Strategy Beyond the Hockey Stick

Strategy isn't the only thing that's at stake here.

Strategy isn't the only thing that's at stake here. Jobs—even careers—are on the line, too. Human nature complicates strategy. In the strategy room, personal agendas, risk aversion, and cognitive biases often overshadow rational decision-making. Executives may prioritize job security over bold moves that could benefit the company. This leads to: Sandbagging: Setting easily achievable targets Hockey stick projections: Overly optimistic long-term forecasts Peanut butter spreading: Distributing resources evenly instead of concentrating on high-potential areas Overcoming social dynamics is crucial. To make big moves and bold decisions, companies must address these human factors by: Encouraging open dialogue and challenging assumptions Aligning incentives with long-term company success Using data and external benchmarks to counter biases

Companies in the top quintile capture nearly 90 percent of the economic profit created, averaging $1.4 billion annually. The Power Curve illustrates stark performance differences. Analysis of thousands of companies reveals a dramatic curve of economic profit (profit after the cost of capital): Top quintile: Captures 90% of all economic profit Middle three quintiles: Generate minimal economic profit Bottom quintile: Destroys significant economic value Implications for strategy: Moving up the curve should be a primary strategic goal Understanding your position on the curve provides context for decision-making The curve is getting steeper over time, increasing the stakes for strategic choices

Your main competitor is the Darwinian force of the market that squeezes your profitability; your main measure of whether you are winning is the extent to which you avoid that squeeze. External factors shape 50% of a company's position. Industry dynamics and geographic exposure play a crucial role in determining performance: Industry trends: Account for about 25% of a company's odds of success Geographic exposure: Contributes another 25% to performance odds Strategic implications: Choosing the right industries and geographies is critical Companies must continuously assess and potentially pivot their industry focus Geographic strategy should target high-growth markets

Companies that made three or more big moves were six times more likely to jump from the middle quintile to the top. Big moves significantly increase upward mobility. The research identifies five moves that, when executed at scale, can dramatically improve a company's odds of success: Programmatic M&A Dynamic resource allocation Strong capital expenditure Distinctive productivity improvement Differentiation improvement Key insights: Making just one or two big moves doubles the odds of reaching the top quintile Three or more big moves increase odds by 6x Big moves must be substantial relative to industry norms to have impact

Companies that shift more than 50 percent of their capital expenditure across business units over 10 years create 50 percent more value over that period than companies that move resources at a slower clip.…