Strategy Development

In the past most organisations took a highly structured approach to strategy development known as strategic planning which involved an annual process of putting plans in place for the coming year and beyond.

However, in today’s complex and turbulent business environment, it is impossible to plan for every eventuality and strategy making needs to be a more flexible and dynamic process which reflects a way of thinking strategically about the business and the environment in which it operates. Organisations that fail to think strategically will be vulnerable to threats and ill-prepared to take advantage of fresh opportunities. A flexible but focused approach will put organisations in a better position to deal with setbacks and to respond to new opportunities as they emerge. 

What is strategy development?

Strategy development is the process of researching and identifying strategic options, selecting the most promising and deciding how resources will be allocated across the organisation to achieve objectives.

​Key questions to be considered include: 
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• What business are we in? Or what business should we be in? (Mission)
• Where do we want to be? (Vision)
• How are we doing? What is going well? What is not so successful?
• How did we get to this point? What went well? What went wrong?
• How can we improve our position?
• What options are open to us?
• What might hinder us from getting there?
• What do we need to do to get there?
• What should we not do?

How do you develop a strategy?

In a company trading for profit, for which competition and profitability are important, your goals will differ from those of a non-profit or government department. Likewise, objectives for a department or team will have a different scope from objectives for your organisation as a whole.
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For example, and depending on scope and circumstances, you may want to develop strategies to:

• Increase profitability.
• Gain more market share.
• Increase approval ratings, or boost customer satisfaction.
• Complete a project under budget.

To determine your strategy, you must understand fully the internal and external environmental factors that affect you. With that understanding, you can identify your clear advantages and use these to be successful. From there, you can make informed choices and implement your strategy effectively.

So, strategy creation follows a three-stage process:
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• Analysing the context in which you're operating.
• Identifying strategic options.
• Evaluating and selecting the best options.

Strategy development process and tools.

Stage 1: Analysing your context and environment

In this first stage, you ensure that you fully understand yourself and your environment. Do the following:
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• Analyse Your Organisation: Firstly, examine your resources, liabilities, capabilities, strengths, and weaknesses. A SWOT Analysis is a great tool for uncovering what you do well and where you have weaknesses, providing that you use it rigorously. It's much easier to achieve your objectives when your strategy uses your strengths without exposing your weaknesses. Also, look at your Core Competencies. These highlight your unique strengths and help you think about how you can set yourself apart from your competitors.

 

• Analyse Your Environment: Now examine your current operating environment to predict where things are moving. Are there exciting opportunities you should pursue? What future scenarios are likely in your industry; how will these impact the work that you do? PEST Analysis, Porter's Diamond, and Porter's Five Forces are great starting points for analysing your environment. They show where you have a strong position within the larger environment, and where you may have issues. As you prepare to create your strategy, make sure that you're working in a way that's aligned with changes in your operating environment, rather than working against them. These external factors are often beyond your control, so if you pursue a strategy that requires a change in one of these elements, you may have a long, exhausting, unprofitable battle ahead of you.

 

• Analyse Your Customers and Stakeholders: Your strategy defines how you'll win, and winning is typically framed by how well you satisfy your customers. Companies trading for profit must keep their customers and shareholders happy. Governments, non-profits, and project teams all have other stakeholders to satisfy as well. Strategy creation must consider these needs. Identify your clients and stakeholders. What do your clients want? And who are the key stakeholders in your success? A Stakeholder Analysis will help you uncover these needs and preferences. Also, look at your market in detail. Answer key questions such as "How is our market segmented?", "What sub-populations can we reach cost-effectively?" and "What is our optimal Marketing Mix?"

 

• Analyse Your Competitors: In a traditional company that trades for profit, you must understand how your products compare with competitors' products, and what your competitors' competencies are. How easy, or difficult, is it to enter your market? What alternatives do customers have? USP Analysis helps you identify ways in which you can compete effectively. You'll also find many useful tools that can help you understand competitors with Competitive Intelligence. Non-profits, departmental teams and projects have competitors too. Other projects and teams within the department compete for money and other resources. Therefore, you must prove that you can add value, meet objectives, and contribute to organisational success.

Stage 2: Identifying Strategic Options

In Stage 1, you developed an understanding of how your organisation or team fits within the context of the internal and external environments. 

Now it's time to think about the different things that you could do to create a clear advantage, and meet your objectives. Here are some fundamental activities that can help you make this decision.
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• Brainstorm Options: Use creativity tools like Brainstorming, Reverse Brainstorming and Starbursting to explore projects that you could run to develop competitive advantage. Guide your brainstorming with reference to the organisation's mission statement. But, depending on your role in the organisation, consider how far you should be constrained by this.

 

• Examine Opportunities and Threats: Your SWOT Analysis identified some of the main opportunities and threats you face. Using this as a starting point, brainstorm additional ways to maximise your opportunities, minimise your threats, or perhaps even turn your threats into opportunities.

 

• Solve Problems: A problem-solving approach can also help at this stage. If your problem is that you're not achieving your goals, ask yourself how you can ensure that you do. (If everyone in your industry finds it hard to deal with a particular problem, then you may gain a competitive edge by dealing with it.) For example, if you want to increase your customer satisfaction ratings in an industry plagued by poor customer relations, your starting position is "low satisfaction." Brainstorm why this is the case, and create strategic options that would increase satisfaction. Tools like Root Cause Analysis, the 5 Whys, and Appreciative Inquiry can give you some interesting new perspectives on these problems.

Stage 3: Evaluating and Selecting Strategic Options

The final stage is to evaluate strategic options in detail and select the ones that you want to pursue.
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• Evaluate Options: By this stage, you've probably identified a range of good projects that you could run. You must now evaluate these to choose the best strategic options. Consider every option you've identified, but don't make a final judgment until you've completed your assessment. Start by evaluating each option in the light of the contextual factors you identified in Stage 1. What do these tell you about each option? Techniques like Risk Analysis, Failure Modes and Effects Analysis and Impact Analysis can help you spot the possible negative consequences of each option, which can be very easy to miss. Make sure that you explore these thoroughly. Many options will be analysed on a financial basis. Here, techniques like Cost-Benefit Analysis, Break-Even Analysis, use of Net Present Values (NPVs) and Internal Rates of Return (IRRs), and Decision Trees are helpful. Decision Matrix Analysis is particularly helpful for bringing together financial and non-financial decision criteria. It helps you weight individual decision criteria, and consider subjective features – like team fit and the likelihood of team buy-in – as well as objective, tangible factors like cost and return on investment.

 

• Choose the Best Way Forward: With your evaluation complete, you now must choose the best strategic option or strategic options, making sure that you don't choose so many options that you spread your resources too thinly. Check your ideas for consistency with your organisation's Vision, Mission and Values, and update these if necessary. It's easy to forget about these critical elements during strategic planning, so ensure that what you want to "win" is something that contributes towards the organisation's overall purpose. Check your assumptions using the Ladder of Inference. This helps you confirm the soundness of the reasoning process used to develop your strategy.

Key points

Your strategy tells you how you'll achieve success, no matter how that success is defined. And whether you're developing a strategy at personal, team, or organisational level, the process is as important as the outcome.

Identify your unique capabilities, and understand how to use these to your best advantage while minimising threats. 
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The process and tools identified above will help you identify a variety of potential strategies for success so that you can ultimately choose the one that's right for you.

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