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06.11.2016 BoD & Startups

Business Strategy Tools - A Brief Overview

Business Strategy Tools - A Brief Overview
06.11.2016 LISTEN

Following up my past postings on Business Strategy, I have received numerous inquires about whether there are Business Strategy tools & frameworks out there, and what are they. Like all professional disciplines, there are indeed tools also for Business Strategy/ Analysis; I will try to briefly mention a few here (thus not an exhaustive list, so at least some awareness would be created.

Keep in mind that having the right and the best tools at your disposal, is just a start. You know that the right tools don't make for a great carpenter. 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.

(Before you) choose a tool
There are a number of important considerations to be aware of when choosing and using.such tools:

1. Avoid tools that create stationary maps and graphs (especially 2-dimensional ones), unless your organization operates in a static or well-defined environment / industry.

2. Make sure that the tool under consideration can properly answer and address the questions that concern your organization.

3. Your strategy tools should allow and obviously benefit from input by your people and their collaboration with other colleagues and functions within your organization.

4. Any proper full use of analytical tools is time consuming. It is important to gain commitment from all key stakeholders, Board of Directors, senior management, etc, so this does not turn into a 1-man's intellectual exercise.

5. Please consider how does a(ny) given tool sharpens the focus of your strategic analysis and how does it ensure a methodical, balanced approach. Obviously it would have to rely on historical data (if you have them) in order to extrapolate any future assumptions.

Partial Brief List of just 10 'Tools'

This is just a brief partial list aimed to create awareness and not to teach you everything about each tool (that could be a separate posting for every single tool)

1. SWOT
Strengths, Weaknesses, Opportunities and Threats is the most basic form of any strategic analysis and you can google unlimited amount of SWOT information, if you are not already familiar with it.

Beware: The SWOT Analysis was never 'designed' as a stand-alone tool. It must be used in combination with other tools!

FYI: There is a variation of the SWOT: TOWS (The capital letter-initials stand for the same words)

2. SOAR
Very similar to the SWOT- it looks at Strengths, Opportunities, Aspirations, and Results (SOAR) combining data about an organization's current position with your future Aspirations and the measurable Results you want to achieve.

Beware: SOAR is biased towards what you can or want to do rather than exploring what areas they should avoid or what opportunities could be created.

3. Porter's Value Chain
In Porter's Value Chains, "Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales, and Service are categorized as primary activities. Secondary activities include Procurement, Human Resource Management, Technological Development and Infrastructure" (Porter 1985)

It is simply a graphical tool for identifying/ describing an organization's main functions and understanding how they contribute to the creation of value (-chains).

4. Porter's 5- Forces
Porter's 5- Forces was created by Porter in 1979 in order to understand how these 5 key competitive forces are affecting an industry. The 5 forces identified are bargaining position of suppliers and customers (here you should also include your distributors), the threat of new entrants and substitutes, as well as industry rivalry.

According to Porter, these forces determine an industry structure and the level of competition in that industry.

5. McKinsey's 7S
The McKinsey 7S is a useful too for considering all aspects of an(y) organization when identifying its strengths and weaknesses. The 7 'S' stand for:

1. Structure,
2. Systems,
3. Style,
4. Staff,
5. Skills,
6. Strategy and
7. Shared Values.


6. Pareto Analysis
You probably are familiar with various versions of the Pareto Analysis. It is based on the simple principle that 20 % of your products, services, customers or distribution-networks deliver 80% of the profits. A variation of that is that 20% of your customers are responsible for 80% of your revenue stream. A Pareto chart is basically a useful visualisation to show this.

7. BCG Matrix (BCG=Boston Consulting Group)
The idea behind it, is that "to be successful, a company should have a portfolio of products with different growth rates and different market shares. The portfolio composition is a function of the balance between cash flows. High growth products require cash inputs to grow. Low growth products should generate excess cash. Both kinds are needed simultaneously."(Bruce Henderson- creator of the BCG Matrix in 1970)

The BCG Matrix is applied to any organization with more than one product or service offerings, or with multiple customer/ market segments. It basically is a graph of the market share against the market growth rate of each product/ service/ customer segment and it used to 'infer' strategic decisions on their relative position on the graph/ chart.

8. Benchmarking
It is a tool used to compare the performance of business processes/ products/ services/ 'whatever' with the best performances of other organizations ideally inside your industry.

Benchmarking= the search for industry Best Practices that lead to superior performance!

Example- uses of Benchmarking:

-to find out which business processes are lean/ optimal/ best performing.

-to allow and facilitate knowledge sharing acquired about other businesses that could hopefully be easily transferred to your organization.

-as a result of the above, benchmarking can help you gain competitive advantage, if you apply the best practices from other industries to your very own industry.

9. The Balanced Scorecard (BSC)
Developed in the early 1990s by Robert Kaplan from the Harvard Business School and David Norton, the founder of probably the most prestigious IT consulting firm, this tool is based on the single premise that "What you measure is what you get".

⦁Objectives are high-level organizational goals. The typical BSC has 10-15 strategic objectives.

⦁Measurements help you understand whether you’re accomplishing your objectives strategically or not.

⦁Initiatives / projects/ actions/activities are key action programs developed to achieve your objectives.

All these will create action items/ action points to assist you in achieving your key initiatives /objectives in a timely and organized fashion.

According to the Gartner Group, over 50% of large US firms have adopted the BSC.And more than half of major organizations in Europe, Asia and Africa are using balanced scorecard approaches.

The critical elements that define a balanced scorecard are:

⦁its focus on the strategic agenda of the organization

⦁the selection of a small number of data items to monitor

⦁a mix of financial and non-financial data items

So, the characteristics and power of a BSC are the presentation of a mixture of financial and non-financial measures each compared to a 'target' value within a single concise report / point- of- reference. It is NOT meant to replace any traditional financial or operational reports but it is meant more like a high- impact summary that captures the information most relevant to those reading it. So you can have different BSCs covering the same topics for different management or stakeholder groups within the same organization.

There are too many books written about BSCs- obviously this is not a topic to easily summarize, explain and present in a few lines. Google it, please

Beware: There are BSC software solutions and unfortunately, many people use them believing that implementing a software solution actually amounts to implementing a balanced scorecard! Sure, when a BSC is properly developed and implemented, performance management software solutions can be used to get -in a timely manner- the right performance information to the right people.

10. Mintzberg's 5Ps (1970)
I am afraid, as a human being, I do have preferences ..and I love this one. I have also enjoyed Mintzberg's books and teachings.

Actually each of these 5Ps is a different approach to strategy:

1. Plan.
2. Ploy.
3. Pattern.
4. Position.
5. Perspective.


I assume than the Planning element is clear - Planning is an important element in Strategy formulation as I wrote in a previous article. But planning, is that it's not enough on its own and that's actually where the other 4Ps come into place.

Ploying can be and is used as a strategy element when conspiring/ plotting to disrupt, discourage, or influence in any way the activities and operations of your competitors. Simple example? If you are a PC manufacturer, buy let's say all available hard-d rives so your competitors do not have hard-d rives to build and sell their own PC- products (ok a bit extreme but it does make the point clear). OK- let me say it in a different way: it's all about outsmarting your competitors.

Remember that the word Strategy is a derivative from the Greek word στρατηγός (= a military general), a composite of the Ancient Greek words στρατός (=army) + ηγώ (=to lead); i.e. the Leader of the Army. So, Ploying is a valid strategy, coming for the idea of War Games as a Strategic Tool.

The Patterning is just about 'seeing' your organization's patterns (in people, processes, etc) and whether these are or have impact in your strategic planning. So, you 'look' at what you 'have at hand'/ what was successful in the past and you try to figure out if and how/ under what conditions this could lead to future commercial success.

The 4th P is about how you Position your organization in the marketplace and how to develop a sustainable competitive advantage by making your products or services unique in the marketplace. OK- let me say it in a different way: it's about your USP Strategy (Unique Selling Points).

As an Entity, every organization makes choices relying heavily on its corporate culture. Saying it in a different way: the Thinking Patterns of an organization will shape its Perspective on the things that it is able to do well. It's about the impact that organizational culture and collective thinking can and do have on Business Strategy.

In Conclusion
This is a simple brief posting, more like a taste on Business Strategy tools. There are a lot more many that what it could be addressed here in a short form. I am sure you might have heard of the Strategy Canvas too, which became popular in the book "Blue Ocean Strategy" (it is used to understand how a firm differentiates itself from its competitors)

But there are tools for almost every aspect of your Business Strategy. For example, for:

⦁Organization Design: EPRG, Greiner's Curve, OD Pyramid, Mintzberg's Organizational Configurations, etc.

⦁Strategic Prioritization: Mullin's 7 Domains, CAGE Framework, Value Chain Analysis, etc.

⦁Strategic Options: Bowman's, Porter's, Mintzberg's 5R, Blue Ocean, Scenario Analysis, etc

⦁Strategy Execution: OGSM, VMOST, Governance models, Hoshin Planning, etc.

⦁Competitive Advantage: Porter's 4Corners, ADL Matrix, VRIO, Kotler's 5 Product Levels, Kotler's Pricing, etc

⦁Marketing Strategy: 4S Web marketing, RFM Segmenting, CEM, Keller's Brand Equity, etc.

⦁Manufacturing and Operations Kaizen, Lean, JIT, TOC, RATER, Kanban, 5S, etc.

⦁Quality Strategy: 0-Defects, TQM, Deming's, 6-Sigma, CTQ, Crosby's 16-Steps, etc

⦁.....


Remember that not all tools are useful in all circumstances and that not all analysis yields results. Choose carefully which tools to use for your organization's maturity and needs at a given point in time, please.

Thank you and Good Luck,
Spiros
Related previous posts:

About the Author: Spiros Tsaltas, a Top-Tier Management Consultant and a former University Professor (RSM MBA, CUNY, etc), is a seasoned Technology & Operations Executive. Spiros has hands-on experience on setting up all sorts of Startups both in the US and in Europe. He is an active transformational leader and strategist with extensive experience on Boards of Advisors & Boards of Directors. He is currently assisting a couple of Ghanaian and other West African StartUps and SMEs with the setup of their Boards and Strategy items.

Spiros welcomes any feedback/ comments/ remarks/ suggestions via your email message to [email protected]

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© 2016 Spiros Tsaltas.

Spiros Tsaltas
Spiros Tsaltas

Top-Tier Management ConsultantPage: BoDStartups

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