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Strategy. A plan to achieve a goal.
It really is that simply defined. When you play a game you plan out a strategy that you believe will bring you a victory, the conceptual framework. The strategy consists of a set of tactics to carry out the strategy, the actions. Whether you are a novice or an expert you will develop a strategy based upon your familiarity with the game. You can probably see the issue immediately. Not all strategies are equal because not all information is equal. Interestingly, if neither player knew of the others level of gameplay, the novice would believe that their strategy is capable of winning because it incorporates all of their current knowledge of the game. But, perhaps the most important understanding of strategies is that... "You do not know what you do not know."
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Why do I mention this slang statement?
Because in strategy we do our best to remedy it. Strategy is about data and intelligence and it needs to be collected and analyzed. Internal data, external intelligence. Internal processes and value chains, external competitor analysis, market cycles, industry cycles and product cycles. Strategy is ever adapting to changes and therefore strategy is a continual endeavor. Because just like in the game your strategy is only as well thought out as your current knowledge enables.
Of course, a strategy isn't enough, you have to manage it too.
Because in strategy we do our best to remedy it. Strategy is about data and intelligence and it needs to be collected and analyzed. Internal data, external intelligence. Internal processes and value chains, external competitor analysis, market cycles, industry cycles and product cycles. Strategy is ever adapting to changes and therefore strategy is a continual endeavor. Because just like in the game your strategy is only as well thought out as your current knowledge enables.
Of course, a strategy isn't enough, you have to manage it too.
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Strategic Management
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A quick run through.
You begin the planning exercise, eventually finding a consensus and formulating the official strategy. Next is the implementation. Everyone who is a part of the strategic plan needs to actually carry it out. This could require using a 'change management' process to solidify the tactical changes laid out in the strategy. After all, a strategy is useless if there is no execution and it can be quite a jump from implementation to execution. Finally, you need to evaluate if the execution is successful. If it isn't, then it needs to be addressed and adapted. It may even need to be adapted if the execution is successful if other factors arise within the competitive market space. And the feedback loop brings us back to the planning. With any luck, the short term, incremental steps that make up the strategy will require only minimal adjusting and dedicated resources to complete the adaptive phase and begin again the strategic loop. You might now understand how making strategy a continual and ingrained process in the managerial levels would be beneficial.
Planning to Implementation
People
Activities
How might you go about this endeavor?
Strategies presented without as complete an understanding of the internal and external factors relevant to a company as possible is no strategy at all. You are the novice, hoping you aren't playing against the expert. You need to begin with information. You can begin with the internal or the external environments, or if you have the resources perhaps you can have personnel tasked on both environments. Remember that the more solid your foundation of understanding of the environments, the better formed your strategy.
Begin with your intended strategy. The Mission. Why does the business exist? The answer should be grounded in your profit and customer value propositions. Do you still feel like you are holding to the Mission?
Now reexamine the Vision. This is where you need the strategy to take you. In this case you know the destination, but are you giving an honest assessment of your starting point?
You begin the planning exercise, eventually finding a consensus and formulating the official strategy. Next is the implementation. Everyone who is a part of the strategic plan needs to actually carry it out. This could require using a 'change management' process to solidify the tactical changes laid out in the strategy. After all, a strategy is useless if there is no execution and it can be quite a jump from implementation to execution. Finally, you need to evaluate if the execution is successful. If it isn't, then it needs to be addressed and adapted. It may even need to be adapted if the execution is successful if other factors arise within the competitive market space. And the feedback loop brings us back to the planning. With any luck, the short term, incremental steps that make up the strategy will require only minimal adjusting and dedicated resources to complete the adaptive phase and begin again the strategic loop. You might now understand how making strategy a continual and ingrained process in the managerial levels would be beneficial.
Planning to Implementation
People
- Who makes the Decisions - Executive Stakeholders
- Who leads the endeavor - Leader
- Who carries out the processes - Analysis, Reporting
- Who is participating - Management
- Aligning the people - How will everyone work together?
Activities
- Internal/External: Data, Intelligence, Analysis
- Planning Direction - Competitive Decisions
- Aligning the operations - What must be done?
- Tactics - Process Activities
- Goals - What should the tactics achieve?
- Objectives - Quantifiable measures of the Goals.
- Timeline of Achievements
How might you go about this endeavor?
Strategies presented without as complete an understanding of the internal and external factors relevant to a company as possible is no strategy at all. You are the novice, hoping you aren't playing against the expert. You need to begin with information. You can begin with the internal or the external environments, or if you have the resources perhaps you can have personnel tasked on both environments. Remember that the more solid your foundation of understanding of the environments, the better formed your strategy.
Begin with your intended strategy. The Mission. Why does the business exist? The answer should be grounded in your profit and customer value propositions. Do you still feel like you are holding to the Mission?
Now reexamine the Vision. This is where you need the strategy to take you. In this case you know the destination, but are you giving an honest assessment of your starting point?
Identify your core competencies. What do you well? What are your value drivers? What strengthens your competitive position in the market? Make a list of your Strengths and Weaknesses going through each segment of your Value Chain. Consider what resources would have to be utilized to improve weaknesses or boost strengths. Is it worth it? As you dig further into discussion with managers, you will have to weigh out the benefits and financially evaluate these decisions. Internal Development. New products, New ventures, New markets. Acquisitions, Divestitures. What you choose will be influenced by the external environment.
The external environment has its difficulties when collecting data. Use government sources of data, financials filed for the SEC, Census Data, the Bureau of Labor to name a few, but there are also industry journals, industry blogs, and industry specific data collectors. It's a hunt so note the best sources of data and how you may be able to store data in a central location for simple reference, like a data lake. External data, because it isn't centralized unless you commit to it, is by far more troublesome than internal data for updating reports and presentation to decision makers. As this should be a continual process to stay up to date with the latest external developments, you will want to be able to track the external data the same way you would your internal data.
When evaluating the external environment it can be separated into three segments, the competitors, the industry, and the market. Each will pose its own opportunities and threats. The competitors research is more than their financials. You will want to read news publications for their headlining announcements, listen to their shareholder calls, comb over their websites, marketing, product lists, price lists and track their promotions. Because you want to keep comprehensive records on your competitors you may find that you will only track those most closely related to your own business.
It is very common to use Porter's Five Forces framework to assess the attractiveness of the industry and the PESTLE framework for the market as a whole. If you are familiar with economics these frameworks will follow right along with macroeconomic influences that impact the business environment and the people of a country. Is there an intense industry rivalry between businesses? Is there a price war or rising producer costs? Does one business dominate the industry? Is there a considerable capital investment required before a business can enter the industry? Are there regulatory requirements for the industry or are regulations going to be introduced into the economy? What about interest rates? Taxes? Inflation? In the external environment you will also be concerned with the customer base and changes to the general demographics, cultures and disposable incomes.
The external environment has its difficulties when collecting data. Use government sources of data, financials filed for the SEC, Census Data, the Bureau of Labor to name a few, but there are also industry journals, industry blogs, and industry specific data collectors. It's a hunt so note the best sources of data and how you may be able to store data in a central location for simple reference, like a data lake. External data, because it isn't centralized unless you commit to it, is by far more troublesome than internal data for updating reports and presentation to decision makers. As this should be a continual process to stay up to date with the latest external developments, you will want to be able to track the external data the same way you would your internal data.
When evaluating the external environment it can be separated into three segments, the competitors, the industry, and the market. Each will pose its own opportunities and threats. The competitors research is more than their financials. You will want to read news publications for their headlining announcements, listen to their shareholder calls, comb over their websites, marketing, product lists, price lists and track their promotions. Because you want to keep comprehensive records on your competitors you may find that you will only track those most closely related to your own business.
It is very common to use Porter's Five Forces framework to assess the attractiveness of the industry and the PESTLE framework for the market as a whole. If you are familiar with economics these frameworks will follow right along with macroeconomic influences that impact the business environment and the people of a country. Is there an intense industry rivalry between businesses? Is there a price war or rising producer costs? Does one business dominate the industry? Is there a considerable capital investment required before a business can enter the industry? Are there regulatory requirements for the industry or are regulations going to be introduced into the economy? What about interest rates? Taxes? Inflation? In the external environment you will also be concerned with the customer base and changes to the general demographics, cultures and disposable incomes.
Referring back to the internal considerations for areas of weakness and strengths and whether allocation of resources to these areas would be worth the investment we can now see that our external assessment would possibly be of considerable influence to the decision. In short, we need both our internal and external data and intelligence to formulate a strategy appropriate for the business and the time of the life cycle of the market, industry, business unit, and product.
Again, once formulated, the implementation still has to be initiated and once implementation has taken hold, the strategy must still be executed. Yes, this was stated already, but the importance of this can't be overly emphasized. If you can not execute the strategy then taking the time to gather data and intelligence is simply wasted resources. For this reason, as you develop strategies, it is beneficial to also consider two other influential factors:
'Barriers to Change' and correlated 'Change Management'
Anytime you want to introduce something new into an organization, it is a good idea to consider the degree to which the change will impact the processes and employees performing the processes. People tend to resist change, especially if the are used to a particular method or process. There is a comfort, for an employee, in believing that they know all there is to know about doing their specific tasks. They perform them currently and they know that they can meet the requirements. Introducing the unknown instills feelings of unease, the unknown. If you are simply introducing a new category of product it will have a different impact on your company than if you introduce a new process, new method of performance measurement or acquire another company. Change always presents with barriers to that change. You will want to anticipate barriers to implementation so that you can get to the execution. One method that can be used to manage change is that of ADKAR.
ADKAR : Awareness, Desire, Knowledge, Ability, Reinforcement
Basically attempt to ease the nerves and resistance to change by address the sources of resistance.
Again, once formulated, the implementation still has to be initiated and once implementation has taken hold, the strategy must still be executed. Yes, this was stated already, but the importance of this can't be overly emphasized. If you can not execute the strategy then taking the time to gather data and intelligence is simply wasted resources. For this reason, as you develop strategies, it is beneficial to also consider two other influential factors:
'Barriers to Change' and correlated 'Change Management'
Anytime you want to introduce something new into an organization, it is a good idea to consider the degree to which the change will impact the processes and employees performing the processes. People tend to resist change, especially if the are used to a particular method or process. There is a comfort, for an employee, in believing that they know all there is to know about doing their specific tasks. They perform them currently and they know that they can meet the requirements. Introducing the unknown instills feelings of unease, the unknown. If you are simply introducing a new category of product it will have a different impact on your company than if you introduce a new process, new method of performance measurement or acquire another company. Change always presents with barriers to that change. You will want to anticipate barriers to implementation so that you can get to the execution. One method that can be used to manage change is that of ADKAR.
ADKAR : Awareness, Desire, Knowledge, Ability, Reinforcement
Basically attempt to ease the nerves and resistance to change by address the sources of resistance.
- Ensure clear and concise communication of the strategy and intent.
- Let employees know how it will enable a competitive advantage and benefit the business.
- Ensure that education and training is available for employees so that they feel that they can accomplish new tasks.
- Continue to push the strategy and its implementation to solidify the change.
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Characteristics as Barriers to Transformation
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GAP Analysis
While much of the resistance to change is based in the human-behavioral factor, GAP Analysis looks at the resources and capabilities that may prevent you from executing the strategy because there is a 'GAP' in the resources desired or capabilities required. Taking an honest look at your business and knowing what you can do and what you can afford is essential due to this analysis. A realistic to pessimistic view is better than a rosy or optimistic view. Can you bridge the GAP from where your business is positioned currently to the next objective set in the strategy?
Again, assess 'Barriers to Change'. Do you have the knowledge? Do you have the skillsets? Do you have the finances? Do you have the technologies and equipment? Do you have the leadership?
Do not get caught being overly optimistic. You WILL fall short. This only hinders future strategic implementation. You will waste time, money and perhaps worst of all, employees will be reluctant to follow.
While much of the resistance to change is based in the human-behavioral factor, GAP Analysis looks at the resources and capabilities that may prevent you from executing the strategy because there is a 'GAP' in the resources desired or capabilities required. Taking an honest look at your business and knowing what you can do and what you can afford is essential due to this analysis. A realistic to pessimistic view is better than a rosy or optimistic view. Can you bridge the GAP from where your business is positioned currently to the next objective set in the strategy?
Again, assess 'Barriers to Change'. Do you have the knowledge? Do you have the skillsets? Do you have the finances? Do you have the technologies and equipment? Do you have the leadership?
Do not get caught being overly optimistic. You WILL fall short. This only hinders future strategic implementation. You will waste time, money and perhaps worst of all, employees will be reluctant to follow.
Finally, How do you know you are executing?
A system of 'Performance Management' must be put into place to monitor changes.
You need to be able to answer if you are achieving the intended outcomes of your strategy. Generally this is done through your goals and objectives and because there needs to be an objective measurement of change, the system needs to be quantitatively designed, even in areas that are subjective such as customer opinions.
Define what to measure. Your goals. There will be aspects of your goals that will be critical to your execution. These are called, appropriately, Critical Success Factors or CSF. It might be critical that you improve cash flow or operating margin or internal failures or customer satisfaction. These factors may or may not be directly measurable. If not, then you need to find a representative measure that will serve as a measure. For example, customer satisfaction could be approximated by way of retention, returns, or referrals.
Compare your measurement. Your objectives. The objectives will be numerical, measurable attainment of a process. The number or rate that you want your process to reach. These measurements will be your Key Performance Indicators or KPIs gauging where your process is rating. You will probably want to compare these against 'Benchmarks'. Benchmarks are typically an industry standard of performance of a process that is common to all businesses in the industry. These benchmarks could be an industry average or 'Best in Class' rating.
Measure. You will want to track your KPIs over time. This is easiest from a database as opposed to calculations in a spreadsheet file.
Monitor and Address.
Broadly, there are five areas of business capabilities that you may want to reference to help you with identifying your CSF and then your KPIs. These are also used to develop the Balance Scorecard Methodology for tracking Business Performance.
The Balance Scorecard Method
In order to implement this as a proper performance tools you really need to have your data visualizations integrated into your database so that all calculations are performed and refreshed on a regular basis with minimal maintenance. Because it involves areas of finance, sales and marketing, operations and customers it can be difficult to implement due to separation of duties and data regulations. However, the method and what is attempted to be measured and tracked is sound in its potential benefit. If the data from the different areas can not be aggregated into one performance reporting deck due to regulatory separation requirements, then the data should be tracked by each respective department for their reference. The reports can then still be accessible by upper level management and the benefit of the scorecard can still be realized.
The premise of the scorecard ~ "If you can't measure it, you can't manage it."
To gain a full picture of the business the CSF and corresponding KPIs focus on the areas of
Financial Ratios
Stakeholder Analysis
A system of 'Performance Management' must be put into place to monitor changes.
You need to be able to answer if you are achieving the intended outcomes of your strategy. Generally this is done through your goals and objectives and because there needs to be an objective measurement of change, the system needs to be quantitatively designed, even in areas that are subjective such as customer opinions.
Define what to measure. Your goals. There will be aspects of your goals that will be critical to your execution. These are called, appropriately, Critical Success Factors or CSF. It might be critical that you improve cash flow or operating margin or internal failures or customer satisfaction. These factors may or may not be directly measurable. If not, then you need to find a representative measure that will serve as a measure. For example, customer satisfaction could be approximated by way of retention, returns, or referrals.
Compare your measurement. Your objectives. The objectives will be numerical, measurable attainment of a process. The number or rate that you want your process to reach. These measurements will be your Key Performance Indicators or KPIs gauging where your process is rating. You will probably want to compare these against 'Benchmarks'. Benchmarks are typically an industry standard of performance of a process that is common to all businesses in the industry. These benchmarks could be an industry average or 'Best in Class' rating.
Measure. You will want to track your KPIs over time. This is easiest from a database as opposed to calculations in a spreadsheet file.
Monitor and Address.
Broadly, there are five areas of business capabilities that you may want to reference to help you with identifying your CSF and then your KPIs. These are also used to develop the Balance Scorecard Methodology for tracking Business Performance.
- Financial Improvements
- Customer Improvements
- Product Improvements
- Productivity Improvements
- Market Share
The Balance Scorecard Method
In order to implement this as a proper performance tools you really need to have your data visualizations integrated into your database so that all calculations are performed and refreshed on a regular basis with minimal maintenance. Because it involves areas of finance, sales and marketing, operations and customers it can be difficult to implement due to separation of duties and data regulations. However, the method and what is attempted to be measured and tracked is sound in its potential benefit. If the data from the different areas can not be aggregated into one performance reporting deck due to regulatory separation requirements, then the data should be tracked by each respective department for their reference. The reports can then still be accessible by upper level management and the benefit of the scorecard can still be realized.
The premise of the scorecard ~ "If you can't measure it, you can't manage it."
To gain a full picture of the business the CSF and corresponding KPIs focus on the areas of
Financial Ratios
- Liquidity
- Solvency
- Asset Management
- Profitability
- Market Value
Stakeholder Analysis
- Internal Processes
- Customer Satisfaction
- Innovation, Learning and Growth
Below is a layout of strategic analysis frameworks and an outline of the methodology of assessing and managing strategy from the Foundational Approach.
The goal of the Foundational Approach is to begin your strategic planning with the reevaluation of the business and processes.
"You have to know where you are to know where you are going".
The goal of the Foundational Approach is to begin your strategic planning with the reevaluation of the business and processes.
"You have to know where you are to know where you are going".