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Using the McKinsey 7-S Model to
Improve Competitive Intelligence
Capabilities
Avner Barnea, A.B. Projects
The 7-S model was originally used
to analyze both large and small firms
by looking at their structure, offering
a wider explanation thorough seven
elements: strategy, structure, systems,
style, staff, skills, and shared values.
Managers should take into account
these factors to successfully implement
their company’s strategy since all seven
elements are interrelated – failing
to recognize one of them affects the
perception of the others.
Tom Peters and Robert
Waterman, then consultants in
McKinsey & Company, applied this
framework when analyzing what
makes a company excellent. Peters
and Waterman published their 7-S
Model in the article “Structure is not
organization” (1980). This model also
appeared later in their book In Search
of Excellence” in 1982.
I was looking for models to support
focusing on target companies and to
improve my analysis work. I applied
this model to competitor companies
and found it a useful contribution to
the overall estimation of the firms’
capabilities.
THE SEVEN ELEMENTS
Strategy. Actions a company
plans in response to or anticipation of
changes in its external environment. It
may also be seen as plans for allocation
of resources to enable the company’s
identified goals.
Structure. Basis for specialization
and coordination influenced primarily
by strategy and by organizational size
and diversity. This is also the way that
different units in the firm relate to each
other.
Volume 11 • Number 3 • May-June 2008 www.scip.org 51
Systems. Formal and informal
procedures that support the strategy
and structure. Often internal systems
are more powerful than they are given
credit for. They are also the procedures
and processes that characterize how
the work should be done and internal
systems used to accomplish the needed
performance.
Style. The culture of the
organization, which consists of two
components. One is organizational
culture, the dominant values, beliefs,
and norms which develop over time
and become relatively enduring features
of organizational life. The other is
management style, how key managers
behave and what they do rather than
what they say. It answers the questions:
How do they spend their time? What
are they focusing their attention on?
Staff. Human resource
management, the processes and
efforts used to develop managers,
socialization, and the shaping of basic
management values, It also includes
ways of introducing young recruits to
the company, and the support given to
manage employees’ careers.
Skills. These are the distinctive
and core competencies of the company,
They include the ways competencies
are expanded or shifted. This can also
be determined from the perspective of
core competencies that exist and are
developed in the firm.
Shared values. Also called supre-
ordinate goals, these are the central
believes and attitudes, guiding concepts,
and fundamental ideas around which a
business is built. Usually stated at the
abstract level, they have great meaning
inside the organization even though
outsiders may not see or understand
them. They can be summarized as what
extent the company stands for and what
it believes in.
These seven elements also help
estimate the effectiveness of a firm.
They are interrelated -- if one element
changes, it will affect all the others.
For example, a change in human
resource systems such as internal
career plans and management training
has an impact on organizational
culture and thus will affect structures,
processes, and finally the characteristic
competences of the organization.
Another example is changes in the
structure such as merging sales and
marketing that affect the number
and quality of new products that the
company can launch.
HARD AND SOFT ELEMENTS 
The seven elements can be divided
into ‘hard’ and ‘soft’ S’s (see figure 1).
The three hard S’s (circles) are concrete
and relatively easy to identify. They
can be found in strategy statements,
corporate plans, organizational charts
and other documentation. It is common
to analyze rival companies by focusing
on these three.
The four soft S’s (circles) are
more variable since the capabilities,
values, and elements of corporate
culture are continuously changing and
developing. Usually determined by
the employees of the organization, it is
more difficult to plan or to influence
these characteristics. Although the soft
factors are below the surface, they have
significant impact on the hard elements.
Peters and Waterman mentioned
that “the most successful companies
work hard on the soft S’s” (1982 p9-15).
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one of the main and make inferences that can be applied

reasons for the to determine how this company will
Structure declining quality react to situations in the future.
and quantity in new Competitive intelligence
patents. An interesting practitioners often have to take
Strategy case is when a global additional steps to gather the relevant
Systems company, while information needed by these elements
looking carefully through interviews of former employees
into its performance, and executives, competitors, strategic
Shared discovered that it partners, suppliers, major customers
was spending much and external experts. This information
Values less resources and can enable a better drill down into
attention to shape a the various aspects that may seem
Skills Style new strategy needed problematic when trying to find out the
as a result of changes principle causes and the scope of the
in the markets and in problems.
their primary rival.
Staff The late response
caused severe damages References
to the company that Pascale, R.; Athos, A. (1981). The Art
were not being seen of Japanese Management, London:
Figure 1: The seven S’s
immediately but Penguin Books.
Waterman, R. Jr.; Peters, T.; Phillips, J.R. (1980).
appeared in two to Peters, T.; Waterman, R. (1982). In
“Structure is not organization,” Business Horizons, v23/3,
three years. Search of Excellence: Lessons from
p21.
I have recently Americas Best Run Companies, New
applied this model York, London: Harper & Row.
From the competitive intelligence point to a mergers and acquisitions process, Recklies, D. (2001). “The 7-S’ model,”
of view, it is not only more difficult which generated significant added value http://www.themanager.org/
to evaluate these four soft S’s but also compared to when it was not used in pdf/7smodel.pdf
more challenging to gather the relevant similar events. Lack of success and Waterman, R. Jr.; Peters, T.; Phillips,
information on these aspects. synergies in such mergers is often based J.R. (1980). “Structure is not
on a clash of different cultures, values organization,” Business Horizons,
and styles, which make it difficult v23/3, p14-26.
COMPETITIVE INTELLIGENCE to establish common systems and
USE structures.
Using the seven S model in
competitive intelligence enables a
better examination of target companies, Conclusions Avner Barnea is a former senior member
including competitors, potential Implementing the 7- S Model of the Israeli Intelligence Community
competitors, strategic suppliers and during competitive intelligence can and is a strategic consultant in CI and
major customers. In one case this provide significant added value. You business strategy in Israel and abroad.
model served to clarify aspects not fully can create better defined and focused He has an intensive experience in the
recognized before: internal difficulties key intelligence topics (KITs) for a integration of CI systems into Israeli
among the senior management that firm by applying the seven elements corporations. Avner is a guest lecturer on
affected the performance of the of this model to the effort. It improves CI at the Hebrew University of Jerusalem
company. In another case the existing both the gathering efforts as well as the Business School and at the Management
culture circumvented cooperation with analysis. School of the University of Haifa, and
senior managers recruited from outside The model also presents a more teaches CI at the Center of Academic
the firm. This caused unresolved comprehensive picture when applied Studies. He holds a MA from the Hebrew
difficulties that prevented them from in addition to the conventional tools University of Jerusalem and graduated
executing effectively. usually based on financial analysis. from the Executive Program at Tel Aviv
In a high tech company, a lack By taking these major aspects into University. Avner can be reached at:
of investing in the development and consideration you can improve your avnerpro@netvision.net.il.
training of the technological staff was assessments regarding a target company

52 www.scip.org Competitive Intelligence Magazine