Monday, 8 August 2016

Understanding 4 different types of growth with Ansoff's Matrix

Most businesses are obsessed with growth. Growth is by no means the only strategic objective worth pursuing, but it is certainly one of the more common ones. Growth creates economies of scale, creates employment, generates shareholder returns, bolsters executives' egos, and of course means more customers getting more of the products and services they want. In a very real sense, a business which is growing, especially one which is growing relative to its competitors, is seen to be winning.

Ansoff's Matrix
However, as H. Igor Ansoff showed with his now famous matrix in 1957, there are at least 4 different types of growth.
  • Market Penetration is achieved by selling higher volumes of the same products and services into existing markets.
  • Product Development involves developing new products or services to sell into existing markets.
  • Market Development involves finding new markets to sell existing products or services to.
  • Diversification involves selling new products or services to new markets, and is considered the most risky strategy on account of it having to deal with two unknowns at the same time.
There is more to these four growth strategies than meets the eye, so we will look at each of them in turn.

1. Market Penetration


For most businesses, market penetration is the default strategy. Of course, if the market itself is growing, then, all other things being equal, the business will grow along with it - they say that "all ships rise with the tide".

Normally, however, market penetration would seek growth relative to the market. There are a number of ways that this can be achieved:
  1. Volume-selling: selling larger quantities of the same product to existing customers - perhaps by increasing distribution and/or offering volume discounts.
  2. Up-selling: selling higher value products to existing customers - perhaps a more expensive model.
  3. Cross-selling: selling additional products to existing customers - such as add-on or complementary products.
  4. Competition: convincing customers who would otherwise have bought from your competitors to buy from you instead.
  5. New customer development: finding customers within the market who are not already using the product or service at all, and convincing them to start.
Market penetration can be achieved by tweaking the marketing mix (reducing price, increasing promotion and/or distribution, tweaking product features or packaging, etc.), or by acquiring a competitor.

2. Market Development


Market penetration can involve developing new markets in a number of ways:
  1. Entering a new geographic region - such as a new region or country.
  2. Targeting a new customer segment - for example, the youth market, or small-to-medium enterprises. Success in this strategy depends on how insightful and nuanced your customer segmentation is in the first place.
  3. Developing new distribution channels - for example, expanding from wholesale into retail distribution, or targeting a different type of distributor.
  4. Expanding from the consumer to the corporate or public sectors, or vice versa.
The exact means of entering those markets will depend on numerous factors, such as different regulatory regimes, different socio-economic norms, and whether a competitor already exists in the market or not.

3. Product Development


Product development may take the form of:
  1. New product development, which typically involves research and innovation in order to create something which the world has never seen before.
  2. Product licensing, which involves acquiring the rights to manufacture a product developed by someone else.
  3. Product sourcing, which involves selecting products which already exist elsewhere (in other geographies, or through other distribution channels) and making them available to your customers. Amazon is a great example of this approach.
Which of these two are most suitable depends on many different factors, key of which are whether the business is fundamentally predicated on technical product or service development expertise and innovation (like Apple), on manufacturing expertise (like Capita), or on customer intimacy (like Amazon).

In practice, new products exist in a continuum from completely new and novel products, through products which are reconfigurations of existing products, to products which are merely incremental improvements to existing products. The resulting products may be own-labeled, co-branded or white-labeled.

4. Diversification


Diversification is the most risky of the four strategies as it involves all of the complexity and risk of Market Development and Product Development at the same time. For this reason, businesses often pursue diversification through acquisition. That is, by acquiring a business or team which already has a track record of selling those products or services in those markets. Even then, the acquirers ability to understand and oversee the acquired business may be a challenge.

Application


Ansoff's Matrix can be used to understand strategies in hindsight. However, it is more powerfully used to help businesses generate a complete list of strategic options for subsequent evaluation. As we have shown, Ansoff's Matrix provides not just the four options shown in the diagram, but a range of variations within each of the four.

Monday, 1 August 2016

Book Review: The Black Swan, by Nassim Taleb

The central premise of the Black Swan, by Nassim Taleb, is that rare outlying events have a greater influence on the world than do statistically predictable ones, but whilst our planning and analysis systems deal with the latter reasonably well, they are completely inadequate for the former.

Examples of rare outlying events that have had a significant event on our world include 9/11, the 2008/9 stock market crash, and, more recently, the UK #Brexit referendum.

Taleb does a reasonably good job of pointing out the flaws in what he terms the Gaussian model (most notably the normal distribution). He also does a good job in demonstrating our tendency to want to try to describe everything in these terms, regardless of whether or not it is appropriate, and therefore to tend to ignore everything that falls outside of this model.

However, he does err towards throwing the baby out with the bath water. The normal distribution (and indeed the other distributions he criticises) are useful in many applications. And that should be the real measure of any theory. All theories have limitations and domains beyond which they should be used, and yet remain useful if appropriately applied, and statistical distributions are not different in this regard.

He also fails to present any useful alternatives, and so does not really take us forward in any meaningful way. Thinking about it from my own perspective, scenario planning does provide one useful alternative which can help us to escape the confines and flaws of the so-called Gaussian model.

The Black Swan is a fascinating and eclectic read which may challenge many of our assumptions about the world and the way we analyse it. However, if you're looking for practical alternative solutions, you may be disappointed.

Monday, 25 July 2016

Using online business strategy development and execution tools to increase collaboration

It is hard to avoid the fact that the digital revolution is transforming almost every aspect of almost every business. As strategists, it is important to remain abreast of these trends in order to able to advise our employers or clients appropriately.

But one often over-looked aspect of the digital revolution is how digital can change the way we do strategy itself. Most strategy processes still boil down to circulating large Powerpoint decks or Word documents by email, just like we did 20 years ago.

Fortunately, that is now starting to change. StrategicLearningApp is an online business strategy development and execution tool designed to increase collaboration.

StrategicLearningApp is arranged around a unique Strategy Board which brings together the 4 core stages of the strategy development and execution cycle:
  1. Analysis
  2. Articulation
  3. Planning
  4. Control

Analysis


The Analysis module is all about understanding the organisation's operating model, capabilities, strengths and weaknesses, as well as its operating environment, such competition, and industry forces and trends. StrategicLearningApp provides a number of tools for doing this, such as:
  • Porter's Value Chain analysis for understanding how the organisation uses it operating model to create value. (Learn more.)
  • McKinsey 7S analysis for understanding the internal factors which lead to success. (Learn more.)
  • PEST analysis for understanding the Political, Economic, Socio-economic and Technological trends. (Learn more.)
  • Porter's 5 Forces analysis for understanding the forces that shape competition in your industry. (Learn more.)
  • Strategy Canvas for comparing and contrasting how different competitors win customers. (Learn more.)
  • BCG Matrix for understanding how different products and services in your portfolio contribute value. (Learn more.)
  • SWOT analysis, a useful way of summarising your organisations Strengths, Weaknesses, Opportunities and Threats. (Learn more.)
The different models are all integrated behind the scenes where this makes sense, so that insights generated in the other tools will automatically show up in your SWOT analysis, and can also be attached to processes in the Value Chain analysis, etc.

Articulation


The Articulation module is where you express what your strategy is. StrategicLearningApp allows you to articulate your Vision, Mission and Values. It also allows you to set your strategic Goals, Objectives, Key Performance Indicators (KPIs), Targets and Actual Results using a Balanced Scorecard framework.

The Performance Plan Map provides a useful summary of you Goals, Objectives KPIs and Targets and helps you identify any gaps in your strategy.

Planning


The Planning module allows you to map out exactly what you plan to do to deliver your strategy. You can organise your Initiatives in timeline or Gantt view, as well as lay them out in a Three Horizons view, helping to ensure you strike the right balance between short, medium and long-term activities. You can link Initiatives back to the Goals they support, and capture Cost and Benefit details.

The Goal/Initiative Matrix allows you to map your Initiatives to your Goals and highlights any Initiatives which don't explicitly support your Goals, or any Goals which don't have any initiatives supporting them.

Control


The Control module runs across the other modules providing tools to assist in the development and execution of your strategy.

A RAID log allows you to record Risks, Actions, Issues and Decisions, and to link these to your to the appropriate items within the other three modules. (Learn more.)

You can also record Stakeholders, either Individuals, Organisations or Generic Groups and, using a RASCI framework, map them as being either Responsible, Supporting, Accountable, Consulted or Informed regarding Goals or Actions.

The Meeting Manager allows you to record which Stakeholders participated in which meetings, together with Agendas, Minutes, Actions and Decisions. The Actions and Decision are automatically included in the RAID log and can also then be linked back to the relevant Insights, Goals and Initiatives, etc.

Lastly the Scorecard provides a graphical summary of all of your KPI's Target and Action Results so that you can easily track if your strategy is delivering, and also feed this back into the ongoing Analysis and refinement of your strategy.

Collaboration


Collaboration is baked into StrategicLearningApp at every step along the way.

To invite someone into your strategy project, simply enter their email address. StrategicLearningApp will then email them with appropriate instructions which will then link them to your project. Only people you invite can see your strategy projects.

All changes are recorded (using a familiar legal red-lining approach where applicable) and timestamped together with the author who made them, so you'll always know who did what an when. There is also a handy notes feature allowing team mates to annotate and comment on any element of your strategy. This ensures that all collaboration around your strategy remains attached to the strategy content to which it relates - no more trawling through email archives and old versions of documents to remember who said what when!

Once a day, StrategicLearningApp will email you a summary of all the changes and notes your team mates have made, ensuring your always up to date and engaged in the conversation.

Reporting, Search & Multi-device


Using the Reporting module you can extract a snapshot strategic plan at any stage in your journey. Because it is a dynamic snap shot at a point in time, your strategic plan truly becomes a "living document", not an annual report which just sits on the shelf until next year.

You can also export your strategy plan into Strategy Markup Language (STRAML), which is the ISO Standard XML Schema for Strategy and Performance Plans and Reports.

Your projects are also fully searchable, and available from any device connected to the internet, be it a PC, laptop, tablet or smart-phone.

Give it a go, NOW


StrategicLearningApp is free to use for up to three projects. If you want to do more than three projects, there is a subscription version available for a small monthly fee.

Why not click here to give it a go, now?

Monday, 18 July 2016

Data Analysis Lessons from "The implications of Brexit for monetary policy"

I recently attended Martin Weale's valedictory speech as a member of the Monetary Policy Committee (MPC), which was entitled: "The implications of Brexit for monetary policy", and was hosted by Resolution Foundation.

The session consisted of the speech itself, follow by panel comments from Sushil Wadhwani (economist and former MPC member), Chris Giles (Economics Editor at the Financial Times) and
Melanie Baker (UK economist at Morgan Stanley), followed by questions from the audience to the speaker and panel.

Martin Weale's speech was fascinating enough in its own right. However this is not a blog on economics or monetary policy, and so I will not even attempt to do it justice here. (If you're interested, you can read the speech itself here, and Resolution Foundation's write up of the event here.) Rather, I will pick up on two related points Sunil Wadhwani made in his remarks, and which I think have direct pertinence to business strategy.

1. Having the data is not enough


Martin showed two separate charts, one showing the weakening of the exchange rate, and the other showing the fall and recovery in the FTSE100 and the fall and not recovery in the FTSE250 immediately following the referendum. He suggested that the fall in the FTSE250 was more representative of sentiment regarding the UK because so much of the FTSE100 consisted of expected foreign earnings from multinationals with UK listings. He then suggested that the fall in the FTSE250 was not significant enough to allow one to draw conclusions (and did little more than confirm that "prices can go down as well as up").

Sunil countered that a better measure of confidence in the UK economy would be the FTSE250 in dollar terms. This had taken a pounding following the referendum, and painted a much more negative outlook than Martin had suggested. (This effectively combines the two charts.)

Whether you agree with Martin or Sunil, the exchange was a potent reminder that its not just what data you have, but also how you analyse it.

It reminded me of a project I worked on some years ago where the data we were seeing was showing a slight decline in the performance of a particular process. Because the decline appeared to be only slight it was not ringing any alarm bells (yet). However, I knew that the process (a) dealt with 6 discrete populations and (b) included a natural delay of some months. So I requested the underlying source data, and (1) split it into the populations, and (2) did a batch cohort analysis of each. This analysis revealed a much deeper - up to 50% for some populations - decline in process effectiveness. That definitely started the alarm bells ringing!

Yes, subtly improper analysis of data can render it very misleading!

2. You'll never have all of the data or analysis


Sunil further responded to Dr Weaver's conclusion that the data was still inconclusive by remarking that:
"You have to form judgments; because you are never as well informed as you would like to be; because the data is simply not there." (Tweet this!)
He went on to advise:
"Resist the temptation to wait for more data before acting. There will always be more data to wait for." (Tweet this!)
(That is my best recollection of the words that he used, but I cannot guarantee that it is verbatim.)

That is one of the key lessons I remember from the many case studies we did on my MBA programme. (I sometimes think that part of the objective of an MBA programme is to overload you with case studies and then put you on the spot in class in front of your peers to draw conclusions from what is inevitably inadequate data, as that is the closest they can get to what it feels like in real life within the classroom context!)

Its a lessons that has stood me in good stead ever since. In any strategic process, there is a time to collect more data, a time to conduct deeper analysis, and a time to accept that what you've got is good enough/as good as you're going to get and its time to make some decisions and move forward.

If you fail to learn that lesson, you invariable fall into 'paralysis by analysis': where data and analysis snowball and any chance of meaningful action falls by the wayside.

Conclusion


Data is a strategist's friend. It is the bedrock of analysis, reasoned decision making and feedback. But it is not without its pitfalls. Good use of data is as much an art as it is a science. And it is one every strategist does well to study carefully.

Saturday, 16 July 2016

How to deal with chronic uncertainty (like Brexit) in business strategy

I've just read (yet another!) blog post advising business owners on what to do about Brexit. The conclusion: there is so much uncertainty about the outcome that business owners should just ignore it and carry on as if nothing had happened.

I have seldom heard such poor advice!

In the first instance, uncertainty is no excuse for burying your head in the sand. We live in uncertain times, and if it were, no-one would ever do anything. As a discipline, strategy has tried and tested ways of dealing with uncertainty.

Secondly, we now have significantly more information about the future than we had 3 weeks ago. To ignore that information would be myopic and foolish.

So, how does one deal with chronic uncertainty in a structured and proactive manner? Here is a 6-step approach:

1. Get the facts


After a referendum characterised by misinformation, it is important to remain appropriately informed. Key questions include:
  1. What is the legal status of the referendum, and what, if anything could overturn it?
  2. What is the actual process, steps to be taken, and timelines for leaving the EU? 
  3. Who are the decision makers and power brokers, in both the UK in Europe, and what are they saying and doing?
  4. What models exist for subsequent engagement with the EU and what do they entail?
Ignorance breeds fear, so get informed.

2. Identify possible outcomes


Following the referendum, there are a number of possible outcomes. At the highest level, these might include:
  1. The UK does not leave the EU.
  2. The UK leaves the EU under favourable terms (so-called Brexit-light).
  3. The UK leaves the EU under unfavourable terms.
  4. The UK leaves the EU, followed by other countries exiting and ultimately, the collapse of the EU itself.
  5. The UK splits, with Scotland remaining a part of the EU and the rest of the UK exiting.
There are, of course many other combinations and permutations which might be worthy of consideration. Whilst it is probably impractical to consider them all, it is important to consider a wide range of possible outcomes.

3. Understand the circumstances and implications of each possible outcome


Within each possible outcome, it is important to develop an understanding of:
  1. What are the future developments and circumstances which might make that outcome more or less likely to emerge, and
  2. What are the implications of that outcome, in general, and for your business specifically.
It is important to develop as vivid a narrative for each possible outcome as is possible. That is, write a plausible story for each outcome a logical chain of actions, events and their consequences. The more vivid the narrative, the more instructive it will be in planning your response.

4. Implement an early warning system


Once you've identified the circumstances which might make it more likely for one outcome to emerge than another, you need to use that as a lens for monitoring developments on an ongoing basis. Make specific people responsible for monitoring specific issues and reporting them to the broader group on a regular basis. Review all of your plans every time there is a major development. Know in advance when you intend to act, and when you intend to sit tight and watch.

Include relevant factors into your competitor analysis (see 7 straight-forward steps to master competitor analysis) to keep one step ahead of the competition.

5. Prepare plans in advance for the most likely outcomes


Don't wait for your early warning system to tell you that something has happened. It's too late to start planning then. Prepare contingency plans for each of the possible outcomes. Add more detail to your plans as events develop and some outcomes become more likely, leaving the plans for the less likely outcomes. You don't need to execute your plans now, but you do want to know in advance who will do what when key outcomes do emerge.

The plans you develop for each of the likely outcomes may be different to the normal plans you'd implement for, say, the implementation of a large system. Plans should emphasise "if this then that" logic, review and decision points and accountabilities, and clear criteria for deciding when to push forward and when to hold back.

You may find that from your plans there emerge some actions which you'd take in the event of many or all outcomes, which expand the options available to you, and/or which are relatively inexpensive to complete. You may then decide to proceed with these "no regrets" actions immediately.

6. Deal with the uncertainty now


The preceding 5 steps deal with planning ahead for what might happen. But there are also things that you could be doing to better cope with the uncertainty right now.

In the case of Brexit, there are at a number of likely immediate considerations:
  1. How are you suppliers, distributors and customers responding? For example, if business partners (especially foreign ones) are less inclined to enter into long-term contracts because of the uncertainty, how could that impact your business and your existing plans for growth or expansion and how will you respond? What could you do to help your partners overcome any such reticence.
  2. A Brexit will inevitably place a huge demand on legal, regulatory, compliance and strategy resources. Do you need need to secure resource in advance, or risk losing out when there is a mad rush at the last minute (as some experienced as the Solvency II deadline approached)? What regulatory or competitive initiatives will be put on hold as regulators and competitors divert resources to deal with their own Brexit plans, and what will you do with the breathing space that might offer?
  3. What are you doing to re-assure your staff, customers and partners that

Chronic uncertainty certainly complicates strategy, but it also offers many opportunities. It is important not to get stunned into inaction, like a deer caught in the headlights. Proactivity remains key to success.

For a confidential conversation about what Brexit might mean for your business, or how to deal with uncertainty in general, please contact me.

See also:

Monday, 11 July 2016

7 straight-forward steps to master competitor analysis


A robust competitor analysis is an essential component of any strategy analysis. With the wealth of easily accessible information available on the Internet, it has never been easier to compile a successful competitor analysis.

However, without a plan, that wealth of information can seem like a firehouse, flooding you information and making it difficult to see the forest for the trees. And because competitors are continually changing and evolving, competitor analysis must be an ongoing programme, rather than a once-off exercise.

This article outlines a simple plan to help focus and sustain your competitor analysis effort.

1. Identify your competitors 


This may seem almost too obvious to mention, but depending on your industry, it can be quite difficult to identify exactly who your competitors are. In fast moving industries, it is easy to be caught unawares by the entry and sudden growth of a competitor before you were even fully aware of their presence. In industries with rapidly changing consumer preferences may be particularly susceptible to substitution, for example when competition for a local restaurant might come only from other restaurants, but also from a local grocery store stocking ready meals. Knowing your local market well may no longer be enough as the Internet can make it easier for competitors to come at you from almost anywhere in the world.

One way to identify competitors is to talk to people. Your staff / colleagues may have worked at your competitors or know people who do. Your customers and suppliers may also do business with your competitors or may have been marketed or pitched to by them. The conversations can be in the form of formal research, or just casual conversation.

Trade bodies, shows and publications, where available are another source of valuable intel.

2. Segment your competitors


Once you've identified your competitors (and possible substitutes) you may find you end up with quite a long list. If your list is too long, and you try to analyse them all, you may find that you are unable to do justice to any of them.

The solution is to segment them. There are two different ways you can approach this. If your competitors can be divided into different groups which behave similarly, then you can simply monitor one or two competitors within each group and extrapolate your analysis to the group at large. (There is clearly an inherent risk here, so it is important to confirm your groupings from time to time.)

You can also divide your competitors into high, medium and low groups depending on how much of a competitive threat the represent. You would then do a more thorough analysis of the first group, and a more cursory analysis of the third group. Part of your analysis of all three groups should be, will, of course, be to confirm that they are still in the right group, and to move them if necessary. Avoid the temptation to put all of them in the high group as that rather defeats the purpose - try and force yourself towards 1:2:3 splits.

3. Know what's important to your customers


Once you know who your competitors are, what are you actually looking for. Studying any competitor without a clear plan of what you're are looking for is inefficient: it could take much longer than needed and you could still miss something important.

The trick is to focus on what's important to your customers - more specifically, what criteria do they use when choosing between you and your competitors. This could be based around price, convenience, product or service features, image, reliability, etc. Once you've identified these competitive factors, you need to be particularly alert to any changes your competitors make or signals of future changes they give off so that you can plan your strategy accordingly.

One way to find out what your industries competitive factors are is, of course, to just ask your customers. Remember to ask not just people who are already your customers, but also people who you would like as customers but don't do business with you yet (prospects and targets). Remember, though, that customers don't always know what they want, so it is important to sense check what they tell you against your own trend analysis (see How to do a PEST analysis).

4. Tap in


Once you have your plan in place, you're ready to start gathering data. Staff, customers, suppliers trade bodies, shows and publications are again all invaluable sources of information. Competitive intelligence gathering is a never ending activity.

There are many information services that you can tap into also. Some of these can be quite pricey. However, simple Google Alerts are often as much as you need.

To set up a Google Alert, simple Google the name of your competitor, click on "News" at the top of the search results, scroll to the bottom of the list of resulting news stories and click on "Create alert". Remember to check the options to ensure you're getting exactly what you want. Et voila, you have competitive intelligence in your inbox on a regular basis. You should have at least one Google Alert for each of your competitors. 

5. Visualise


Once you're collecting high quality and relevant competitor intelligence its helpful to find a way to summarise and visualise the results.

The Strategy Canvas provides a neat way of mapping your own business relative to your competitors according to competitive factors you've identified (see How to draw a Strategy Canvas).

It does require you to score each competitor on each competitive factor. The actual numbers of the scores are not important, they're just a way of comparing one competitor against another (or against your own business). So you have to use your best judgement. Particularly if you're working in a team environment, forcing yourself to score each competitor against each competitive factor is a great way to focus debate and avoid a pointless talking shop.

6. Tool Up


You can, of course, complete the entire exercise on the back of a paper napkin (or using MS Word, Powerpoint or Excel). However, if you've invested all this time an effort in competitor analysis, it makes sense to use a more appropriate tool to help you manage it.

StrategicLearningApp is an online tool designed to help you collect and process your competitor analysis, including drawing a Strategy Canvas (it includes many other tools as well, covering the entire strategy development and execution cycle, but we'll leave those for another day).

It's a collaborative environment as well, so you can work with your team. All of your insight and discussion is captured in one place so you'll never have to scour through old documents and emails to put it all back together again. There is also a handy 'bookmarklet' tool which allows you to pull any information from anywhere on the internet into your analysis with a single click of a button.

Go ahead and give it a try!

7. Act


Of course, no amount of competitor analysis will make any difference unless you act on it!

There are a number of ways of using competitive analysis in your strategy: you can mimic (fastest follower), differentiate, under-cut, exclude (using exclusivity agreements or patent protection), collaborate with (subject to anti-trust / competition laws) or out-maneuver your competitors in a variety of ways. You can also build competitor analysis into game theory analysis to understand how competitors may respond to significant strategic moves you're planning before deciding how best to proceed.

Summary


Competitor analysis can seem like a daunting task. Fortunately, there are now many sources of readily available information, as well as tools, such as StrategicLearningApp, to help you do it. The most important success criterion is to approach it is a planned and structured manner.

If you need any help getting your competitor analysis programme up and running, please contact me to discuss how I can help.

photo credit: ISST London via photopin (license)

Tuesday, 5 July 2016

Using the McKinsey 7S Framework to assess strategic alignment, strengths and weaknesses


McKinsey and Co's 7S model provides a useful framework for assessing internal strategic alignment and analysing the strengths and weaknesses of an organisation (see also 9 Essential Strategy Analysis Tools). The McKinsey Consulting Firm identified strategy as only one of seven elements exhibited by the best managed companies.

The 7Ses can be divided into two categories: Strategy, Structure and Systems can be considered the "hardware" of success whilst Style, Staff, Skills and Shared values can be seen as the "software". Companies, in which these elements are present and aligned are usually more successful at the implementation of strategy.

Hardware


1. Strategy


Strategy is about the degree of alignment around the vision and direction of the company, as well as the manner in which it derivesarticulatescommunicates and implements that vision and direction.

Things to consider:
  1. Does the firm have a clear strategy?
  2. Is there a clear, logical and understood connection between and understanding of the firms strengths and weaknesses, environmental context, strategic intent, strategic and business plans, and management information and control systems?
  3. Is the strategy known to and understood by the staff in the organisation? Is it communicated to everyone as appropriate in a way that accords it the right amount of attention?
  4. Is everyone aligned behind the strategy?
  5. Is the strategy acted on and implemented? Is it actively applied in the making of decisions on a day to day basis? (All to often, a strategy is a document which sits on an executive shelf while the organisation continues to act as it would have done, regardless.)
  6. Do key individuals continue to pursue their own strategies and agendas, contrary to the strategy?
  7. Is the organisation opportunistic or is it inclined to develop detailed plans and stick to them?
  8. Is strategy formulated by an elite group (strategic planning group or senior executives) and handed down from the top, or using an inclusive, participative bottom-up process?
  9. Is the strategy transformative (large and structural changes to the firm or industry) or incremental (smaller adjustments)?
  10. Is the strategy reviewed and cast in stone once a year, or more regularly (or even continuously)?
  11. What is the organisation's strategic style?
See also: The 5 Levels of Strategic Orientation.

2. Structure


Structure includes both staff reporting lines, as well as committee and other governance structures and other governance structures. Structure considers the depth and breadth of structures, levels of collaborationcentralisation and decentralisation.

It is a truism of strategy that "structure follows strategy", and the structure of an organisation, along with its policies and processes, has a direct bearing on how well it will perform.

There are a number of dimensions to consider.
  1. Is it flat and broad or deep and hierarchical?
  2. How many layers are there between the CEO and the front line?
  3. What are the typical spans of control for managers?
  4. Is it organised around brand, products, channels, customer segments, geographic or functional lines?
  5. How well does the organisation's structure map onto its value chain?
  6. Is decision making authority devolved or highly centralised?
  7. Are there clear lines of accountability? Do key elements of its strategy span or fall between multiple decisions makers at the senior level, or are accountabilities clearly established?
  8. Consider also Porter's categorisation of group structures, distinguishing between those which are efficient allocators of capital, those which are efficient allocators of resources and skills, and those which are structured around the sharing of capabilities.

    3. Systems


    Systems include both computer systems, manually systems and informal practices. They cover all processes in the Value Chain, including both core (operational) and supporting (HR, Finance, etc.) processes.

    The decision making systems within the organisation can range from management intuition, to manual policies and procedures, to structured computer systems, to complex expert systems and artificial intelligence. The level of rigour of systems can range from rigid and bureaucratic, to more laissez faire and flexible.

    Consider:
    1. Are the systems modern and efficient or out of date? Are they fit for purposes?
    2. To what extent are systems formally controlled by a central IT department or reliant on end-user-computing?
    3. Are systems bespoke or off-the shelf? If bespoke is the development inhouse or outsourced. If off-the-shelf, how heavily are the systems customised? What are the licensing and support arrangements?
    4. How flexible are the systems / development capability? Can they easily adapt to changes in the environment and strategy?
    5. What is the quality, in terms of errors, exceptions and downtime, etc.
    6. Are adequate Disaster Recover Plans ("DRP") in place?
    See also: How to design a Target Operating Model (TOM)

      Software


      4. Style


      Style refers to the employees' shared and common way of thinking and behaving - unwritten norms of behaviour and thought.
      Consider:
      1. Are people generally relaxed and informal, or more formal?
      2. Is the culture collegiate and consensus driven, or more hierarchical and individualistic?
      3. Are leaders authoritative, or persuasive? Do they lead by example, or by fiat? Are leaders visible and available or remote?
      4. Is there a culture of busy-work, or is it more results based?
      5. How does the organisation reward and celebrate success?
      6. How politically charged is the environment?
      7. Do staff respect or fear their colleagues and leaders?
      8. Is the culture one of leadership and transformation, or managerial and weighted towards the status quo?
      9. Are people open to change and transformation, or do they prefer to stick to "the way its always been done"?

      5. Staff


      Staff means that the company has hired able people, trained them well and assigned them to the right jobs. Selection, training, reward and recognition, retention, motivation and assignment to appropriate work are all key issues.

      Consider:

      1. Is the selection, training and reward of staff all aligned to the strategy?
      2. Are job responsibilities clear (up-to-date) and aligned to the strategy?
      3. How are different people matched to different roles?
      4. How does the organisation manage under-performance? How does the organisation identify and treat high performers?
      5. How is training done: externally, internally; in classrooms or on-the-job? How are role-modelling and mentoring used?
      6. What is the ration of fixed to variable pay? What is the degree of variation in variable pay between high and low performers?

      6. Skills


      Levels of skill and knowledge required can range from the PhD level qualifications required for highly technical or scientific work to relatively unskilled labour such as supermarket shelf stacking. The levels of skills required by different functions within the same business may vary significantly.

      Consider:
      1. Are staff skilled in their work, in general and/or relative tot he competition?
      2. Does the organisation promote specialisation and focus, or generalisation and rotation?
      3. Does the firm nurture skills internally, or hire them in?
      4. Does the firm have ready access to a market of skilled resources?
      5. How do staff stay up-to-date with developments in their fields?
      6. Is existing of skills or the investment in growing or acquiring skills aligned with the firms strategic priorities?
      7. What is the mix of skilled versus unskilled (or less skilled) work and staff?
      8. Are the skills and knowledge required generic to the industry or field, or specific to the firm?

        7. Shared Values


        Values are things that you would strive for even if they were not demonstrably profitable - things that are worth doing in and of themselves. Shared values means that the employees share the same guiding values. Values act as an organisation's conscience, providing guidance in times of crisis.

        Consider:
        1. Does the organisation have clearly articulated values?
        2. Are those values a laundry list of the usual keywords ("Integrity", "Teamwork", "Putting the Customer First") or has the organisation imbued them with real and personal meaning? 
        3. To what extent do all staff and leadership align with and practice the values?
        4. Is it evident that the values influence decisions on a day to day basis?
        5. Does the organisation value "hard heads" (rational thinking, value maximisation, etc.) or "soft hearts" (social good, etc.).
        6. To what extent do people outside of the organisation (customers, suppliers, distributors) recognise those values in the organisation? What is the tangible evidence of the organisation's values/
        Example: 'The Johnson and Johnson Tylenol case is an example where a credo helped provide guidelines for practical decision making. When tainted Tylenol was discovered, Johnson and Johnson's leaders could quickly make a decision to immediately, publicly, remove all Tylenol from the nation's shelves, because they were following the organisation's credo - which said that Johnson and Johnson's first responsibility was to provide quality products to doctors, nurses and patients. This dramatic action helped insure a reinstatement of both public trust and employee pride in the integrity of the company, and led to higher long term sales.'[Senge, Ross, Smith, Roberts and Kleiner: 1994]


        Identifying corporate values is also the first essential step in defining the organisation's role in the larger community in which it functions.

          Resources:

          Other references: