How To Build A Strategy? An Overview Of Strategy Tools

I thought of writing something to refresh memories on strategic tools, options, foresight, intent etc….Not sure whether I’d be writing them exactly how I perceived during lectures back in 2012. The reason behind saying this is because I personally feel that my understanding is differing now as I’m becoming more mature. Not sure how others think but as I am growing older I tend to focus more on the resultant force that would influence more than other forces. It might be a priori within since I’m an engineer to consider that major contributing resultant force (say top 40%), but of course it comes with risks. The only thing I can do at work is to be logical, and there is no room for philosophy or arguing about risk management or about Beck or anyone because organization are all rational to a major extent. They’d rather fail being rational than trying to spend a lot for a trade-off. Beck said so much, for example – “Science’s rationality claims to be able to investigate objectively the hazardousness of a risk permanently refutes itself” – Ulrich Beck (1986), but who cares? Leave it, let’s quickly move to strategy and exhale the frustration….

What is Strategy?

Let’s start with Strategy definition, it could be dicey to comment anything now so let’s figure out what is not a strategy first because that is very important to know what shouldn’t be considered as a strategy statement- Maximizing profit, reducing operating cost, improving quality are not a strategy. Becoming no #1 airline in the world, no #1 X in the world, maximize sale is not a strategy. Regulating money, giving the best class loan or maximizing number of accounts for a bank is not a strategy but they are goals and goals cannot be a strategy. Any strategy that is not imperfectly imitable is not a strategy.

Strategy is about doing things so differently at every step of production/services that competitors cannot imitate, and that gives you a value proposition in overall process resulting in maximizing profit or X ~ AB

Other wrote something similar to mine: P

A long-term direction which seeks to meet the expectations of, and create value for, stakeholders

  •  Johnson, Whittington and Scholes

However beautiful the strategy, you should occasionally look at the results.

  • Winston Churchill

If you’re serious about strategy work you must always do your own analysis

  • Richard Rumelt

Building Strategy: Tools

We’ve so far covered strategy definitions, then comes external audit, internal audit, corporate and competitive strategies, and developing and evaluating options.

External audit is done mostly through tools like SWOT, PEST, Porter’s diamond, Cause and Effect diagram, scenario implication etc. These tools are to access outside environment and competitors. Let me talk about the tools I use at work. So far I’ve used SWOT, PESTLE, BCG Matrix, and sometimes in fact just once Porter’s 5 Forces. However, topics from operations management are more valid for my role than any other subject including TQM, Balance scorecard, FTE calculations, Break-even, production optimization, fixed and variable costs etc…

Internal audit is equally useful because understanding and analysing own footprint matters the most. It can be done through positioning analysis, SWOT, RBV logic, VIRO, core competencies, capability resources, investment and transfer-ability, useful questions from Javidans (given below), 5 whys etc..

We know how to __________ very well.

In one part, or all, of our business(es) ?

We are better at _______ than our competitors ?

Then comes diagnosis before making a strategy, as per Rumelt’s 3 steps strategy process: Diagnosis, Setting guiding principles and coherent set of action. Diagnosis can be done through tools like open framing and closed framing (WXYZ) statements:

W …       the objective or goal of the change process
X
…        the process by which change will be delivered
Y
…        the resources or skillset involved
Z
…        the time frame for the change to be completed

In addition, tools like porters generic strategy helps to diagnose and identify the footprint, market share and other business attributes to a certain extent. Bowman’s Strategy Clock can assists with positioning and target. Strategic groups and strategic space is the most common type of graph used for representing companies of similar industry with bigger, medium or smaller circle, or using matrix visualization putting significant x/y axis for market share and responses. Porter 5 forces of course is a powerful tool but it is for me a tool with no use upfront, but a good tool to use in classroom. Other tools include Blue ocean strategies, BCG matrix, Ashridge visuals etc..

Now comes building strategy(options), to start with there is a need for development directions and tools like Ansoff Matrix can help with it revealing Existing and new markets and products, and they’re resultants from internal/external audits, 5 forces, competitive, cooperativeness analyses etc. TOWS analysis can assist with creating options through prioritizing the SO, WO combinations. And at last, choosing SFA – suitable, feasible and acceptable option(s) can give a strategy.

How To Build A Strategy? An Overview Of Strategy Tools

Related Article:
https://hbr.org/2010/05/the-five-questions-of-strategy.html