Tools & Techniques of strategic Analysis
There are many definitions, tools, and techniques that can be applied to strategy analysis. If you do an internet search you will find all sorts of options available. The challenge is selecting the best approach, tools, and techniques to use given the business problem or opportunity.
Another part of the challenge is understanding what strategy analysis means since there can be many definitions. This can make it confusing. It is best to simply say that strategy analysis is an approach to facilitating, researching, analyzing, and mapping an organization’s abilities to achieve a future envisioned state based on present reality and often with consideration of the organization’s processes, technologies, business development and people capabilities. Part of that whole process is the ability to bridge gaps that exist between the strategic, tactical, and operational aspects of the organization. This requires a look at the present state, the future state, risk and financials and the creation of change requirements to achieve the desired outcomes.
Even though the definition of strategy analysis varies, there is common thinking on the key planning requirements.
- Preparation for planning through the identification and review of information relevant for strategy analysis
- Performing high-level environmental scan looking at the internal and external business environment with consideration for mission, vision, stakeholders, structure, existing plans, people profiles, and question responses.
- Applying a choice of different tools and techniques to analyze the present state of a business environment and mapping out its future.
Some of the more common analysis tools and techniques include:
- VMOST: This stands for Vision, Mission, Objectives, Strategy, and Tactical.
Success in an organization happens with top-down or bottom-up alignment. I was recently reminded of is when working with a client who stated that their tactical is not connected to the strategy. VMOST analysis is meant to help make that connection.
- SWOT: The standard analysis tool, defined as Strengths, Weaknesses, Opportunities, and Threats.
Strengths and weaknesses are internal to the organization, opportunities and threats are external. SWOT requires you to be candid and provide an honest assessment of the state of things. It forces you to create a dialogue with stakeholders to get different viewpoints. Eventually, you focus in on the key issues.
- PEST: This is a great tool to use in tandem with SWOT. The acronym stands for Political, Economic, Social and Technology.
PEST reveals opportunities and threats better than SWOT, the direction of business change, projects that will fail beyond your control, and country, region and market issues through helping you create an objective view.
- SOAR: This stands for Strengths, Opportunities, Aspirations, and Results. This is a great tool if you have a strategic plan completed, and you need to focus on a specific impact zone.
I used SOAR to help a business that needed to focus on their business development requirements due to an external market change. The organization needed to discuss how they would recapture lost sales by $1 million per month to ensure they maintained their profitably. Given that they had already done everything they could to cut costs and operate a lean business, the SOAR was critical in helping define the focus for the next 12 to 24 months.
- Boston Matrix (product and service portfolio): This tool requires you to analyze your business product or service and determine if it is a cash cow, sick dog, questionable, or a flying star.
I have applied this tool to product and service reviews with to help make product decisions with consideration for market share and market growth. But it has no predictive value, does not consider the environment, and you need to be careful with your assumptions. It does force discussions on your present offering and whether it makes sense to maintain or enhance those offerings. For example, maybe you are holding onto a business product that you love but is really a sick dog and maybe there is a cash cow in your business that you are not optimizing. A decision has to be made.
- Porter’s Five Forces: This tool helps you understand where your business power lies in terms of present competitiveness and future positioning strength. It forces you to analyze the bargaining power of suppliers and customers, the threats to new entrants and substitutes, and competitive rivalry in your marketplace. Using this tool helps you understand the balance of power and to identify areas of potential profitability. According to Porter, this model should be used at the line of business level.
- Maturity Models: There are many maturity models that can be applied to a business. From the evolution model, the technology model, to the team model. The idea is that every business or department goes through a maturity cycle. The standard cycle is chaotic, reactive, proactive, service, and value. If you were looking at processes in a department, you would look to see where that process is on the continuum. Then you would determine where you need to be and what it would take to get to that point of maturity. This is a simple explanation. When using a maturity model, it is important that you have a clear problem definition and solution context.
- Root Cause Analysis: This is important, as there are times in the strategy analysis process you need to dig deeper into a problem. This is where RCA is used. The key is that you need to identify and specify the problem correctly, analyze the root cause using a systematic approach, verify the causes, and determine the corrective actions. Implementation of the corrective action is extremely important.
There are many definitions, tools, and techniques that could be addressed. The ones mentioned here are only the tip of the iceberg for strategy analysis and become a foundational part of the strategy analysis toolkit. In a short blog, there is no way to mention them all. But you could create a tool checklist that you could use in your next planning and analysis engagement to help you and your team define the present, future, risk and change state that you need to succeed.