The McKinsey 7S Model helps in Strategy implementation: A Theoretical Foundation 7

The McKinsey 7S Model helps in Strategy implementation:

A Theoretical Foundation

Sandeep Kumar* Abstract: A strategy refers to a detailed plan to achieve success in

Geetika** situations like war, politics, business, industry, or sport, or the skill of
planning for such situations. Successful strategy implementation depends
on doing a well done job of working with and through others, building
and strengthening competitive capabilities, motivating and rewarding
people in a strategy supportive manner and instilling the discipline of
getting things done. The McKinsey 7S Framework was designed by
former employees like Tom Peters, Richard Pascale and Robert Waterman,
formers consultants of McKinsey, the American consulting firm and is
applied in organizations all over the world. The 7S in this model refers
to the seven elements or factors that start with the letter ‘S’. According
to Tom Peters, Richard Pascale and Robert Waterman, the condition is
that the relationships internally between these factors are well-organized
and that the elements steer the organization in the same direction. The
study views the how the McKinsey 7S model in the process of strategy
implementation works, by making use of the internal resources to create
a sustainable competitive environment to enable the organization to
achieve its intended revenue and policy targets.

Introduction develop, utilize, and amalgamate organizational

A strategy refers to a method or plan chosen to structure, control systems, and culture to follow
bring about a desired future (Pearce and Robinson, strategies that lead to competitive advantage and
2007). Johnson, Scholes, and Whittington (2005) a better performance. On the other hand, strategy
describe strategy as the direction and scope of an implementation is defined as the process that
organization over the long term, which achieves turns strategies and plans into actions in order to
advantages in an ever changing environment through accomplish strategic objectives (John, 2005). According
its configuration of resources and competencies to Kaplan (2005) the concept of successful strategy
with the aim of fulfilling stakeholder expectations. implementation requires the input and cooperation
Strategy which is a basic management tool in any of all players in the company. Pearce and Robinson
organization is a multi-dimensional concept that (2007) describe five critical variables that are usually
various authors have defined in different ways. It considered for the successful implementation
is the link between an organization’s resources and of strategy. These are: tasks, people, structures,
skills and the environmental opportunities as well technologies, and reward systems. Successful
as the risks which it has to face and the purposes strategy implementation calls for effective design
which it wishes to accomplish. and management in order for these factors to be
integrated. To operationalize strategy, an organization
Strategy Implementation needs to identify short term objectives, initiate specific
functional tactics, and communicate policies that
Karami (2005) defines strategy implementation empower people in the organization and design
as the manner in which an organization should effective rewards (Pearce and Robinson, 2007).

*Sandeep Kumar, Professor, TIAS

**Geetika, Assistant Professor, TIAS

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8 Sandeep Kumar, Geetika

Strategy implementation involves working with excellent. The Seven S model was born at a meeting
people and the structure of the organization to of the four authors in 1978. It went on to appear in
make the visionary ideas developed earlier come true “In Search of Excellence” by Peters and Waterman,
(Manage, 2007). Pearce and Robinson (2007) observe and was taken up as a basic tool by the management
that the objective of the strategic management process consultancy McKinsey (Manage, 2007).
pertains to the formulation and implementation of According to the model, managers, need to take
strategies which result in the long term achievement of account of seven basic factors to be sure of successful
the company’s mission. David (1997) defines strategy implementation of a strategy. These include strategy,
implementation as a stage of strategic management structure, systems, style, staff, shared values, and
that involves the use of organizational tools as skills. These factors are all interdependent, thus failure
well as direct resources towards achieving strategic to pay proper attention to one, marks the beginning
outcomes. Successful strategy implementation of failure (Peters and Waterman, 1982). The 7-S model
involves: clarifying the strategy by breaking it posits that organizations are successful when they
down into goals and objectives, communicating the achieve an integrated harmony of all these factors
strategy to people at all levels of the organization (Barney, 1991). The hard components are normally
and cascading strategy to the practical and tactical feasible and easy to identify in an organization as
components of people’s jobs (John, 2005). Effective they are normally well documented and seen in the
strategy implementation using the above process can form of tangible objects or reports such as strategy
be a source of competitive advantage. statements, corporate plans, organizational charts and
The McKinsey 7S model can be explained using the other documents. The remaining four Ss are more
resource-based view theory of the firm and strategy difficult to comprehend (Dunphy and Stace, 1988).
(Kraaijenbrink, Spencer and Groen, 2010). The central Strategy is the plan of action to the new position
proposition of this theory is that if a firm is to achieve described by objectives, subject to constraints of the
a state of sustained competitive advantage it must capabilities or the potential (Kaplan, 2005).
acquire and control valuable, rare, inimitable, and
non-substitutable resources and capabilities (Barney, Structure refers to the way in which tasks and people
1991). The principles of the resource-based view are specialized and divided, and authority is distributed;
theory are:business processes are the building blocks how activities and reporting relationships are grouped;
of strategy; the transformation of processes into the mechanisms by which activities in the organization
valuable strategic capabilities is a key to success; by are coordinated (Kaplan, 2005). Organizations are
strategic investments capabilities are created and the structured in a variety of ways, dependent on their
manager must be responsible, because competing objectives and culture. The structure of the company
on capabilities involves cross-functionality. The often dictates the way it operates and performs (Peters
open system theory explains how the organization and Waterman, 1982). Traditionally, businesses have
depends on its environment for input and transforms been structured in a hierarchical way with several
these inputs into an output (Barney, 1991). The divisions and departments, each responsible for a
elements in the organization are used to control the specific task. Although this is still the most widely used
transformation process to ensure success. organizational structure, the recent trend is increasingly
towards a flat structure where the work is done in
The McKinsey 7S model is a holistic approach to teams of specialists rather than fixed departments. The
company organization, which collectively determines idea is to make the organization more flexible and
how the company will operate (Karami, 2005). The devolve the power to employees by eliminating the
McKinsey 7S Model Manage (2007) defines the middle management layers (Manage, 2007).
McKinsey 7S model as a model of organizational
effectiveness used in organizations to analyze the Systems refer to the formal and informal procedures
environment to investigate if it is achieving its used to manage the organization, including
intended objectives. The McKinsey 7S Model was management control systems, performance
created by Tom Peters and Robert Waterman while measurement and reward systems, planning,
they were working for McKinsey & Company and budgeting and resource allocation systems, and
by Richard Pascale and Anthony Athos at a meeting management information systems (Kaplan, 2005).
in 1978 (Peters and Waterman, 1982). They had been Every organization has some systems or internal
looking at how the Japanese industry had been so processes to implement and support the strategy and
successful, at around the same time that Peters and run day-to-day affairs. These processes are normally
Waterman were exploring what made a company strictly followed and are designed to achieve
maximum effectiveness. Traditionally, organizations

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 The McKinsey 7S Model helps in Strategy implementation: A Theoretical Foundation 9

have been following a bureaucratic-style process of purpose for all employees. All members of the
model where most decisions are taken at the higher organization share some common fundamental ideas
management level. Increasingly, organizations are or guiding concepts around which the business is
simplifying and modernizing their processes by built. This may be to make money or to achieve
innovation and use of new organizational structure excellence in a particular field. These values and
to make the decision making process quicker. Special common goals keep the employees working towards
emphasis is on the customers with the intention to a common destination as a coherent team and
make the processes user friendly (Manage, 2007). are important to keep the team spirit alive. The
Staff refers to the people, their competencies; how organizations with weak values and common goals
the organization recruits, selects, trains, manages often find their employees following their own
the careers, and promotes them (Kaplan, 2005). personal goals that may be different or even in
Organizations are made up of humans and it’s the conflict with those of the organization or their fellow
people who make the real difference to the success colleagues (Peters and Waterman, 1982).
of the organization in the increasingly knowledge-
based society. The importance of human resources Theoretical Foundation
has thus got the central position in the strategy of the The application of the McKinsey 7S model in
organization. All leading organizations such as IBM, strategy implementation can be explained using
Microsoft and Cisco put extraordinary emphasis on the resource-based view theory of the firm and
hiring the best staff, providing them with rigorous strategy. According to Rapert, Lynch and Suter
training and mentoring support, and pushing them (1996) the resource based view theory outlines that
to achieve professional excellence (Karami, 2005). the competitive advantage of an organization lays
It is also important for the organization to instill primarily with the application of the organizations
confidence among the employees about their future resources. RBV holds that sustained competitive
career growth. advantage can be achieved more easily by exploiting
Skills refer to the distinctive competencies; what internal rather than external factors.
it does best along dimensions such as people, Kraaijenbrink, Spencer and Groen (2010) describe
management practices, processes, systems and the resource-based view theory as stemming from
customer relationships (Kaplan, 2005). the principle that the source of firms’ competitive
Style refers to the leadership style of managers; how advantage lies in their internal resources, as opposed
they spend their time; what they focus attention on; to their positioning in the external environment.
how they make decisions; also the organizational That is, rather than simply evaluating environmental
culture, that is, the dominant values and beliefs, the opportunities and threats in conducting business,
norms, the conscious and unconscious symbolic acts competitive advantage depends on the unique
taken by leaders (Kaplan, 2005). All organizations resources and capabilities that a firm possesses.
have their own distinct culture and management The resource-based view of the firm predicts
style. It includes the dominant values, beliefs, thatcertain types of resources owned and controlled
and norms which develop over time and become by firms have the potential and promise to generate
relatively enduring features of the organizational competitive advantage and eventually superior firm
life. It also entails the way managers interact with performance (Tesot, 2012). These resources must
the employees and the way they spend their time. be identified with key potentials, that is, valuable,
Businesses have traditionally been influenced by the rare, inimitable, and non-substitutable without great
military style of management with strict adherence to effort.
the upper management and procedure expected from Barney (1991) explains that resources are valuable
the lower-rank employees. However, there have been if they help organizations to increase the value
extensive efforts to change the culture to a more offered to the customers. This is done by increasing
open, innovative and friendly environment with differentiation and decreasing the costs of the
fewer hierarchies and smaller chains of command production (Rapert, Lynch and Suter, 1996). Resources
(Dunphy and Stace, 1988). that can only be acquired by one or few companies
Lastly, Kaplan (2005) defines shared values as the are considered rare. A company that has valuable
core or fundamental set of values that are widely and rare resource can achieve at least temporary
shared in the organization and serve as guiding competitive advantage (Porter, 1985). However, the
principles of what is important; vision, mission, resource must also be costly to imitate or to substitute
and values statements that provide a broad sense for a rival. The resource itself does not confer any

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10 Sandeep Kumar, Geetika

advantage for a company if it’s not organized to This theory explains how senior managers of
capture value (Barney, 1991). successful companies can change their existing
Only the firm that is capable to exploit the valuable, mental models and paradigms to adapt to radical
rare and inimitable resources can achieve sustained discontinuous change in their environment. This
competitive advantage. To transform a short-run is made possible through the organization’s ability
competitive advantage into a sustained competitive to orchestrate and reconfigure externally sourced
advantage requires that these resources are competencies (Ofunya, 2013). This therefore enables
heterogeneous in nature and not perfectly mobile. If the organization to maintain threshold capability
these conditions hold, the firm’s bundle of resources standards and hence ensure competitive survival.
can assist the 1960s, theoretical psychologists applied The McKinsey 7S model elements’ can be exploited
the theory to organizational structures such as by the organization to create short-term competitive
governments, universities and businesses. Any time positions (Manage, 2007). Elements such as skills,
an individual organization uses resources from its staff, structure and systems can be used to respond
environment in its production; its system is open to quickly to changes in the environment. These changes
outside forces. When a business regularly interacts will result in competitive survival and will be used
with its environment, and exchanges and processes to build on the longterm competitive advantage
feedback, it is an open system organizational ensuring a successful strategy implementation
structure. Open systems have porous boundaries process.
that allow feedback exchanges from inside and
outside the business (Porter, 1985). The controllers Application of the McKinsey 7S Model in
of open systems pay attention to their external Strategy Implementation
environment, internal environment and customer The strategy implementation process can be clearly
needs and reactions. outlined using five phases (Pearce and Robinson,
Open systems tend to devise more than one way 2007). The first phase is the alignment of initiatives. A
to accomplish goals with different conditions and new strategy in an organization must be supported by
operations. This is what is referred to as equi-finality new priorities and activities to support its successful
(David, 1997). This is in direct contrast to closed implementation. All initiatives must be therefore
systems that function under the assumption that strategic value and impact to the organization.
there is only one way to achieve a result. The open The next phase is the alignment of budgets and
system organizational structure promotes effective performance (David, 1997). All departments within
strategy implementation through clarifying the big the firm must allocate and manage their budgets
picture. to deliver the strategic initiative. Organizational
performance should be closely aligned to strategy.
The elements of the McKinsey 7S model of style
The third phase of strategy implementation
and shared values enable continuous feedback
is harmonization of structure and strategy. A
and response resulting in better understanding, by
transformational strategy will require transformation
leadership and management, of the organization’s
to the firm’s structure. The structure of the firm
structure within the environment and the interactive
should allow strategy to cascade across and down
dynamics between them. That opens the door for
the firm so as to efficiently deliver the strategy
better communication which will result in successful
(Karami, 2005).
strategy implementation. Dynamic capabilities
theory also provides a basis for the application of The next phase is the engagement of staff so
the McKinsey 7S model in strategy implementation. that they can get behind it for successful strategy
The basic assumption of the dynamic capabilities implementation. The final phase of strategy
framework is that core competencies should be used implementation is monitoring and adaptation. Since
to modify short-term competitive positions that can change is a constant in all businesses, strategies
be used to build longer-term competitive advantage must be adaptable and flexible. Strategies must be
(David, 1997). In organizational theory, dynamic reviewed regularly to assess priorities, actions and
capability is the capability of an organization to adapt performance (Pearce and Robinson, 2007). McKinsey
adequately to changes that can have an impact on 7S model is a tool that can be used to understand
its functioning (Barney, 1991). the strategy implementation process (Simiyu, 2013).
The dynamic capabilities theory focuses on the Strategy refers to actions taken by an enterprise, in
issue of competitive survival (Kahihu, 2005). response to changes in the external environment,

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 The McKinsey 7S Model helps in Strategy implementation: A Theoretical Foundation 11

intended to achieve competitive advantage be engaged in delivery of the intended strategy

(Karami, 2005). The alignment of the initiatives and must be empowered to act on the targets of
will be translated into strategies that will guide the the firm. They must also have a positive attitude
organization towards its purpose. The strategies so as to assist in the monitoring of the progress
must also include performance and budget goals so of the strategy implementation process and be
that performance is delivered within the established trusted to make the necessary adjustments. Shared
budgets. Structure refers to distribution of authority values refer to the fundamental set of values that
and reporting relationships within the organization are widely shared in the organization (Karami,
(Karami, 2005). 2005). They serve as guiding principles of what is
The organization must put in place proper structures important and provide a broad sense of purpose for
that 22 will support the strategies that are developed. all employees. This element encompasses the whole
The second phase of implementation is the alignment strategy implementation process from the alignment
of budgets and performance. Structures must exist of initiatives so as to formulate strategies to the
to support how resources are allocated to each alignment of budgets with the expected performance.
performance target. Structures are also necessary to Shared values enable a proper harmonization of
enable monitoring of the implementation process. strategies and structure so as to offer necessary
This last phase of the implementation process helps support (Peters and Waterman, 1982). According
ensure the firm is working towards the right goals. to Peters and Waterman (1982), the model is
Systems are the formal and informal procedures used operationalized by first identifying the areas that
to manage the organization (Karami, 2005). are not effectively aligned. The second step involves
This element supports the third phase of the strategy a determination of the most effective organizational
implementation process. Systems must exist in the design the organization wants to achieve. The third
firm so as to harmonize the strategies and structures. step is basically the action plan, which will detail the
This harmonization enables faster adoption of the areas that need to be realigned and how it should
new changes in the environment and the building be done. Dunphy and Stace (1988) observe that if
of milestones into the implementation process. John the firm’s structure and management style are not
(2005) defines skills as distinctive competencies of aligned with company’s values, the firm should
the organization. reorganize the reporting relationships and influence
a change in management style. Finally, there should
Elsewhere, Drucker (2007) suggests that skills be a continuous review of the seven elements. A
are necessary for the fourth phase of the strategy change in one element always has effects on the
implementation process. Engagement of staff in other elements and requires implementing new
the implementation process is only possible if they organizational design (Peters and Waterman, 1982).
possess the necessary skills to be able to understand
the strategy and communicate to management what Conclusion
changes are necessary and how these changes can
be adopted faster. To conclude we can say that the McKinsey 7S Model
is a framework for organizational effectiveness that
Style refers to the leadership style of managers, postulates that there are seven internal factors of an
what they focus attention on, what questions they organization that need to be aligned and reinforced
ask of employees, and how they make decisions in order for it to be successful. The 7S Framework
(John, 2005). The strategy implementation phases is mainly used to trace performance problems in
of harmonization of structure and strategy and an organization to subsequently change and/or
engagement of staff heavily rely on the leadership improve these. With a blueprint or (photo) of these
style in the organization. A participative leadership performance problems, several elements could be
style is best suited to support alignment of strategies put to use in a targeted manner. It is important
and the organization structure. The leadership must in this to compare the present situation (IST) with
be also committed to fully inform the staff and get the desired and future situation (SOLL). The 7S
them behind the goals set so as to implement strategy Framework constitutes a good framework, in which
successfully (Dunphy and Stace, 1988). possible gaps and inconsistencies between IST and
Staff refers to the people within the organization SOLL can be traced and adjusted.
(Drucker, 2007). This element of the McKinsey
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