.
Slow and steady doesnt win
n boLI LIe boom oI LIe mId-zooos und LIe hnuncIuI crIsIs LIuL IoIIowed, muny compunIes
dId noL (or couId noL) muke crILIcuI porLIoIIo cIoIces und Lrude-oIIs. TIIs muy be wIy
so Iew-jusL 1q percenL oI uII respondenLs Lo LIIs survey-suy LIeIr compunIes Iuve u dIsLIncL
process Ior deveIopIng corporuLe sLruLegy (ExIIbIL 1). NeurIy u quurLer, Iowever, LIInk
Exhibit 1
Developing a distinct strategy
Which point on the spectrum best represents our compcn's cpprocch
to corporcte strcte detelopment?
Survey 2011
Corporate strategy
Exhibit 1 of 6
Exhibit title: Developing a distinct strategy
1
RespondenLs wIo unswered don`L know ure noL sIown.
A distinct exercise that
specically addresses corporate-
level strategy, portfolio
composition issues
An aggregation of business unit
strategies, with no separate
attempt to address corporate-level
strategy questions
% of respondents,
1
n = 2,174
6
19
14
22
16
14
6
Crectin more tclue uith corporcte strcte McKInsey GIobuI Survey resuILs
Exhibit 2
Few revisit strategy regularly
Hou ojten does our compcn ence in corporcte strcte detelopment?
Hou ojten should it?
Survey 2011
Corporate strategy
Exhibit 2 of 6
Exhibit title: Few revisit strategy regularly
1
RespondenLs wIo unswered oLIer or don`L know ure noL sIown.
% of respondents,
1
n = 1,944
On an ongoing basis
8
23
More than once per year
4
8
Annually
44
34
Every 23 years
25
25
Every 45 years
11
8
Less than every 5 years
6
2
Actual
Ideal
LIeIr compunIes should enguge In corporuLe sLruLegy deveIopmenL on un ongoIng busIs
(us opposed Lo epIsodIcuIIy), compured wILI onIy 8 percenL wIo suy LIey currenLIy do so
(ExIIbIL z). TIe smuII group oI respondenLs uL LIe eIIecLIve-deveIoper compunIes Is
uIeud oI LIe puck: 1q percenL suy LIeIr compunIes currenLIy revIew corporuLe sLruLegy on
un ongoIng busIs.
A sImIIur puLLern emerges wILI regurd Lo LIe umounL oI LIme u compuny`s senIor-execuLIve
Leum ucLuuIIy spends-und IdeuIIy sIouId spend-on deveIopIng corporuLe sLruLegy In
u LypIcuI yeur. No more LIun one In seven respondenLs suy LIeIr compunIes` senIor Ieuders
currenLIy spend more LIun 1 percenL oI LIeIr LIme on LIIs ucLIvILy, buL neurIy LIree
LImes us muny descrIbe LIuL us LIe IdeuI LIme commILmenL. Among respondenLs uL eIIecLIve
deveIopers, u quurLer suy senIor Ieuders currenLIy spend more LIun 1 percenL oI LIeIr
LIme on corporuLe sLruLegy deveIopmenL.
q Crectin more tclue uith corporcte strcte McKInsey GIobuI Survey resuILs
Exhibit 3
Prioritizing nancials, macrotrends
Survey 2011
Corporate strategy
Exhibit 3 of 6
Exhibit title: Prioritizing nancials, macrotrends
1
RespondenLs wIo unswered don`L know ure excIuded; respondenLs wIo unswered oLIer ure noL sIown.
% of respondents
1

Top-ranked inputs considered
by company when developing
corporate strategy
Respondents who say their
companies are effective
developers of strategy, n = 149
Macrolevel trends
Performance of our overall portfolio
Competitors current strategies, known plans
Extent of regulation in the countries where we operate
Operational benchmarking
Investor expectations
Analyst expectations
Our talent pool
Industry dynamics
Financial projections
26
23
18
15
4
3
3
2
2
0
All other
respondents,
n = 1,743
13
21
20
24
5
3
1
8
2
2
What goes into strategy
InuncIuI projecLIons ure ImporLunL Ior uIIocuLIng cupILuI Lo busInesses In LIe exIsLIng
porLIoIIo. BuL LIe ImporLunce oI Lrend unuIysIs grows wIen IL comes Lo uddIng corporuLe vuIue
by creuLIveIy reuIIocuLIng resources und by cIungIng ILs composILIon LIrougI mergers,
ucquIsILIons, und dIvesLmenLs.
YeL execuLIves runk hnuncIuIs us LIeIr compunIes` mosL ImporLunL InpuL wIen deveIopIng
corporuLe sLruLegy-z percenL oI uII respondenLs runk IL hrsL, IoIIowed by LIe perIormunce
oI LIe overuII porLIoIIo, wIIcI z1 percenL oI uII respondenLs runk hrsL. nLeresLIngIy,
execuLIves uL eIIecLIve deveIopers runk hnuncIuI projecLIons Iower und mucroIeveI Lrends
sIgnIhcunLIy IIgIer (ExIIbIL ). urLIermore, wIen usked wIuL LrIggers u revIew oI
ur more execuLIves uL eIIecLIve-deveIoper compunIes LIun oLIers suy
LIe deveIopers oI LIeIr corporuLe sLruLegIes work exLremeIy cIoseIy
wILI LIeIr compunIes` murkeL-IucIng groups, sucI us compeLILor InLeIIIgence
und murkeLIng.
Crectin more tclue uith corporcte strcte McKInsey GIobuI Survey resuILs
Exhibit 4
Dissatisfaction with status quo
Survey 2011
Corporate strategy
Exhibit 4 of 6
Exhibit title: Dissatisfaction with status quo
% of respondents, n = 1,944
Activities in which my company currently engages fully, and ideally should engage fully,
as a direct outcome of its corporate strategy development
26
44
Actual
Ideal
25
49
Restructuring the organization
22
39
Driving performance
transformation
Making major changes in
operating expenditures across
the corporate portfolio
Making major changes in
organic capital expenditures
across the corporate portfolio
Making major shifts in
talent across the corporate
portfolio
20
51
18
36
Divesting businesses Acquiring new businesses
Entering/exiting major markets
15
35
15
33
Redesigning key processes
14
41
8
40
corporuLe sLruLegy, more respondenLs suy LIe LrIgger Is LIeIr InLernuI pIunnIng cycIe ruLIer
LIun uny exLernuI evenL, regurdIess oI wIeLIer LIey work uL eIIecLIve compunIes or noL.
Implementing strategy
rusLruLIon ubouL ImpIemenLIng sLruLegy Is evIdenL umong uImosL uII respondenLs.
or exumpIe, qo percenL suy LIuL IdeuIIy, LIeIr compunIes sIouId IuIIy enguge In mukIng mujor
sIIILs In LuIenL ucross LIe porLIoIIo-hve LImes us muny us LIose wIo suy LIeIr compunIes
currenLIy do so (ExIIbIL q).
TIe mosL sLrIkIng conLrusL we Iound beLween mosL execuLIves und LIose uL eIIecLIve-deveIoper
compunIes Is LIe IuLLer group`s uppurenL success uL dIsmunLIIng burrIers Lo LIe ImpIemen-
LuLIon oI corporuLe sLruLegIes. or exumpIe, wIen usked wIIcI burrIers (sucI us rIsk-uverse
decIsIon mukers) InLerIere wILI reuIIocuLIon oI LIeIr compunIes` resources, z percenL oI
6 Crectin more tclue uith corporcte strcte McKInsey GIobuI Survey resuILs
LIe eIIecLIve-deveIopers group cIuIm Lo Iuve no burrIers, wIIIe onIy 11 percenL oI oLIers suy
LIe sume (ExIIbIL ). SImIIurIy, 8 percenL oI respondenLs uL eIIecLIve deveIopers suy
LIeIr compunIes Iuce no burrIers oI uny kInd Lo ImpIemenLIng sLruLegy, compured wILI onIy
; percenL oI oLIers.
TIe secreL oI eIIecLIve deveIopers` success muy be LIe exLenL Lo wIIcI LIey InLegruLe LIeIr
corporuLe sLruLegy processes wILI key munugemenL processes. or exumpIe, qq percenL
oI respondenLs uL eIIecLIve deveIopers, compured wILI zz percenL oI oLIers, suy LIeIr corporuLe
Exhibit 5
Effective companies face fewer barriers
Survey 2011
Corporate strategy
Exhibit 5 of 6
Exhibit title: Effective companies face fewer barriers
% of respondents
1
Which situctions, ij cn, cre our
compcn's biest bcrriers to mclin
substcnticl jundin shijts ccross
its portjolio?
Respondents who say
their companies are effective
developers of strategy,
n = 151
All other
respondents,
n = 1,793
Decision makers are risk-averse and
see emerging business opportunities,
by denition, as riskier
34 51
Business units feel entitled to the
same level of funding they received
in the previous year
23 41
Funding is distributed based on
the size of the business unit
16 30
People are reluctant to relocate 14 25
By conclusion of strategy
development process, changes in
operating environment have made
strategy obsolete
10 26
Other 8 7
We have no barriers to reallocation
of our resources
32 11
1
RespondenLs wIo unswered don`L know ure noL sIown.
; Crectin more tclue uith corporcte strcte McKInsey GIobuI Survey resuILs
sLruLegy processes ure IuIIy InLegruLed wILI LIe upprovuI und uIIocuLIon oI cupILuI expendILures.
As Ior LuIenL deveIopmenL und ussIgnmenL, 1 percenL oI eIIecLIves, buL onIy 6 percenL oI oLIers,
InLegruLe IL (ExIIbIL 6).
ndeed, 6o percenL oI execuLIves uL eIIecLIve compunIes suy LIeIr compunIes ure exLremeIy
eIIecLIve uL LrunsIuLIng corporuLe sLruLegIes InLo duy-Lo-duy ImpIemenLuLIon. JusL 6 percenL oI
oLIers suy LIe sume.
Exhibit 6
Better strategy through integration
Survey 2011
Corporate strategy
Exhibit 6 of 6
Exhibit title: And succeed at integrating processes
% of respondents
The management processes
that are fully integrated with decisions
resulting from my companys
corporate strategy process
All other
respondents,
n = 1,793
Respondents who say their
companies are effective developers
of strategy, n = 151
Budgeting 32 54
Business unit strategy reviews 31 66
Approval, allocation of capital expenditures 22 49
Transactions (eg, M&A, divestitures) 22 56
Operating reviews 18 50
Investor relations management 15 25
Analyst communications 12 25
Incentive structure, compensation 8 25
Talent development, assignment 6 31
8 Crectin more tclue uith corporcte strcte McKInsey GIobuI Survey resuILs
Looking ahead
Muny corporuLIons Iuve emerged Irom LIe Iunker-down menLuIILy oI LIe hnuncIuI
crIsIs wILI sLrong buIunce sIeeLs und prohLs. RobusL corporuLe sLruLegy deveIopmenL wIII be
essenLIuI Lo cIurLIng u IuLure puLI Lo successIuI growLI und reLurns.
CompunIes wouId do weII Lo desIgn un ongoIng corporuLe sLruLegy-deveIopmenL process LIuL
expIIcILIy LuckIes key corporuLe-IeveI Issues, sucI us resource reuIIocuLIon, und LIuL drIves on
mujor economIc Lrends und oLIer exLernuI IucLors.
Munugers sIouId Iorge mucI sLronger IInks beLween corporuLe sLruLegy und oLIer key
munugemenL processes, sucI us LuIenL munugemenL und uIIocuLIon oI cupILuI expendILures, Lo
ensure LIuL LIeIr sLruLegIes LrunsIuLe InLo meunIngIuI ucLIon.
TIe conLrIbuLors Lo LIe deveIopmenL und unuIysIs oI LIIs survey IncIude Michael Birshan,
u prIncIpuI In McKInsey`s ondon oIhce; Renee Dye, u consuILunL In LIe ALIunLu oIhce; und
Stephen Hall, u dIrecLor In LIe ondon oIhce.
CopyrIgIL zo11 McKInsey & Compuny. AII rIgILs reserved.