7 top tips for strategy analysis

Strategy analysis is the bedrock of good strategy. In this post, we look at 7 top tips for doing it well.

1. Know your tools

You can't be a mechanic without the right tools. Nor can you be a strategist without the right tools, frameworks and methodologies.

Using the right tools is the most basic requirement of strategy analysis.

You will need a wide range of tools at your disposal. You will need to know both how and when to use each one.

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.

See: Essential tools for Strategy Analysis

2. Take an external perspective

Avoid being too introspective.

Companies have a tendency to tell themselves stories. Particularly about what they're good at. It's natural. They've invested time and energy into creating what they got. They want to believe they're good at it. They want to take pride in what they've done.

And if they tell themselves the same stories often enough, they start to believe they are true.

Strategy analysis requires you to look beyond those stories.

One way to do this is to take an external perspective. How do your stakeholders see your business and your market?

Your list of stakeholders should include your customers, distributors and suppliers. Anyone the business relies on to succeed. Consider existing stakeholders and target stakeholders.

Ask what your customers would see as your strengths and weaknesses - relative to your competitors. Ask how industry trends might affect your suppliers and distributors.

Read industry reports. Attend conferences. Join online forums. Get out there and talk to people.

If appropriate, get an external review of your analysis.

3. For insight, present data, facts and interpretation

Opinions are a dime a dozen.

As Jim Barksdale said:

“If we have data, let’s look at data. If all we have are opinions, let’s go with mine.” (tweet this)

Strategy analysis relies on data. Facts. Evidence.

You can ask people for their opinions. But then use those opinions to work out what data you need. Does the data confirm or disconfirm the opinions? What does that mean?

Data can come from lots of different sources. Internal sources include operational and financial reports. External sources include industry reports and primary research.

You can present data in lots of different ways. There is an art to presenting data in the manner which best reveals its meaning.

Annotate your data with insights, conclusions and interpretation. Draw the story out of it. But be careful of inferring causality when all the data shows is a correlation.

4. Embrace the ambiguity

No matter how good your data, things are seldom conclusive.

If you've asked lots of different people and drawn on lots of different data sources, it's unlikely they will be.

Expect to find contradictions and gaps.

One way to deal with ambiguity is to use scenario planning.

Even then, strategy analysis is uncertain. Part of being in business is taking risks. Sometimes you just have to take a chance. But make it an informed decision.

5. Keep repeating

Once you've completed your analysis, don't expect people to get it the first time.

Remember, you've been working on this for some time. You're familiar with the material. But your audience probably isn't. They're probably distracted by other things.

So keep repeating it. Keeping trying different ways to get your message across. Learn what works and what doesn't work. Keep repeating what works.

Don't make the mistake of moving to the next stages - articulation, planning and execution - assuming that everyone will remember the analysis. People forget - sometimes quite quickly. And then the strategy starts to drift away from the analysis. It usually reverts back to 'the way we've always done things around here.'

6. Never stop analysing

Strategy development and execution is not a linear process.

As Helmuth von Moltke the Elder said:

"No plan survives first contact with the enemy." (tweet this)

As soon as you start executing your strategy things start to change. Things don't work out quite the way you planned. Stakeholders don't respond as you'd expected. Competitors fight back.

So strategic analysis is an ongoing process. In fact, strategy is best thought of as a loop. Analysis, articulation, planning, execution and back to analysis.

See: the Strategic Learning Methodology

7. Use intuition to help you know where to start

But, where do you start? There is so much data out there it can be daunting.

That's where intuition comes in. It can be your own intuition if you have experience in this area. Or you can talk to other people with experience and ask them for their intuitions.

Use intuition to help you form hypotheses. What do you think is happening. Then start looking for data to confirm or disconfirm those hypotheses. It is important to look for both confirmation and disconfirmation. Otherwise, you could fall victim to confirmation bias. This is where you see only evidence that supports your assumptions, and don't see evidence which contradicts them.