Showing posts with label SWOT. Show all posts

The most popular posts on strategy development and execution in 2018

Happy New Year to you all!

At the end of another year - where does the time go - I took time to reflect on the most popular posts on the Strategic Coffee blog during 2018.

Here they are:

10. What is a SWOT Analysis

Love it or loathe it, the humble SWOT analysis remains one of the most popular frameworks in the book, coming in in a respectable 10th place. See also 11 techniques to help you do a better SWOT analysis and The consistently popular SWOT analysis.

9. McKinsey 7S Case Study

This is the only case study we've ever blogged. Client confidentiality usually prevents us from writing case studies, but this one was kindly submitted by a reader. Perhaps you have another you'd like to share with us?

8. The BCG Matrix

The BCG Matrix is a portfolio analysis tool which can help you decide which subsidiary business, product or service lines you should invest in, hold or dispose of.

7. Harvey Balls Font

Harvey Balls, sometimes called Booz Balls, are those little circles with 1, 2, 3, 4 or no segments coloured in. They are useful for indicating high/medium/low, or degrees of strength without being as specific as using numbers would suggest. This post provides a link to a font you can install to make them incredibly easy to use in, say, Word, Powerpoint or even Excel.

6. How to use Porter's Value Chain Analysis

At one time, I thought Porter's Value Chain had fallen from favour, replaced by more modern alternatives such as the Business Model Canvas. This post's position on this list suggests otherwise.

5. How to use a RAID log

A RAID log is a staple tool in project management. Here, we adapt it for use as a strategic management tool.

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

The McKinsey 7S analysis makes a second appearance on this list in position 4. This time, it is a more conventional post explaining how to use it.

3. How to draw a Strategy Canvas in 4 easy steps

The Strategy Canvas, popularised in Blue Ocean Strategy, is a visual tool for differentiating your proposition to set it aside from the competition.

2. How to design a Target Operating Model (TOM)

In an environment where businesses must increasingly compete not just on what they deliver (products and services) but also on how they deliver, Target Operating Models are a key consideration for strategy execution.

1. 9 essential tools for Strategy Analysis

And finally, in the top stop, our ever-popular compendium of the 9 most essential tools for Strategy Analysis. This includes a number of those lower down on this list, plus several more.

In reviewing this list, it strikes me first of all that all of these articles are very practical guides on the basics of how to develop and execute strategy. I think this practical focus is heartening in a subject which can sometimes tend towards the theoretical on the one hand, and the hyperbolic on the other.

Secondly, I notice that many of these articles were written some years ago - albeit that many of them have been updated several times since they were first published.

That may point to the perennial nature of the subject - in a field which is constantly searching for the next big thing, many of the basics of how we do so have not changed terribly much.

But it may also point to the nature of SEO (Search Engine Optimisation). Most of our readers find the blog by searching on Google or Bing and search engines favour content which has been there for a longer time.

Do these posts reflect the kind of content you'd like to read on strategy development and execution? We're constantly looking for new content to keep the blog fresh, so why not let us know what type of content you'd like to see during 2019 by dropping us a note in the comments below? I'd love to hear what you think.

12 techniques to help you do a better SWOT analysis

The humble SWOT analysis lists an organisation's Strengths, Weaknesses, Opportunities and Threats. It remains one of the most popular models in strategic analysis.

But is simplicity and power make it notoriously difficult to do well.

In this article we will look at several techniques to help you do a better SWOT:

1. Brainstorm a quick and dirty SWOT

Brainstorming is probably the default way of doing a SWOT analysis. Whilst it is not the most robust approach, it should not be dismissed entirely. Particularly if you are looking for

a very quick result or
a starting point for further work using some of the other techniques described below.

You can improve your brainstorm by including a broad cross-section of employees and outsiders such as consultants, customers, suppliers and distributors. You can also make use of SWOT checklists.

2. Work in reverse order

An outside-in approach is almost always better than an inside-out approach for strategy. So it makes sense to start with the external factors - the Opportunities and Threats - before moving on to the internal factors - the Strengths and Weaknesses - that will allow you to exploit or avoid those opportunities and threats.

3. Start from your Business Model Canvas

A much more structured approach is to start with a Business Model Canvas or enhanced Business Model Canvas of your as-is or to-be organisation. Work through each element in each section of the canvas and do a mini-SWOT of that element. Evaluate your strengths and weaknesses regarding that element. And consider what trends might impact it positively (opportunities) or negatively (threats).

You don't need to have a long list of strengths, weaknesses, opportunities and threats for each element. But the process of working through them in this way will yield a much more thorough SWOT analysis.

4. Start from your Value Chain Analysis

You can use a Porter's Value Chain of your as-is or to-be organisation in much the same way.

If you've already used a Business Model Canvas or enhanced Business Model canvas to improve your SWOT, then you will already have considered your Core processes. So all that remains is to consider any Strengths, Weaknesses, Opportunities and Threats relating to your Support processes.

5. Use a PESTEL Analysis

A PESTEL analysis is a great way to identify a wide range of opportunities and threats your business faces. For each consideration identified in the PESTEL analysis, simply ask how it might help or hinder your organisation. You may also be able to identify threats and weaknesses by asking where your organisation is particularly well or poorly placed to respond to the trends in your PESTEL.

For a very thorough analysis, consider the possible impact of every item in your PESTEL analysis against every element in your (enhanced) Business Model Canvas or Porter's Value Chain.

6. Use a Porter's 5 Forces Analysis

You can use a Porter's 5 Forces analysis very much like you use your PESTEL analysis to identify opportunities and threats.

7. Use a McKinsey 7S

The PESTEL and Porter's 5 Forces analyses focus on factors outside of the organisation itself. A McKinsey 7S analysis looks at factors which are directly under the organisation's control. Consider the strengths and weaknesses for each of the 7 dimensions in this analysis. Also, consider the alignment between them as a source of potential strength or weakness.

8. Mine your Customer Analysis

If you've already used your (enhanced) Business Model Canvas to improve your SWOT, you will already have considered each of your customer segments. But don't stop there - scour all of your customer analysis for clues to what should be in your SWOT.

What do your customers say they value or don't value about your organisation's products and service, and how you deliver them? If they don't buy your products and services, what do they buy instead?

9. Mine your Competitor Analysis

Competitor analysis is a great source or insight into your organisation's strength, weaknesses, opportunities and threats.

Which competitors are gaining or losing market share and why? Are their target markets shifting over time? What capabilities are they investing in, and what kinds of skills are they hiring? Which employees or customers are leaving you or your competitors and where are they going? What do your competitors say in their press releases and marketing material to persuade their investors and customers that they will be successful?

When think, strengths and weaknesses, you need some point of comparison. Strong or weak compare to what? Competitors (and substitutes) provide one point of comparison. (Customer expectations provide another.)

10. Be specific - avoid platitudes in your SWOT

When listing their strengths, most organisations say things like "our people are our greatest asset" or something similar. But don't settle for that. Ask: What specifically can your people do, that customers, distributors or other stakeholders value, that is different and better than your competitors? The more specific and quantifiable you can be, the better.

See also:

Are your strategic insights insightful?

11. Back your SWOT up with detailed analysis

Usually, when you see a SWOT analysis it is in the form of simple lists of short statements of strengths, weaknesses, opportunities and threats. But don't stop there. For each statement, back it up with detailed evidence and analysis. What data support the statement? What examples illustrate it? The more detail you can provide, the more compelling your SWOT analysis will be.

Don't be afraid of including contradictory evidence and data. Strategy is a complex and often ambiguous subject. If it was easy, everyone would be doing it. Including contradictory evidence and data will increase your credibility. It will also allow stakeholders with contrary views to feel that they have been heard. Most importantly, it will help you to remain more alive to the possibility of your analysis changing as the situation evolves.

Your detailed analysis could include evidence and data about not only your organisation but also about your customers, partners competitors, etc.

12. Prioritise what you include in your final SWOT

Used correctly, these techniques will generate a vast quantity of information for your SWOT. A good SWOT analysis, however, is usually brief and to the point. It highlights only the absolutely key strengths, weaknesses, opportunities and threats in a way that engages, connects with and focusses key strategic decision makers.

It is therefore important to prioritise your findings. Prioritise strengths and weaknesses by impact. Prioritise opportunities and threats by impact and likelihood. Don't be afraid to combine related items. Or to separate more complex items out into their constituent parts.

Once you've prioritised your SWOT analysis, exclude the least impactful or likely factors. Don't discard them, though. You may want to continue to keep an eye on them in case circumstances change and they become more significant again.

StratNavApp.com supports all of these techniques in a collaborative online environment. Why not try it for free right now and start producing a better SWOT analysis that makes a real difference to your organisation?

See also:

The consistently popular SWOT analysis

Dealing with 'inevitabilities' in business strategy

Many of the threats and opportunities we identify on SWOT and PESTEL analyses are uncertain. Things that might or might not happen. Or things that might happen one way or another. Others are simply trends which carry with them an air of inevitability.

For example, we don't know:

if antibiotics will lose their effectiveness or if medicine will find an alternative approach,
if the world will be able to reverse the effects of global warming and/or overpopulation, or
whether the current political trend to the right will continue, etc.

But, we can be pretty sure that:

products and services will continue to digitise,
data will become more important in the way the world functions,
autonomous vehicles will eventually replace human-driven vehicles,
people will be more inclined to rent assets which they had previously had to own, and
AI will take on ever more complex tasks previously thought to need a human to perform them.

Of course, the distinction between these categories of uncertain and inevitable changes can be blurred. It can also depend on the lens through which you look at them. But in any strategic context and time-frame, you can usually distinguish between the two.

How should a strategist handle these inevitabilities?

One swallow does not a summer make

Every inevitability will have its doubters: people who think it will not come to pass. As often as not, this is because they simply don't want it to happen.

But as strategists, we must deal with the world the way it is, not the way we wish it were.

Even the strongest trends seldom proceed in a straight line. There are usually many setbacks and other surprises. The doubters will seize upon these as evidence that it will not happen. But, as Aristotle said:

One swallow does not a summer make.

There can be few recent examples as dramatic as the bursting of the dot.com bubble around the turn of the century. Many businesses went bust. I am sure that small fortunes were lost. At the time, many claimed that this was proof that people wanted to continue to do business as they had before. That the threat of technology had been shown to be a hollow sham. But, as much of a setback as it was, the dot.com trend recovered and strengthened.

Part of the strategists' role is to see through these setbacks and other anomalies and remain focused on the underlying trend.

Not 'if' but 'when' and 'how'

Once we've established that something is more or less certain to happen, we can stop worrying about if it will happen. We can start applying our minds to when and how it will happen.

The strategist should monitor such trends on an ongoing basis. Do recent events suggest that the trend is speeding up or slowing down, or likely to speed up or slow down? Are they evolving in a way which is different from how they started out or were originally expected to play out?

For example, Amazon changed the business of book distribution (and many other businesses!) forever. But fewer people had anticipated how Amazon was able to use its new-found power in the publishing industry to launch the Kindle where so many other e-readers had failed before it. Amazon now sells more ebooks than print books in what some have described as a 'reading renaissance'. (Source)

Being alert to these subtle changes in a trend which seems otherwise inevitable could be a source of significant strategic advantage. Especially where all of your competitors are also building their propositions around the same trend.

So, perhaps it is time to go back over your SWOT and PESTEL analyses:

distinguish between those which are uncertainties and those which are inevitabilities, and
ensure you have appropriate sense-and-respond strategies in place for each.

photo credit: Duncan Rawlinson - Duncan.co - @thelastminute Passage via photopin (license)

How to evaluate and prioritise strategic options

Once you've developed a comprehensive list of strategic options, it's time to evaluate, prioritise, select and sequence the ones you want to pursue.

You should base your evaluation on four criteria:

feasibility,
strategic fit,
interdependencies, and
financial risk and reward.

Feasibility

An option may seem very compelling. But, if it requires you to build a time travel machine and teleport into a parallel universe, you're probably going to fail.

Feasibility is a measure of how easy it will be to execute an option.

One way to establish this is to cross-check the option against the strengths and weaknesses in your SWOT analysis.

Does the option capitalise on your strengths?
Would you have a distinct advantage over others who lack those strengths?
Does the option require strengths you don't have or where you are weak?
Would the option protect you from exposure to your weaknesses?

Of course, you may find the option requires capabilities which you simply did not evaluate when you originally did your SWOT. In that case, you may want to consider updating it.

Just because an option will be difficult for you to execute does not mean you should give up on it. When America decided to put a man on the moon, no-one thought it would be easy. But it is certainly an important consideration when weighing an option up against alternatives.

Strategic Fit

There is little point in starting to build a commanding position offering a product or service for which demand is in free fall.

Strategic fit is a measure of the future attractiveness of an option.

There are three techniques you can use to establish strategic fit:

Cross-check each option against your strategic goals and objectives. Options which make a greater contribution to a greater number of your strategic goals are more attractive.
Cross-check each option against the opportunities and threats identified in your SWOT analysis, PESTEL analysis and/or Porter's 5 Forces analysis. Do industry trends suggest that demand for a product, service feature or attribute is likely to increase or decrease? Does the option capitalise on recent or anticipated changes in order to operate more effectively or efficiently? Do other external factors mitigate in favour of or against this option?
Cross-check each option against the strengths and weaknesses identified in your SWOT analysis and/or McKinsey 7S analysis. Is it a unique fit to your specific relative strengths and weaknesses? Or is it a me-to undifferentiated move?
Cross-check each option against your scenarios. Options which produce good outcomes across all scenarios are better than those which produce even better outcomes in some scenarios, but poor outcomes in other scenarios.

Typically, strategic fit for Horizon 1 will be more impacted by strengths and weaknesses. Conversely, strategic fit for Horizon 3 options will be more impacted by opportunities, threats and scenarios.

A rigorous assessment of feasibility and strategic fit should also stop an organisation from meandering aimlessly in pursuit of the next shiny idea. Instead it helps to develop a portfolio of strategic options which is holistic and based on sound analysis.

Interdependencies

It is important to remember that not all strategic options are independent of each other. There may be:

Trade-offs and mutual exclusions. This is where going in one direction may make it harder, or even counterproductive, to go in another.
or
Dependencies. This is where executing one option first may make it easier to implement another one second.

It is important to identify these before proceeding to look at financial risk and reward, as these interdependencies can have a significant impact on financial costs, benefits and risks.

The matrix below illustrates a simple approach to bulleting out the potential interdependencies between options (additional supporting documentation may be required):

Financial Risk and Reward

Financial risk and reward is probably the most widely written about of the 4 criteria. It is also the least strategic in that it can be applied to any project on a standalone basis. However, having worked through the other three criteria have a significant impact in understanding the costs and risks of implementation (feasibility & interdependencies) and the size and risk of the prize at stake (strategic fit and, again, interdependencies).

There are a number of ways of assessing financial risk and reward, including NPV, Profitability Index, IRR, Payback Period, Discounted Payback Period, etc. each with its pros and cons. Discussion of these is beyond the scope of this post. (If there is demand, I may consider a future post - please let me know in the comments.) All of these methods are based on future expected cash flows. Again, there are numerous ways of calculating these, and again, they are beyond the scope of the post (but could be the subject of a future post if there is demand).

It is self-evident but never-the-less worth stating that all of these methods of assessment are only as good as the forecasts on which you base them. Garbage in - garbage out. Furthermore, forecasts are notoriously unreliable, and probably more so as the options you're evaluating get more innovative and strategic.

It is important to undertake financial risk and reward forecasts as they force you to confront difficult to answer questions. However, it is equally important not to then believe that your forecasts are somehow factual or accurate.

Bringing it all together

Once you've evaluated all of your options against each of the 4 criteria, you're in a position to review your portfolio and to start making choices.

Start by assigning a simply High, Medium and Low score to each option for each of Feasibility, Strategic Fit and Financial Risk and Reward. The result can easily be translated into a total score from 3 to 9 by giving one point for a Low and 3 points for a High. The options can then be sorted based on that score. Finally, where there are dependencies, you can remove any lower scoring options which are mutually exclusive with higher scoring options. Also, if any preceding options score less well than their succeeding options, move the preceding options to just before the succeeding options.

The strategic portfolio analysis matrix provides a useful way to visualise the solution.

This basic approach will yield a prioritised list of options from which you can build a roadmap for delivering your strategy. There will inevitably arise situations where you disagree with the result. Any system for prioritisation will give you an indication but not a definitive solution. So if you really think you should change what the formula spits out, then do so. But do it consciously. And make sure you document and agree your reasons so that you're not left second guessing yourself later.

Once you've evaluated and prioritised your strategic options, you're ready to move on to build your implementation roadmap. But that will have to wait for another post.

Do be sure to signup to receive email updates to make sure you don't miss it if you've not already done so - just enter your email address in the panel to the right at the top of the page.

7 techniques and 5 tips for developing strategic options

So, you’ve completed your analysis. You now understand everything there is to know about your firm, the market in which it competes, and how you anticipate the future might unfold. Well, maybe not everything, but as much as you reasonably can.

Now what?

The next step is to develop strategic options for taking the firm forward. Options are simply things you could choose to do or not do.

But how exactly do you do that?

Contrary to popular belief, you don't have to rely on vague notions like 'blue-sky thinking'. Nor must you simply hope that inspiration strikes like a bolt from the blue (although a little inspiration never hurt anyone!) In contrast, there are specific processes you can undertake to develop strategic options.

7 techniques for generating strategy options

There are a number of ways to generate options, for example:

Use Ansoff’s matrix to consider all the possibilities of selling:

existing products to new customers (new geographies, customer segments, etc),
new products to existing customers, or even
new products to new customers (learn more).

Use the innovation templates for a systematic approach to developing new products and services (learn more).
Use Porter’s generic strategies as a framework for choosing between and developing options based on either:

Cost Leadership,
Differentiation or
Focus (learn more).

Add, change or remove a competitive factor on your Strategy Canvas (learn more). This best done using the Voice of the Customer (VOC) off the back of customer research.
Develop options which flow directly from the insights in your SWOT analysis (see below).
For a portfolio of businesses or products, use a BCG Analysis (learn more) or a Pareto Analysis (learn more) to understand and develop your options for shaping the portfolio.
Ask people for ideas (see below).

Developing options from the insights in your SWOT analysis

Weaknesses:

Strengthen your capability or acquire the resources
Partner with some who is strong at it
Avoid it by focusing on customer segments who value it less highly
Discount opportunities which rely on it

Strengths:

Find other products, services or customer segments which rely on it
Promote it to your customers
Target customers who prize it most highly

Opportunities:

Invest in building and using related strengths
Position and promote yourself as a leader in the field
Conceal your intentions so that competitors are less aware of the opportunities

Threats:

Exit or de-emphasis directly affected markets
Capitalise on a competitor's weaknesses in this area
Seek to neutralise it

Look especially for examples where your strengths play into opportunities. And take evasive action where your weaknesses most expose you to threats.

Don't forget to just ask people

In addition to using the other techniques, don't forget the simplest one of all: just ask people what they think you could or should do. You could ask colleagues, customers, distributors, suppliers, and, of course, professional consultants. When doing so, it is best to follow the brainstorming guidelines of suspending judgement of those ideas until later.

5 tips for generating strategic options

The purpose of developing options is to allow for choice. As Porter said:

Strategy is about making choices, trade-offs; it's about deliberately choosing to be different.

Here are some tips to ensure your options allow for real choice.

Don't just stop once you've found an option you like.

If you'll do, you'll never know if the next option would not have been even better. Work through the full range of options.
Look for options which are mutually exclusive and/or involve tradeoffs.

This will help to ensure you're making the really tough calls to differentiate yourself in the market, and not simply executing as many of the ideas as you can.

For example: Airline brands must typically choose to position themselves as either 'discount' or 'premium'. By eliminating meal options, discount airlines can reduce flight turnaround times and costs (well beyond the cost of the meals themselves). However, this would deter premium customers.

Far from being a limitation, such mutually exclusive options are strategically valuable. They allow different competitors to take up different positions without competing head-on.
Beware Hobson's choice.

Hobson's choice creates the illusion of choice by positioning one option as the only alternative to either doing nothing or failing. I've seen people do this when they only really have one option (see tip 1).

For example: We must replicate a competitor's last move or lose market share. Instead, ask: What else could you do to retain and even grow market share?
When faced with a large number of options, group mutually reinforcing options into themes.

Strategy is a pattern of decision making, rather than a number of decisions made independently of each other. Grouping options into themes can help to highlight those patterns. Some options can be included in more than one theme.

In extreme case, themes can have their own vision and mission statements. Values, however, should remain consistent across all the options and themes.

Theming options presents you with two levels of choice:

which themes to pursue / not pursue, and
which options to pursue / not pursue within them.

Suspend judgement until the end

Resisting the temptation to judge options as either good or bad too early in the process. This will cloud your judgement. An option which does not appear very good in isolation might be a vital component of a very powerful theme.

Once you're done, you're ready to move on to the next step: How to evaluate and prioritise strategic options.

Which of these do you already use? Which of these do you planning on trying out next? Please share your stories and plans in the comments below.

Image adapted from: marfis75 decisions ( #cc ) via photopin (license)

The consistently popular SWOT analysis

A recent Google Trends analysis (see below) highlights some interesting insights in the popularity of some of the most widely used Strategy Analysis tools:

The chart above shows the popularity, measured in terms of Google search frequency, of 5 popular strategy analysis tools. (Google Trend analysis allows only 5 search terms at a time.)

Looking at this analysis, I draw 3 interesting conclusions:

Despite being much maligned by many as being too simplistic to be of any real value, the humble SWOT analysis is the most popular of the three models by a wide margin. This is consistent with my own experience: the SWOT analysis is the cornerstone of any analysis, and whilst it is easy to abuse, it is a vital tool when in the hands of a skilled strategist.
The popularity of all of the search terms, especially "SWOT analysis" is noticeably seasonal, peaking each November and March. This suggests that interest is still tied to some annual planning process. It is disappointing to see that strategy is still seen as a periodic episode linked to some financial and business planning calendar and not a more fundamental way of thinking about how a business is run on an ongoing basis.
Finally, the popularity of all search terms appears to be gradually diminishing over time. It would be heartening to believe that this is simply because everyone is now familiar enough with these terms to no longer need to search them on Google, but my own experience suggests that it is more likely to be because people are more inclined to chase the latest fad rather than relying on fundamental strategic analysis, as suggested by the Strategic Learning framework..

What is a SWOT Analysis?

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

The SWOT Analysis is almost certainly the most fundamental of all the strategy analysis tools and techniques. It is also the most widely recognised.

Many argue that it is too basic to be of much use. I would disagree.

What is SWOT analysis used for?

The SWOT Analysis can be incredibly useful as:

a lite or quick and dirty strategy analysis,
a precursor to assist in

planning a more comprehensive strategy analysis and
selecting the most appropriate more complex tools to use, or

a means of collating and summarising the outputs from more sophisticated techniques.

What does SWOT analysis look like?

A SWOT Analysis is conventionally represented as a 2X2 matrix with:

Strengths listed in the top left quadrant,
Weaknesses in the top right,
Opportunities in the bottom left, and
Threats in the bottom right quadrant.

There is a logic to that presentation. I will come to that next. But at the end of the day, it boils down to 4 simple lists of strategic insights. Presentation is probably a matter of taste.

Understanding the logic of the SWOT structure

The Strengths and Weaknesses represent the internal dimension of the business unit under consideration. These cover factors which are or should be under management's control. A McKinsey 7-S analysis is a good way of making sure you've covered all your bases.

The Opportunities and Threats represent the business unit's external environment. These cover factors which are typically not under management's control. A PESTEL analysis (or one of its many variants), or Porters 5 Forces model, is a good way of going after these.

The Strengths and Opportunities represent the positive strategic forces. The Weaknesses and Threats represent the negative strategic forces.

In summary:

the vertical axis represents internal and external dimensions, and
the horizontal axis represents positive and negative dimensions.

It is sometimes tempting to blur the boundaries between positive and negative factors, particularly in the external dimension. After all, is every Threat not really just an Opportunity not yet grasped? This may make us feel more optimistic and proactive. But I don't think it really adds anything to the analytical process. So, I advise considering simply whether the factor under consideration, if left unaddressed, would be likely to take the organisation closer to or further from its goals.

A SWOT Analysis can be an incredibly quick and insightful way to understand and communicate an organisation's current strategic positioning. It should not be overlooked simply because of its simplicity. In fact, that may be its greatest strength.

You can build a SWOT analysis, alone or with a team, using our completely new and free collaborative StratNavApp.com.

See also:

14 essential tools for strategy analysis [Updated 2023]

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.

Having the right tools won't necessarily make you a good mechanic. Nor will having the right strategy analysis tools make you a good business strategist. But they will help a good strategist get the job done more effectively.

Here is my list of 10 essential strategic analysis tools:

1. SWOT

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

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 about Porter's Value Chain)

3. The Strategy Canvas

The Strategy Canvas was popularised in the book "Blue Ocean Strategy" by W. Chan Kim and Renee Mauborgne. You can use it to understand how a firm differentiates itself from its competitors and other alternatives. (learn more about the Strategy Canvas)

4. The Business Model Canvas

Alexander Osterwalder and Yves Pigneur introduced The Business Model Canvas in the book "Business Model Generation". It is a very effective way of describing the key components of a business model. You can use it as the starting point for strategic analysis as well as for exploring alternative business models. (learn more about the Business Model Canvas)

5. PESTEL

The PESTEL is a macro-scanning framework which 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 about PESTEL)

6. 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 about McKinsey 7S)

7. 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 about Porter's 5 Forces)

8. 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. However, its accuracy depends on the reliability of your cost allocation system. (learn more about Pareto Analysis)

9. BCG Matrix

You can apply the BCG Matrix to any business with more than one product or service line, or more than one customer segment. Plot the market share against the market growth rate for each product, service or customer segment. Then consider strategic options based on their relative position on the chart. (learn more about BCG Matrix)

10. Scenario Analysis

The future is inherently uncertain. Fortunately, good business strategy only requires you to be able to anticipate the future. You don't need to be able to predict it. Scenario Analysis is a tool to help you to anticipate multiple different futures. This allows you to construct your strategy around the premise that you can't be sure which, if indeed any, of them will come to pass. (learn more about Scenario Analysis)

11. Value Proposition Canvas

The Value Proposition Canvas helps to understand what a particular customer segment and how the business satisfies it (the value proposition). For each segment, it allows you to match the customer segments Jobs to be Done, pains and gains. These are then matched against the organisations products and services, gain creators and pain relievers. Pains, gains, pain relievers and gain creators help to move the perspective from the what to the why of an organisations value proposition. This supports better strategic analysis, as well as more strategically aligned marketing.

Given that the customer segments and the value proposition both appear on the Business Model Canvas, the Business Model Canvas and Value Proposition Canvas make very complementary companions. (learn more about the Value Proposition Canvas)

12. Lean Canvas

The Lean Canvas is a version of the Business Model Canvas which is favoured by some people for use in the early stages of conceptualising a new startup. 6 of the 9 categories are identical to those on the Business Model Canvas. However, whereas the Business Model Canvas includes Key Partners, Key Activities, and Key Resources, the Lean Canvas replace these with Problem, Solution and Key Metrics. The similarities between the two make it easy to progress from one to the other as your thinking evolves. (learn more about the Lean Canvas)

13. The Ansoff Matrix

The Ansoff Matrix is a strategic planning tool that helps businesses determine their growth strategy by exploring four key areas: Market Penetration (selling existing products to existing markets), Product Development (introducing new products to existing markets), Market Development (expanding into new markets with existing products), and Diversification (offering new products to new markets). This framework assists in evaluating the risks associated with each strategy, making it a valuable tool for businesses looking to expand or consolidate their market position. (learn more about the Ansoff Matrix)

14. The Balanced Scorecard

The Balanced Scorecard is a strategic tool used for performance management. It translates an organization's mission and vision into tangible objectives and measures across four perspectives: Financial, Customer, Internal Business Processes, and Learning & Growth. By balancing financial measures with those from these additional perspectives, it provides a more comprehensive view of business performance. This approach helps organizations monitor and manage their strategies effectively, ensuring that short-term achievements are aligned with long-term goals. (learn more about The Balanced Scorecard)

You can work with all of these strategic tools online in the StratNavApp.com online application. It's 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:

photo credit: Old Tools $2.00 Each via photopin (license)

Key Components of a Business Plan

It is difficult to prescribe an exact template or framework for a business plan. Much depends on the purpose and audience for which you are preparing it.

For example:

a business plan prepared for a start-up seeking funding from a venture capitalist
would be quite different from
a business plan used for management and control within an established organisation.

However, it is possible to describe the basic components of a business plan.

The main categories would include:

The organisation's vision, mission and values
Analysis
Plan
Key Risks
Organisation and Resources

Each of these is considered below.

The organisation's vision, mission and values

These define the basic purpose and parameters of existence for the organisation.

Often a vision statement OR a mission statement is enough. You probably don't need both.

Over the last decade, the emphasis has shifted from vision statements towards mission statements. This has happened as organisations recognise the increasing importance of purpose.

Where the organisation is not a completely stand-alone entity, the vision, mission and values should reflect the context of the parent structure. The more stand-alone the organisation is, the more important it is that the vision and mission reflect a uniquely differentiated competitive position.

Analysis

The analysis sets out the evidence which supports the business plan.

It should cover:

the external competitive environment, as well as
internal factors.

The external competitive environment

You should include an analysis of

the current situation,
recent changes and
anticipated changes

in:

The relative negotiating power and interests of external entities such as customers, distributors, suppliers, regulators, government and lobbying groups.
The level and nature of competitiveness within the industry, for example:

the number of competitors and/or level industry fragmentation,
their recent performance and strategies, and
the bases of competition, for example, price, innovation, customer segmentation, distribution relationships, etc.
See also: 7 steps to master competitor analysis for business strategy

The threat of product or service substitution or becoming obsolete.
The threat of new entrants into the market. This should include an analysis of the barriers to entry.

See Porter's 5 Forces Analysis for more insight into these considerations. A PESTEL analysis is another great way to identify a wide range of opportunities and threats your business faces.

Scenario planning is a useful technique for external analysis where there is a lot of structural uncertainty in the competitive environment.

The internal factors

Internal factors would include, strengths, weaknesses and flexibility with regard to:

Systems, including computer and manual systems, process, procedures and policies,
Staff, skills, knowledge / intellectual property and organisational capabilities, and
Culture, organisational style and structure.

The external and internal analyses are often combined and summarised in a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis.

You might also include an Options Analysis. This is where you consider a number of options before deciding on a way forward, and justify which option(s) carried forward into the plan. Typically you would evaluate each option in terms of:

Robustness in the face of the external analysis. This includes multiple scenarios if you have done scenario planning.
The organisation's ability to deliver it, given its strengths and weaknesses.
Fit to the vision, mission and values of the organisation or its parent context.
The financial value of the option. This is calculated using a Discounted Cash Flow or similar analysis.

Fortunately, you don't have to start with a blank sheet of paper when doing your analysis. There are numerous frameworks and tools that have emerged to help with this. You can see the key ones at 9 essential tools for strategy analysis.

Plan

Based on the analysis, the plan itself is then articulated in terms of:

Goals, Objectives and Key Performance Indicators (KPIs) with targets, and Critical Success Factors (CSFs). In simple terms, KPIs are the measurable outcomes that are to be achieved as part of the strategy. These could include key financial indicators, as well as measures of customer outcomes, product, service or process performance, or internal capabilities. CSFs include less quantitative outcomes that must be achieved.

I find it useful to specify KPIs as S.M.A.R.T. objectives. It can be useful to further divide these into 4 perspectives:
1. Financial objectives such as shareholder returns, (working) capital efficiencies, margins, funding, etc.
2. Market share and/or customer experience objectives,
3. Process performance and efficiency objectives, and
4. Organisational capability, staff, skills, systems and cultural objectives.
These objectives should reflect the specifics of the strategy. Avoid generic industry benchmarks.

See also: Getting the most out of KPIs.
Initiatives or tasks: What will be done, by whom, and by when to achieve the KPI targets and CSFs. Including what the output or deliverable of the task will be. A simplified Gantt chart is often a useful way of communicating this.
Financial: A budget or forecast showing how the plan plays out. This should include a forecast of:

the cash flow, income statement and balance sheet for the organisation,
key non-financial indicators such as head-count,
key financial and non-financial ratios, and
sensitivity analysis

The financial plan should include the costs and benefits of the initiatives and tasks listed in the section before.

Typically, you would do this:

on a monthly basis for the first 12 months, and then

on an annual basis for the subsequent 4 years.

The structure of the financial plan should reflect the underlying economics of the business model. This is so that you can run meaningful sensitivity tests. The inputs to the sensitivity tests should be consistent with the uncertainties identified in the Analysis or in the Key Risks. The outputs should be consistent with the stated Objectives.

Key Risks

The Key Risks should follow naturally from the Analysis. You should also highlight the plans and governance you will put in place to manage and mitigate these risks.

Organisation and Resources

An organigram or biographies of key players and their roles is useful. This might include significant external players or other divisions within a group.

photo credit: verchmarco Eine Liste mit Zielen für das neue Jahr 2019 auf einem Notizbuch mit Kugelschreiber via photopin (license)