When developing, refining or reviewing a business strategy there are a huge range of tools, models and frameworks that can help you organize your thinking and give you a process by which to conduct analysis and get the necessary insight to make the right strategic decisions for your business.
Knowing what to do to grow your business and drive your success is difficult and you’re unlikely to simply be struck with a brainwave and suddenly have all the answers. But don’t panic, hundreds of academics and business theorists, as well as leading practitioners and business thinkers have devised numerous frameworks to help leaders ask the right questions, to get the right insight and uncover the best course of action for their business.
So, it’s just a case of working through all these strategy tools and coming out with a plan. Right?
Well…the trouble is, there are quite literally loads of possible tools to choose from. You can’t use them all or you would be analysing and strategizing for all of time, rather than getting on with the execution and achieving your goals.
So, which tools should you pick? And in what order should you work through them? With so many strategy tools and frameworks in existence it’s hard to know what tool does what or when you should use them. That’s why we’ve pulled together this initial list of our favourite tools to get you started.
All of these tools will help you with the first three stages of your strategic analysis – namely, understanding your market, external environment, competitors and your own business.
Keep an eye out for our forthcoming strategy tool lists covering the rest of the strategic planning process!
The stages of strategic analysis
If you use the right strategy tools, then devising a strategic plan can be a process. We certainly believe that here at Lucidity, after all, that’s what our strategy software does! We guide our customers through the process of conducting analysis and making strategic decisions to build a solid plan to drive their growth. It can be a simple, step-by-step process if you have the right tools.
Here are the stages of analyse you need to do in order to build an informed and effective strategy.
- Understand your market and the external environment you are operating in
- Understand your competitors
- Analyse your own business
- Understand the different strategic options you have
- Evaluate the different strategic options and make the right decisions to set your strategy
- Structure your strategy plan so it’s easy to understand
- Test that strategy and refine accordingly
Today we’re going to focus on the first three stages and take you through our favourite strategy tools to get the job done, with links to find out exactly how to use each tool once you’re ready to get started.
How to use these tools
We would always recommend you use these strategy tools as the basis for workshops with a diverse range of people from across the business. Although you can work through these tools on your own, working and collaborating with your teams will nearly always produce a better result. Different people will have different perspectives and that will lead to different ideas and observations.
Since this early part of your strategic planning efforts are all about information gathering and knowledge building, the more experience you have in the room and the greater the spread of departments and roles, the more insight you will be able to capture when it comes to both your external and internal analysis.
You should also try and bring this process to life as much as you can. If you can effectively get everyone engaged in the process early on, you’ll ultimately have a more successful strategy and better execution success.
So, don’t just think about which tools you’ll use, but also consider how you will complete them. You’ll find a lot of these tools and frameworks within Lucidity meaning you can work through them together on-screen (remotely or in-person), filling them out step-by-step and have all your work saved together in one place and looking great.
Tools for external analysis and understanding the market
PESTLE is both simple to use and understand, and comprehensive. It’s a tool that gets you to list out all the external factors that could impact your business. The sections of the model are Political, Economic, Societal, Legal and Environment.
This is an extension of PESTLE which overlays location as a consideration across all of the PESTLE categories. You’re asked to consider how the impacts differ when you look at the Local, National and Global contexts.
This is an alternative to PESTLE which has more emphasis on demographics. Here you will consider the profile of the population and think about how that will impact your business – age, education, gender, geographies, family statuses etc. The categories in DESTEP are Demographics, Economic, Sociocultural, Technological, Ecological and Political/Legal.
Porter’s Five Forces
The Five Forces strategic tool will help you analyse your industry (or, indeed any industry or market, say if you’re considering a new venture or a move into a new space). The tool helps you consider all the forces at play in a competitive market and see what things will impact growth potential. It’s a great tool for determining the potential profitability of a market.
Tools to understand your competitors
Four Corner Analysis
Four Corners is a great tool for analysing a chosen competitor company and provides you with a succinct, single diagram of information and insight on that business. As the name suggests, there are four sections to the tool that ask you to document the business’ motivations and drivers, their current strategy, the management assumptions (how the leadership team perceive their position in the market) and their capabilities.
This is a great tool for mapping out where all of your competitors sit in the market. Although this won’t help you capture lots of information on each company, it will give you an easily understandable and digestible visual representation of the whole competitive landscape. The diagram has two axis, typically (but not exclusively) price and quality, and the task is to position all of your competitors along those axis in relation to how consumers perceive them. You will also place your own brand on the graph and have a clear view of where you sit in relation to the rest of the players in your market.
Tools for analysis of your own business
Possibly the most famous of all strategic planning tools, SWOT stands for Strengths, Weaknesses, Opportunities and Threats. There is no better place to start when it comes to examining your business and starting to think about the future of your company.
SOAR is another 2 x 2 matrix tool, and while it shares the Strengths and Opportunities quadrants of a SWOT Analysis, it shies away from the negative Threats and Weaknesses and instead opts for focusing on Aspirations and Results. So, on one side are the positives about your business that can be exploited, and the other side has the vision of what you want to achieve if you exploit those factors well. If you’re running workshops with different groups in the business at different times, you may find the SOAR exercise would be better suited to some groups rather than SWOT.
Porter’s Value Chain
This is an extremely valuable framework that can help you understand the value you create for your customers and therefore determine your competitive edge. It asks you to capture all the activities within the business that go into creating and delivering your product or service, and comparing the cost of those activities to the value you create. This leads you to your margin – and the higher the value of your product/service, or the lower your costs of creating that value, the better your margin.
This is another strategy tool which will aid your understanding of how your business works and the strengths that can be exploited for growth. Here you are mapping out the aspects of your business that give you a competitive advantage. You’re asked to list what resources, capabilities, products, partnerships – anything really – that are Valuable, Rare, Inimitable and Organized. Thing of this as a list of your best of the best – all the great stuff you have going for you.
BCG Growth-Share Matrix
This strategic tool, developed by the Boston Consulting Group, will help if you have a number of different products or services. The 2 x 2 matrix has four boxes that describe different statuses based on market share compared to potential market growth. The quadrants are Stars (where you have high market share in a market with high growth potential), Cash Cows (where you have high market share but it’s not a growing market), Pets (low market share in a market that’s not got a lot of growth potential) and finally Question Marks (where you have low market share in a market with high growth potential). By understanding the profile of your products/services in this way you’ll start to get a good idea of what to do with each in order to drive the overall growth of your business.
Like the BCG Growth-Share Matrix, the ADL Matrix is a tool to help you map out a portfolio of products or services and truly understand each of them and their value to your business. With this matrix you position each of your products or services in relation to their competitive position (from weak compared to the competition all the way to dominant) and the industry lifecycle stage (from an embryonic market to an ageing industry). The model has different advice and suggested actions based on each possible position on the grid. It helps you see how much time and attention to spend on which products or services – from big pushes to gain market share, to completely abandoning, and everything in between.
Perceptual Map…. again
We’ve already talked about the perceptual map tool when looking at your competitors. Now you’re focused on analysing your own business it’s time to pull it out again and add yourself to the map. Where do you sit in relation to the rest of the market? This tool is great for giving a fast and easy to understand visual representation of your competitive positioning – very handy when you’re explaining your offering to people, be in new recruits or even potential customers.
Whether you’ve chosen to work through all of those tools, or picked from the bunch, you’ll end up with a solid grounding of analysis to help you build the right strategy for your business.
Now you fully understand what’s going on externally and what’s happening internally, you’re ready to consider the different strategic options available to you and start to assess each to determine the strategy that’ll drive your success. Check out our list of recommended tools to evaluate different strategic options.