Showing posts with label scenarios. Show all posts

Why should you do business strategy?

I think people ask this question because business strategy appears to be a discretionary activity. It appears to be something you can choose to do or not to do.

Most people recognise that a manufacturing business has to buy raw materials, turn them into finished products, and sell them to customers. If you stop doing those things, then your business has stopped. There are similar activities that would seem to be essential to other types of businesses, such as wholesale, retail or service businesses.

But strategy seems more discretionary*. If you stop doing strategy your business will continue to function. For a short time at least. Without strategy, your business may become less relevant over time. But it will take a while before the full effect is felt. And by then the damage is done. Your business is on the back foot. In a weakened state. Trying to catch up with a market where the competitors are stronger and better placed.

*Other functions like marketing or branding may suffer a similar challenge.

So when organisations are under pressure, it is often activities like strategy that are the first to suffer.

When COVID-19 struck, organisations had their hands full. Setting their teams up working from home. Rebuilding their supply and distribution chains. They were focused on surviving the immediate present. There was little time left to think about what they would need to do to succeed in a decreasingly certain future.

Crises force organisations to become reactive. But strategy is a fundamentally proactive process.

It's ironic that at the exact times when the status quo is most disrupted and the future is least certain, when strategy is most needed, that most organisations are least able and likely think strategically.

And so it is at times like this that it is even more important than ever to have a clear answer to the question: Why should you do business strategy?

I think there are two equally important answers to this question:

1. Strategy is about how to succeed in the future

Experience teaches us about how we succeeded in the past. But we know that the future will be different from the past. We may not know exactly what will change. We may not know how big the change will be. We may not know how quickly it will change. But we do know it will be different. Ironically, experience confirms this.

If we had a crystal ball - if we could see the future clearly - we would have less need for strategy. But we can't. Strategy helps us fill that gap.

Strategy is not about forecasting or predicting the future. That would be a fool's errand. But it does present toolsets and processes that can help us to imagine, anticipate and prepare for not just one future, but a range of possible futures.

These tools include things like macroscanning, game theory and scenario analysis.

See for example:

Wayne Gretzky, the legendary Canadian ice-hockey player once explained his success on the ice:

"I skate to where the puck is going to be, not to where it has been."

Wayne Gretsky probably only needed to anticipate the next few seconds of play to achieve this. How far ahead should we look when doing business strategy?

That depends on three things:

How fast can we move?
How long do we need to be there (before we move again)?
How fast-changing and uncertain is the environment?

1. How fast can we move?

It takes about 20 minutes to stop an oil tanker travelling at normal speed. So an oil tanker captain has to be able to anticipate at least 20 minutes into the future. (Fortunately, they've gotten pretty good at that, for the most part.)

If it is going to take you 6 months to develop and launch a new product, you need to be able to anticipate demand and market conditions at least 6 months into the future. Similarly, if it is going to take you 2 years to bring a new factory on line, you need to be able to anticipate demand and market conditions at least 2 years into the future.

2. How long do we need to be there?

If it costs you lot of money and resources to get into a position, then you need to be able to stay there for long enough to earn a return on that investment before you have to move to the next position.

Note that the distance you need to look into the future is the sum of both 1 and 2. That is you need to see far enough ahead to allow for the time it will take you to get there plus the time you need to stay there.

3. How fast-changing and uncertain is the environment?

As the Oracle in The Matrix Revolutions says: "No one can see beyond a choice they don't understand."

Some environments are inherently more complex and fast-changing than others. Sometimes it is in the nature of one industry to be more complex and fast-changing than another. Other times it can be a point of crisis (like COVID-19) which introduces complexity and change across many industries for a period of time.

The tools that strategy gives us will help us to a point. But eventually, in complex and fast-changing environments our ability to anticipate into the distant future becomes more clouded.

Then we have to deal with less granular understanding. This requires us to pursue strategies with higher degrees of inherent optionality. Alternatively, we focus less far into the future and restrict ourselves to smaller but more regular moves. Such organisations invest heavily in methodologies like Agile to shorten delivery cycle times and costs. (See also Agility needs a strategy.)

I conclude this section with a quote from William Gibson:

"The future is already here - it's just not very evenly distributed."

The clues lie all around us if we just look at them in the right way.

2. Strategy is about making choices

At any point in time, there is an almost unlimited number of things an organisation could do. And some organisations seem intent on trying to do them all, and often all at the same time!

Sometimes this is because different people can't agree amongst themselves which ones they should and shouldn't do. This creates a problem of alignment - or misalignment. Other times it's because organisations somehow think they can grow faster by trying to be all things to all people (customers). This creates a problem of focus.

But, as Michael Porter points out (in several different ways):

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

"Strategy 101 is about choices: You can't be all things to all people."

"The company without a strategy is willing to try anything."

"The essence of strategy is choosing what not to do."

So strategy provides frameworks for helping organisations to make decisions in a holistic manner; to achieve both alignment and focus in an organisation's efforts.

I like to say that you don't really have a strategy until you've used it to say "no" to an idea which, on a standalone basis, makes good business sense.

As several commentators have noted, COVID-19 didn't fundamentally change things. Instead, what it did was to accelerate existing trends. Changes which many people had anticipated would happen over the next 3-5 years were compressed into the last 4 months. COVID-19 merely sped things up. It removed obstacles holding back trends which had been building for some time. It forced people to confront challenges they had previously been putting off.

As a result, those organisations which had been alive to and preparing for those trends are coping with the crisis much better than those that had not. Their strategic thinking over recent years has been vindicated and rewarded.

But the fact that what we might have anticipated over the next 3-5 years has now already happened does not mean we will enter a period of stability. Instead, some of the things that we might have anticipated over the next 5-10 years are now more likely to happen over the next 3-5 years.

So the need to think strategically - to anticipate and prepare for the future; to align decision making and execution around a clearly articulated plan - is as great as ever. Those organisations able to shift some of their attention from survival to strategy sooner will win markets from those who are not.

Which will you be?

Should business strategists have foreseen COVID-19?

The answer is: Yes.

But the aim of this article is not to lament what we should have done. Nor is it to crow about what we did do. Instead, it is to consider what we should do going forward.

One of the roles of strategy is to help businesses to be successful into the future. And we must do so for whatever the future brings. When something like COVID-19 comes along, we can't simply excuse ourselves for not having prepared for that future.

Now, I am not suggesting that any business strategist should have predicted exactly what happened.

For example:

that a virus would emerge from Wuhan in late 2019/early 2020,
that it would evolve into a pandemic and shut large parts of the world down,
that it would overburden most countries healthcare systems, and
that government would respond by locking their populations and economies down.

What could we have foreseen?

But there are many aspects of COVID-19 which were easy to foresee. These include, for example:

a pandemic,
a global economic downturn,
the failure of stretched and global supply chains, and
remote working.

These are things we've talked about in the past at length. We've even experienced these before. Perhaps not in our own lifetimes. And of course, each time they happen they're different.

We've had pandemics in the past. (You can click on the chart to the right to see it in more detail.) This 2015 Ted Talk by Bill Gates is one of many warnings of what future pandemics might be like. And we've long been aware of emerging strains on our health care systems posed by things like:

population ageing and
antibiotic-resistant diseases.

Likewise, we've had global economic downturns in the past. Arguably, as recently as 2008. Some argue that this one will be deeper and longer than any we've encountered to date. But even so, that possibility is not hard to imagine.

We've been worried about the impact of globalisation. Be that on the distribution of wealth or on the environment. We've also worried about possible disruptions to stretched global supply chains. Even if that concern was more fueled by concerns over a trade war between the US and China than by concerns of a pandemic.

And we've been debating the pros and cons of flexible and remote working for years. Until now, the status quo has conspired against them. However, in London, for example, the Olympics (see here), as well as numerous train strikes, have offered regular glimpses of the need for greater flexibility.

Our job as strategists is not to be experts in all of these fields. But we should be aware enough of the possibilities to help our organisations to understand and prepare for the specific consequences they might bring.

What should we do?

There are three steps to be prepared:

Be aware.

The first step is to be aware. If we're not watching those Ted Talks, studying that macro-analysis or reading those risk reports then we won't know what's out there.
Consider the impacts.

Then we need to consider the impacts these things might have on our businesses. Each business is unique. And the so the impacts on each business will be different.

Consider, for example, how different the impacts of COVID-19 have been on hotels, airlines, restaurants and the highstreet, contrasted against the impacts on firms like Amazon, Ocado and Zoom.
Integrate this analysis into our planning and execution processes.

If our planning processes amount to simple extrapolations of last year's budget into next year's budget. COVID-19 highlights the significant uncertainties we face. And this underpins the importance of integrating scenario-based analysis and planning. (See: Scenario Planning: A Practical Guide for Navigating Uncertainty).

Once the planning is complete, the results need to be built into your execution processes. Early warning systems need to be put in place. Responses need to be rehearsed. Capacity for rapid change needs to be built.

What are the challenges?

Typical short-comings I have encountered in trying to achieve this include:

Fatalism: Decision-makers conclude they can't predict or avoid crises. They call them 'black swans' and place them outside the bounds of normal logic. As a result, they can't or don't know how to prepare for them. Ultimately, they conclude that they're better off just ignoring the possibility.

It's true that you might not be able to guarantee that the Titanic would be unsinkable. But you could make sure she carried enough life-boats.
Theorism: Decision-makers engage in the analysis. But this fails to progress beyond being an "interesting exercise". Once it is complete, everyone goes back to their desks and carries on as before.

The only thing worse than facing a crisis with your head buried in the sand is facing it with your eyes wide open and in the full knowledge that you failed to prepare.
Optimism Bias: This is the expectations that whilst bad things do happen, they won't happen to me. The best time to repair your roof is when the sun is shining. But that's also the time when the need to do so seems less pressing.

When times are good, we fail to prepare for when they are not. And by the time they are not, it is often too late. Running cash reserves and building redundancy into your processes and supply chain seems like an unnecessary waste during the boom years.

We don't know how and when the COVID-19 crisis will end. So far, most businesses have been very reactive. Just trying to survive. But sooner or later* businesses need to start looking forward and preparing to succeed in the future. Whatever that may be.

*I would strongly suggest sooner.

6 steps for using scenarios in strategic planning (info graphic)

I have been doing a lot of work with scenarios lately, and so I compiled an info graphic outlining the key steps to using them for strategic planning.

The 6 steps are:

Scenarios are plausible stories about how the future might unfold.
Use a PESTEL analysis to identify uncertainties in your future.
Build an Impact/Uncertainty matrix to identify scenario drivers.
Create a 2X2 matrix of the highest impact/highest uncertainty drivers.
Forecast your business plan within each scenario to identify problems and opportunities.
Evaluate your strategic options against each scenario for robustness.

I hope you enjoy the info graphic below. Please let me know what you think in the comments below the post.

9 Predictions for the UK Financial Services Sector

They say "it is dangerous to make predictions, especially about the future". However, we can't wander into the future with our eyes closed either. So, consider these less as predictions and more as the musings of someone who spends his days wondering what the future holds, and more importantly, how one might prosper in it.

1. Government engagement in the sector will increase through bodies like the FSA and Money Advice Service.
It may that government engagement (or is that just interference) in all sectors is increasing, but it certainly looks set to increase in the financial services sector. This should probably not come as a surprise after year of mis-selling scandals and an economic melt-down still raw in the collective psyche, and it is likely to be years before these effects wear off. The effect of such engagement will to change the shape of the industry, either directly by disallowing certain types of activities, or indirectly by changing the regulatory compliance and capital costs of other activities.

2. The Money Advice Service will be reconceived and rebranded within three years.
I don't believe that the Money Advice service goes nearly far enough to solve the underlying challenge, and as a publicly funded body, I think it is unlikely that it ever could or even should. However, I also don't believe that the powers that be will give up easily. As a result, it will be declared to have failed to achieve its objectives and simply resurrected under a different name. That is ineffective, inefficient, confusing and sadly almost inevitable.

3. The number of IFAs will reduce from about 30,000 by as much as 25% over the next three years.
This is because many will fail to qualify and/or be unable to communicate a value proposition for which customers are willing to pay. Much of this reduction will be in the form of early retirement. (See also The RDR: unintended consequences.)

4. Demand for financial solutions will continue to increase.
Consumer confidence in the industry may continue to languish, but demand for financial solutions will continue to grow. On the demand side, historic increases in longevity show few signs of abating (despite numerous predictions), increasing desires to enjoy a long and experiential retirement, and general increases in living standard and the accompanying hunger for more and better technology. On the supply side we have the steady decline of defined benefit and state pensions. It only remains for someone or something to regain consumer confidence in order to unlock this excess demand.

5. Those IFAs that remain will cluster towards the high end of the market.
With the costs of regulatory compliance and capital increasing, there will be fewer who can afford personalised face-to-face advice.

6. Technologically enabled direct propositions will creep up from the lower end of the market.
Technology is rapidly moving from the back-office into more client facing applications. This is true for IFAs who will increasingly rely on mobile applications to use in front of clients (as opposed to just back at the office), but also true for direct-to-consumer services. Customers will both demand and get richer planning tools, rather than simple price comparisons and product supermarkets.

7. Distribution will dis-aggregate with advisers focusing on financial planning and outsourcing asset allocation and investment management to specialist suppliers and outsourcing product analysis and selection to paraplanners.
As fee earning IFAs start to think more like professional services businesses, they will look to cut costs out of the value chain and achieve efficiencies through increased focus. This will ultimately result in the right-sourcing of many non-core components of the value chain, and specialist providers will develop in order to meet that need. Direct-to-consumer proposition will face similar pressures in order to bring services to consumers cost-effectively and at scale.

8. There will be a consolidation in the wrap provider market, with only a fewer of the smaller ones able to find a profitable niche in which to prosper.
There are around 30 wrap platforms on the market at the moment, but market share is concentrated in the big 3 (Skandia/Selestia, Cofunds, and Funds Network/Fidelity). Given that most advisers use only 2.1 platforms for new money flows, it's hard to see all of the smaller ones surviving. Those that don't may get bought out, morph into corporate wraps, or find other niches.

9. There will be an ongoing drive to corporate wrap, payroll and benefits administration in order to retain corporate business in the face of the RDR and NEST.
The corporate pensions sector will be the hardest hit by the RDR as large parts of this have been historically funded out of commision recouped from members contributions even though the members themselves may have received little or no personal advice. With NEST providing an easy "no-regrets" option for employers, the private sector will be looking for ways to demonstrate future value-add in this market.

Only time will tell if I am right, of course. But in the meantime, the causes and effects of these predictions can be profitably debated. What do you think?

Longevity in strategic planning

Longevity has been in the news again this week - in contradictory stories.

The BBC reports that the European Commission has warned EU member states to overhaul their pensions systems to adjust for low birth rates and ageing populations as life expectancy increases. They note that there are currently four working people for each person over 65, but warn that this will increase to only two working people for each person over 65 by 2060. The also note that less than 50% of adult Europeans are still in employment by the age of 60%. (They also highlight discriminatory and tax rules and barriers to cross-border activity relating to pensions, but that is another topic altogether.)

On the same day, the FT reported that RMS, a leading risk modeller for the insurance industry, has predicted that the recent rate of increase in life expectancy will not be sustained. As a result of this, they argue that insurers and pension funds may already be overstating the risk of longevity increases on liabilities. RMS base their assertion on the extent to which known causes of death, such as heart disease, have already been controlled (resulting in diminishing marginal returns from further work in those areas) combined with a review of thousands of medical trends and drug trials suggesting what new areas of improvements might or might not be opened up.

It's is the job of actuaries to balance these seemingly contradictory views in assessing future insurance and pension liabilities.

In strategic planning, however, we are able to consider both by constructing different scenarios for different potential outcomes, and then testing strategies against all scenarios. In this way, strategists can conduct rational analyse to formulate strategies which are robust regardless of whether its the European Commission or RMS who turn out to be right.

Scenario Planning for Business Strategy

Scenario Planning is a powerful methodology for considering the implications of your strategic analysis for the future. Although you can't predict the future, it is possible to anticipate a range of different outcomes.

You can achieve this as follows:

1. Identify the critical uncertainties facing your business (2 or 3).

These should follow from the threats and opportunities you've already identified in your SWOT, PESTEL and/or Porter's 5 Forces analyses.

2. Identify discreet possible outcomes for each.

For example, if the uncertainty is around a political election, then you might consider 2 discreet outcomes (1) Party A wins or (2) Party B wins. You're aiming for a small number of distinctive but realistic possibilities. So you don't need to include every possible outcome, such as (3) a hung parliament, or (4) stronger or weaker wins or losses.

3. Map and vividly describe the permutations of outcomes

Consider the permutations of all of your uncertainties together - they don't happen in isolation. Each permutation is then one scenario.

For example, your critical uncertainties might include the outcome of a political election and the introduction of a regulatory change. In that case, you might consider that the outcome of the election will impact the likelihood of the regulatory change.

4. Consider how well you would fare under each scenario

What impact would each combination of outcomes have on your business? Remember to consider the impact on:

demand from customers,
suppliers,
employees,
other stakeholders,
your internal processes, etc.

5. Identify the key variables to watch

These are the early warning signs that will help you understand how the critical uncertainties are playing out.

Make sure you have systems and accountabilities in place for monitoring those early warning signs and ensuring there is an understanding of changes as they emerge. Use this flow of information to update your scenario analysis as and when required. Don't just wait for next year's annual planning cycle.

6. Identify means to influence the outcomes

Where possible, identify means to engage with and/or influence the critical uncertainties, such as industry bodies, etc.

In many cases, you'll find your not the only player in your industry who has an interest in things. You may be able to achieve more, in some circumstances, by banding together.

7. Evaluate all strategic choices against your scenarios

Strategic choices that are robust across multiple scenarios are much more valuable than those which pay off under some scenarios only, and result in losses in others.

Additional success factors

There are 4 additional critical success factors:

Aim for realistic, plausible yet distinct possibilities.
Avoid bland outcomes, such as the stock market going up by 5% versus down by 5%.
Understand the causes and effects and the inter-relationships between your critical uncertainties.
Ensure executive engagement, alignment and commitment around the scenarios.

Develop you Scenarios in StratNavApp.com

You can develop your scenarios in StratNavApp.com. StratNavApp.com is the online tool for collaborative business strategy development and execution. Why not sign up for free now?

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.

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)