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:
The SWOT is the most basic form of strategic analysis. Simply list the organisation's Strengths, Weaknesses, Opportunities and Threats. (learn more)
- 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)
- 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)
- The Business Model Canvas
The Business Model Canvas, introduced by Alexander Osterwalder and Yves Pigneur in the book "Business Model Generation" is a very effective way of describing the key components of a business model. This can be used as the starting point for strategic analysis as well as for exploring alternative business models. (learn more)
The PESTEL 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), Technological, Environmental and Legal opportunities and threats in the firm's environment. (learn more)
- 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)
- 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)
- Pareto Analysis
A Pareto Analysis is based on the maxim that 20% 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)
- 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)
- 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.
- For insight, present data, facts and interpretation.
- 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.