McKinsey 7-S Framework: A Checklist
Here is a checklist for using the McKinsey 7-S Framework to describe a
business. Note that the 7-S model was developed in the 1980’s by Robert
Waterman, Tom Peters and Julien Philips while working for McKinsey and
originally presented in their article “Structure is not Organization.” Also
included are questions to help evaluate industry structure.
Mckinsey 72 Model
Strategy
1. In what kinds of markets
does the business compete and how are these markets changing?
o
Types of
Customers
o
Local Market
o
Regional Market
o
Global Market
2. What are the firm’s
sustainable competitive advantages and how are they changing?
o
Technical
Leadership
o
Cost
o
Quality and
Reliability
o
Service
o
Knowledge of
the Market
o
Control of
Distribution Channels
o
Monopoly Power
through Government Policy
o
Artificially
Protected Market
o
Government
Connections
3. How do the basic elements
of the business system work, and where are the key leverage points? How might
these change?
o
Technology
o
Product Design
o
Procurement
o
Manufacturing
o
Distribution
and Selling
o
Service
4. How has the firm deployed
its major resources and how is this changing?
o
Funds
o
Management
o
Service,
Selling or other Distinctive Capabilities
o
Market Position
5. What are the firm’s
overriding strategic priorities?
o
Protect
Existing Market Share
o
Penetrate New
Markets
o
Enhance Value
to Customers by Lowering Production Cost, Improve Product/Service or Greater
Technology Edge
o
Acquire or Move
Into New Business or Technology
o
Change the Game
6. How does the firm secure
needed support from its other major constituencies and how is this changing?
o
Employees
o
Distributors
and Retailers
o
Suppliers of
Funds
o
Suppliers of
Materials and Equipment
o
Key
Governmental Bodies
Structure
1. How is the company/team
divided?
2. What is the hierarchy?
3. How do the various
departments coordinate activities?
4. How do the team members
organize and align themselves?
5. Is decision making and
controlling centralized or decentralized? Is this as it should be, given what
we’re doing?
6. Where are the lines of
communication? Explicit and implicit?
Skills
1. What business activities
that are crucial to its successes is the firm good at performing and how are
these changing?
2. What business activities
that are crucial to its success is the firm weak in performing and how are
these changing?
3. What important management
activities must the company perform much better than it does now?
o
Business System
Functions
o
Nonbusiness
System Functions
§ Employee Relations
§ Staff Development
§ Government Relations
o
Special
Management Challenges
§ Multi-Product Line
Management
§ Acquisition Management
§ Resource Deployment
§ Divestment
§ “Privatization”
4. Is this an “excellent”
firm?
o
Action and
Execution Focus
o
Close to the
Customer
o
Productivity
Through People Focus
o
Simple Form,
Lean Staff
o
Stick to their
Knitting
o
Hands-on,
Value-Driven
o
Simultaneous
Loose-Tight Properties
Shared Values
1. How do people in the firm
describe the ways in which it is distinctive?
2. How do people in the firm
describe what is key about “how we do things around here?”
o
Controlling
Considerations in Decision Making
§ Impact of Priority
Customers
§ Internal Political
Considerations
§ Financial Attractiveness
§ Impact on Market Position
§ Donor or Government
Requirements or Expectations
o
How Important
Constituencies are Dealt with
o
How Things get
done
o
How decisions
are made
o
What
preoccupies senior management
3. What things get the most
and the least top-management attention and how is this changing?
o
Business
Functions
o
Markets and
product Lines
o
Organizational
Units
o
Projects
o
Threats
o
Cost Versus
Value to Customer
o
Shore Versus
Long Run
o
Internal Versus
External
4. Does management give much
importance to the firm’s culture and shared values?
5. Does the firm have a true
guiding concept that is
o
Directional
o
Fundamental
o
Plausible
o
Achievable
o
Shared
And does the
guiding concept fit with the strategy and skills of the firm?
Systems
1. What are the most important
management processes that top management uses to run this firm?
o
Annual Strategy
and/or Performance Review
o
Monthly or
Quarterly Operating Reviews
o
Capital
Investment Approvals
o
“Kitchen-Cabinet
Sessions”
o
“Management by
Walking Around”
2. What are the most striking
characteristics of these processes?
o
Formal versus
Informal
o
Financial
versus Substantive
o
Staff versus
Line-Dominated
o
Multilateral
versus Bilateral
3. What managerial functions
are most and least emphasized in the conduct of these processes and what are
the trends?
o
Path Setting
o
Problem Finding
o
Decision Making
o
Execution
o
Interpretation
4. What are the most important
information systems in the firm? What variables are monitored and controlled
most closely?
Style
1. What is top management’s apparent
view of its own principal value-add?
o
Monitor, review
and ensure results
o
Make sure
others answer tough questions before they make decisions
o
Make tough
decisions directly
o
Stay on top of
internal operations
o
Identify issues
for attention
o
Relate with
outside world
o
Maintain
internal conditions for effective function
o
Chart course
and set direction
2. For people in the firm,
what are the most-watched indicators of top-management expectations and values?
o
Recent
decisions
o
More or less
formal pronouncements
o
Informal
questioning routines
o
Praise and
promotion or criticism
3. How does top management
make decisions?
o
Wide
consultation versus narrow consultation versus solitary decision making
o
Reliance on
data and analysis versus trusted counsel versus lessons of experience
4. How does top management
seek to motivate employees?
o
Orders
o
Compensations
and perquisites
o
Personal
relations
o
Hoopla
o
Participation
and team spirit
o
Internal
competition
Staff
1. What are the demographics
of the management group and how are they changing?
o
Functional and
business unit experience within the company
o
Educational
background/professional discipline
o
Experience
outside the company
o
Religion,
political party, age, sex, regional factions
2. What kinds of things are
current senior managers known for and what is the “next generation” of managers
known for?
o
Important
accomplishments
o
Interests and
personal crusades
o
Connections
3. Where in the firm are the
strongest managers found? The weakest?
4. How much importance does
the firm really give to its people?
o
Emphasis on
development planning, performance appraisal, training, etc.
5. What is the top-management
structure and how is it changing?
o
One man versus
CEO/COO versus team
o
Collective
executive versus collection of top managers of various organizational units
o
Government
representation or oversight
o
Board as review
versus deliberative versus directive body
6. Are “special” structural
devices used?
o
Task Forces
§ Full time versus part time
§ Volunteers versus draftees
§ Reports versus results
o
Czars
o
Project
managers
o
Quality circles
o
Management
“panels” or “boards”
7. How does this firm deal
with functions that could be internal or external and how is this changing?
o
Distribution
and sales
o
Materials
supply, subassembly, etc.
o
Technology
supply
Evaluating
Industry Structure
Threat of New
Entrants
1. Do large firms have a cost
or performance advantage in your segment of the industry?
2. Are there any proprietary
product differences in your industry?
3. Are there any established
brand identities in your industry?
4. Do your customers incur any
significant costs in switching suppliers?
5. Is a lot of capital needed
to enter your industry?
6. Is serviceable used
equipment expensive?
7. Does the newcomer to your
industry face difficulty in accessing distribution channels?
8. Does experience help you to
continuously lower costs?
9. Does the newcomer have any
problems in obtaining the necessary skilled people, materials or suppliers?
10. Does your product or
service have any proprietary features which give you lower costs?
11. Are there any licenses,
insurance or qualifications which are difficult to obtain?
12. Can the newcomer expect
strong retaliation on entering the market?
High barriers to entry = + factors (favorable to industry)
Low barriers to entry = – factors (unfavorable to industry)
Threat of
Substitutes
(Some other product or service which performs the same jobs as yours)
1. Substitutes have
performance limitation which do not completely offset their lowest price or
their performance advantage is not justified by their higher price.
2. The customer will incur
costs in switching to a substitute.
3. Your customer has no real
substitute.
4. Your customer is not likely
to substitute
Low threat of substitution = + factors (favorable to industry)
High threat of substitution factors (unfavorable to industry)
Bargaining
Power of Suppliers
1.
My inputs
(materials, labor, supplies, services, etc.) are standard rather than unique or
differentiated.
2.
I can switch
between suppliers quickly and cheaply.
3.
My suppliers
would find it difficult to enter my business or my customers would find it
difficult to perform my function in house.
4.
I can
substitute inputs readily.
5.
I have many
potential suppliers.
6.
My business is
important to my suppliers.
7.
My cost of
purchases has a significant influence on my overall costs.
Low bargaining power of suppliers = + factors (favorable to industry)
High bargaining power of suppliers = – factors (unfavorable to industry)
Determinants of
Rivalry Among Existing Competitors
1. The industry is growing
rapidly.
2. The industry is not
cyclical with intermittent over-capacity.
3. The fixed costs of the
business are a relatively low portion of total costs.
4. There are significant
product differences and brand identities between the competitors.
5. The competitors are
diversified rather than specialized.
6. It would not be hard to get
out of this business because there are no specialized skills and facilities or
long term contract commitments, etc.
7. My customers would include
significant costs in switching to a competitor.
8. My product is complex and
requires a detailed understand on the part of my customer.
9. All my competitors are
approximately my size.
Low level of rivalry = + factors (favorable to industry)
Higher level of rivalry factors (unfavorable to industry)
Overall
Industry Rating
Threat of new entrants = __
Threat of substitutes = __
Bargaining power of suppliers = __
Bargaining power of buyers = __
Rivalry among the existing companies = _
