I’ve written a lot about the Balanced Scorecard because I believe that this business concept gives many possibilities for top managers to execute strategy better by aligning measures and initiatives with strategic objectives.
The reality is that the business toolbox of a top manager never consists of just one business tool. I’d like to talk about the time-tested McKinsey’s 7-S framework.
The 7-S framework was introduced in 1980; later in 1982 the model was shown to the general public in the bestseller “In Search of Excellence” by Tom Peters and Robert Waterman. Ten years late in 1992 David Norton and Robert Kaplan published an article in the Harvard Business Review introducing their “Balanced Scorecard.”
Although both concepts address the same goal, which is help in executing strategy, I find that each of the frameworks has its value for a company.
- Those who use the Balanced Scorecard these days should master the 7-S model as well.
At a minimum, the 7-S will be another useful business checklist. Here is what Robert Kaplan one of the authors of the Balanced Scorecard concept says:
I believe that the BSC is not only fully consistent with the 7-S framework, but that it can also enhance it in use.
Robert Kaplan in “How the Balanced Scorecard complements the McKinsey 7-S model” 
The history of 7-S Framework
One of the authors of the 7-S framework, a well-known business guru Tom Peters, shares the history of the business concept in his “Brief History of the 7-S (“McKinsey 7-S”) Model” .
The concept was introduced in 1980 in the article “Structure Is Not Organization”  published in Business Horizons. The article addressed organizational effectiveness issues. Co-authors of Tom Peters were Julien R. Phillips and Robert H. Waterman (all worked at that time in the San Francisco office of McKinsey & Company).
The article starts with a simple statement:
- “The picture of the thing is not the thing… An organizational structure is not an organization.”
This statement addressed to an approach to solving strategic business problems that in most cases consisted of suggesting a different organizational structure. Later, Tom Peters explains in the “Brief History of the 7-S Model” : “McKinsey’s arsenal mostly consisted of strategy and, secondarily, structure.”
Companies failed to execute their strategy and the research done by Tom Peters, and later by his colleagues, were about finding other drivers of success, and alternatives to structural design.
During the brainstorming of the final look at the framework, authors of the article decided to use alliteration, so all of the 7 parts of the framework should start with an “S”. Probably because of this small trick the concept is still a must-have part of a business management toolkit.
7-S of the framework
While doing research for this article, I’ve found that most resources just copied the list of Ss without paying much attention to what standards behind them were.
In the 7-S Framework the effective organizational change is driven by 7-Ss. Before we will go into the list of 7-S, I’d like to mention that there are “Hard Ss” and “Soft Ss.” “Hard” in this case refers to something formal, tangible, and measurable. There are three “hard Ss”:
The rest of 7-S are “Soft Ss,” meaning ideas that are informal, and difficult to measure:
- Shared Values
“Hard” and “Soft” drivers of success
In his article  Tom Peters captures the power of 7-S concept in 6 words:
Hard is soft. Soft is hard.
Tom Peters. Brief History of the 7-S. 
Sometimes what we think is “hard” (like strategy or business system), doesn’t give us a result without what we thought was “soft” (people and our values).
In the Balanced Scorecard there is a similar idea of the shift from the financial-only measures to intangible perspectives like Customers and Education and Growth.
Both business concepts underline the importance of paying attention to the different aspects of the business, not only financial ones.
The important part of the 7-S framework is a diagram, which has a spider-web form and consists of 7 S-cycles and interconnections between them. This structure was chosen to underline the complexity of factors that can influence the change in the company.
The approach of a 7-S framework is multi-dimensional. The elements on the 7-S chart are interconnected with lines of equal size, all of the elements are equally important and all of them should be used together. To make progress in one of “Ss” you one need to achieve success in others.
The shape of the diagram is a cycle as well. The diagram has no starting point. This shape was chosen intentionally to demonstrate that it is not obvious which of the Ss will be a driving factor for solving a particular business problem.
What does each “S” in 7-S mean?
Now, let’s review the Ss from the 7-S model one by one. As was said before alliteration was used to make all the key elements of the 7-S model begin with “S.” It helps a lot in memorizing the elements of the framework, but some elements need to be explained for a proper understanding.
When I hear “business structure,” I always have a picture of the organization chart. The process of improving the structure ends up as re-arranging the boxes on this chart. International corporations were taught how to play this game over many years and now they have mastered this skill. The ultimate goal of the organization structure is to divide the tasks and resources in some way to make everything work properly.
A short question: what structure do we need to execute this strategy?
Strategy is another hard “S” in 7-S framework. That’s a company’s route to the success. In this article I don’t want to give another cliché-like definition of the strategy. What is more important is that the idea of the strategy in 7-S framework is just the same as a strategy in a common business sense. The strategy answers the question what should the company do to achieve success by taking into account competitors and limited resources.
A short question: what should we do to solve the specified business problem?
We have a business structure and the strategy. But how actually do things happen? The last hard “S” is “Systems.” Systems bring the life into any business. How is the customer treated, how does the marketing work, how does the delivery operate? All this is supported by systems.
Some top managers want to work with strategy only. But during the last few year’s we saw a lot of examples where companies win not because of their strategy, but because of their system. In the article “Structure Is Not Organization”  one bank is mentioned, that defined its strategy as an improvement of their systems infrastructure. The system was their strategy.
A short question: what business system do we need to use or invent to execute the strategy?
At least for me it was not clear what might stand behind the “style” word here. Without further explanation and details it is easy to have a false conclusion about the “Style” part of 7-S framework. After reading the original article I would explain the “style” of 7-S as a leadership style and the company’s culture. In simple words: how do executives spend their time?
A short question: what leadership style and cultural qualities will help us to achieve a strategic objective?
With staff the authors of the concept refer to the company’s people. And there is an interesting explanation why managers are skipping this aspect of the business.
- On one hand there are formal training programs, appraisal systems that are often a prerogative of HR only.
- On the other hand there is a moral, engagement, motivation that is missed by the manager as cannot be really controlled.
The result is that managers do nothing about their people. The problem is not so crucial at the level of line employees, but should be taken seriously in the aspect of the development of managers.
A short question: how should we help our managers in their growth?
With skills 7-S framework refers to the “dominating attributes or capabilities” of the company. There are several interesting aspects highlighted in the original article.
- First, if the skill/capability is not explicitly marked, then it tends to get lost during strategy or structure shift.
- Second, the new skill can appear only when the old skill is revised and removed/modified together with its supporting structure and systems.
For these two reasons it is recommended to work with a company’s skills, or at least to label them properly.
A short question: what are the specific skills that will help us? What skills do we need to develop?
In the original article another “S”-phrase was used: Superordinate Goals. Nothing new here, these are company’s principles/DNA expressed at high levels of abstraction. This is usually senseless for outsiders, but it means a lot for employees.
In the Balanced Scorecard some companies put them at the bottom of the strategy map saying in this way that these values are actually a base for other business perspectives.
A short question: which of our principles help us? Why do we do what we do in the way we do it?
Use of the 7-S concept as a checklist
Good news. You can use these 7-Ss just as a simple checklist. No rocket-science, no automation software. “It gives us a deeper bag in which to collect our experiences,” say the authors of the framework.
Lowell Bryan, a director in McKinsey’s New York office, shares his vision  of the key ideas of 7-S framework:
Most of us have black spots… this simple checklist causes you step back and think about elements that are natural to you.
Lowell Bryan, a director in McKinsey’s New York office
Action Plan and KPIs
Officially, an action plan and KPIs do not form a part of the 7-S framework. But it is obvious that no strategy can be executed without suggesting and working on some action-oriented initiatives.
As for KPIs, companies already use them for some business systems (“hard” S). As for “soft” Ss, authors of the 7-S framework expect that they will be measured as well:
“We believe that style, systems, skills, superordinate goals later ["superordinate goals" were replaced with "shared values"] can be observed directly, even measured.”
“Structure is not organization”, Business Horizons 
An example of using the 7-S framework applied to a real task
I’d like to find out how we could apply the 7-S framework to some real business task. As an example, let’s take the problem that any online business faces these days: “How to get more qualified visitors to a website.”
- Before we start. I think it would be great if you could try the 7-S framework for your business right now. You can download a free Template for the 7-S framework. Print it out and start adding your answers there.
- Users of BSC Designer Online and BSC Designer PRO can enjoy 7-S framework created with BSC Designer Online.
I’d start with “Systems.“ Basic research shows that getting more qualified visitors is about attracting traffic from search engines. Attracting traffic from search engines is about creating high quality content that is of high use for potential visitors. The first system we need is one that will help in creating a high quality content. Let’s call it a Content Business System.
It is obvious that without additional marketing efforts nobody will know about this excellent content, so the second system that we need is a Marketing Business System. The goal of this business system is to promote content in social media and by other means.
If we check Google’s recommendations on this topic, we see that Google likes fresh content that is published regularly. The goal is not to publish just one interesting article, but to do it regularly. It means that in some way we need to find fresh ideas regularly and to write a specific number of articles per month. It is obvious that we need one more business system that will ensure the regularity of the publications.
Get this template for free.
How will we focus our business systems? We need to understand who our client is and where can we find them. I would like to use this objective as a strategic objective. For the “Strategy” we might take the following:
- Do a market research to find out who our user is and where to find these people online, and find out what their information needs are.
- Use the Content Business System to create high quality content to address the needs of potential clients.
- Use Marketing Business System to promote created content within target user groups online.
As was mentioned before, we are looking at creating of high-quality content, not just some bulk writing. Our final goal is to attract people by providing high quality information. The company from an example is not using any black-SEO methods. Using 7-S model I’d put this to the “Shared Values.”
The creation of high-quality content and marketing of the new content will require from us certain skills. The “Skills” part of 7-S framework suggests us to explicitly mark our skills to see what we have, what should be added or modified.
Obviously, we have experts in our domain, and they have excellent research and writing skills. Our graphical designed can create amazing illustrations for new articles, so we have a graphical design skill. What probably does need to be updated are skills of those who work in the marketing system that are supposed to deliver the high quality content to the end readers.
In this way we have gotten to the “Staff” element of 7 “S” of the framework. As mentioned before we assume that our marketing managers should be trained to deliver better marketing results. The question is what the company should do to achieve this.
This question is more about “Style“ element of the framework. How according to the company’s culture and management style of company’s leaders the company solves problems like this. Should we invest in the training of the current manager, hire someone new, or hire an external consultant. A company’s manager should decide what is more appropriate in this case.
One of Ss that was not yet discussed is a “Structure.“ We might have some insights about the structure we need once all the business systems are formed. For now, it is obvious that research and writing experts should be controlled by a senior editor. Marketing should be controlled by some type of senior manager.
According to this analysis, using the 7-S framework we see that the major work is in the “Systems” part. We could say that our strategy is working on these systems.
The 7-S framework gave us a big picture of what can we do about an above mentioned problem and we have some strategy that will help us to achieve an objective. To execute this strategy we need to design an action plan with specific initiatives and add some KPIs that will tell us that we are on the right track in executing our strategy.
I’d call the 7-S framework a business compass. The compass alone won’t get you from point A to point B, but without it you will fail to make the journey (execute the strategy properly).
- The 7-S model makes us think about “soft” parts of the business, such as shared values, skills, staff, style. These aspects are intangible, hard to measure, but sometimes they affect the business even more than “hard” parts like strategy and systems.
- The 7-S framework suggests a balance between “soft” and “hard” Ss. As having problem with one S will prevent you from achieving results.
- In the 7-S framework there are no specific recommendations about “measurement” and “action” parts, but it was clearly expressed by the authors that all the Ss, especially “soft” ones, can be observed and measured.
I believe that this business compass is a must-have tool in your business toolbox, at least for its simplicity. With an 7-S framework you can easily get a big picture of a problem that you deal with and have some insights for possible ways to achieve desired results.
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- Robert S. Kaplan (2005). How the balanced scorecard complements the McKinsey 7-S model VOL. 33 NO. 3 pp. 41-46, Emerald Group Publishing Limited, STRATEGY & LEADERSH http://www.hrd.nida.ac.th/fileupload/paper/teacher/4.2.%20Kaplan%202005%20Strategy%20BSC%20and%20McKinsey.pdf
- Tom Peters (2011, January). Brief History of the 7-S (“McKinsey 7-S”) Model. http://www.tompeters.com/docs/7SHistory.pdf
- Robert H. Waterman, JR., Thomas J. Peters, and Julien R. Phillips. (1980, June). Structure is not organization, Business Horizons pp. 14-26, http://www.workmonkeystudio.com/sites/default/files/Structure_Is_Not_Organization.pdf
- Enduring Ideas: The 7-S Framework. http://www.mckinsey.com/insights/strategy/enduring_ideas_the_7-s_framework