Thursday, 11 June 2009

9 essential tools for strategy analysis

Strategic Analysis is a core step in the Strategic Learning Cycle. Every strategist should have a toolbox of analytical models at his or her disposal. Just as having the right tools won't necessarily make you a good mechanic, having the right strategy analysis tools won't necessarily make you a good strategist - but they will help a good strategist get the job done more effectively.

Here is my list of 9 essential tools for  strategy analysis:
  1. SWOT

    The SWOT is the most basic form of strategic analysis. Simply list the organisation's Strengths, Weaknesses, Opportunities and Threats. (learn more)

  2. Porter's Value Chain

    The value chain is a simple (graphical) method for identifying and describing a firm's main functions and understanding how they contribute to value creation. (learn more)

  3. McKinsey 7S

    The McKinsey 7S is useful for ensuring that you consider all aspects of the organisation when identifying its strengths and weaknesses. The 7 Ses stand for: Structure, Systems, Style, Staff, Skills, Strategy and Shared Values. (learn more)

  4. PEST

    The PEST framework is useful for ensuring that you consider a broad range of possible sources of opportunities and threats. The letters represent the Political, Economic, Social (or Socio-economic) and Technological opportunities and threats in the firm's environment. (learn more)

  5. Porter's 5 Forces

    Porter's 5 Forces model is another framework for identifying threats and opportunities within the firm's environment. It considers the bargaining position of suppliers and customers (including distributors), the threat of new entrants and substitutes, as well as competitive factors within the industry itself. (learn more)

  6. BCG Matrix

    The BCG Matrix can be applied to any business with more than one product or service line, or more than one customer segment. In simple terms, it involves plotting the market share against the market growth rate for each product, service or customer segment, and then basing strategic decisions on their relative position on the chart. (learn more)

  7. Pareto Analysis

    A Pareto Analysis is based on the maxim that 20 percent of the products, services, customers or distribution deliver 80% of the profits. A Pareto chart is a useful visualisation for showing this. Accuracy, however, depends on the reliability of your cost allocation system. (learn more)

  8. The Voice of the Customer (VOC)

    No matter how good your other data is, at some point, you have to engage directly with your customers (and other stakeholders). You can use traditional structured methods, such as focus groups, more modern methods, such as social media, or even simply just go and chat to people.
  9. The Strategy Canvas

    Popularised in the book "Blue Ocean Strategy", the Strategy Canvas is used to understand how a firm differentiates itself from its competitors. (learn more)
Here are some critical success factors for strategic analysis:
  1. Avoid being too introspective.   What do your customers, distributors and suppliers think about these issues?   What are your customers doing?   If appropriate, get an external review.
  2. For insight, present data, facts and interpretation.
  3. Remember that not all tools are useful in all circumstances and that not all analysis yields results.   Much of it will end up on the cutting room floor.
You can work with many of these tools online in the online application. Its free, and if you are working in a team, you can collaborate with your team members in building your strategic models. Click here to get started.

See also: