Strategy is choice. It is making choices that allow you to win. To be successful, we must have a strategy. A strategy helps us answer the question: How are we going to win in the future?
You can’t win anything worthwhile if you don’t have a strategy. Athletes and professional sports teams know this. Military generals, medical doctors, and experts in organizational know this well. Your organization needs a strategy.
Strategy chooses where the organization should be at some point in the future in order to win and makes specific choices to do some things and not other things to allow the organization to win. Strategy is all about winning.
Strategy determines the overall direction and goals of the organization. Consequently, strategy development influences numerous aspects of the organization, including what:
- Products and services will be provided by the business and how those products and services will be designed
- Organizational structures, management systems, and roles will be needed by the organization
- Performance goals should be established for positions throughout the business
- Board committees should be developed
- Resources will be needed to achieve those goals, and consequently, how much money is needed to procure those resources. In the end, the goals determine the content of various budgets.
A good strategy pays constant attention to current changes in the internal and external environment of your organization, and how all of this affects the future of the organization. It does so so that it can make the best choices possible to allow the organization to win. As such, skills in strategy development are critical to the long-term success of your organization.
There are many different ways that people approach strategy creation. This article gives basic steps that you need to go through to come up with a good strategy. In Playing to Win, A. G. Lafley and Roger Martin present an approach to strategy development that I love to use. I love it because they present the time-tested concepts of strategy creation as a series of five simple choices that need to be made in an iterative process with feedback loops. This is so helpful because it prevents people from creating visions and missions without thinking about where they will actually apply them (where to play) or how they will actually win (how to win) against the competition. Like Martin says, “It is extremely difficult to create a meaningful aspiration/mission/vision in the absence of some idea Where to Play and How to Win…Any mission or vision will do when you don’t have a thought-through Where to Play or How to Win.”
The choices, which are presented as a logical cascade of questions, are as follows:
- What are our broad aspirations for our organization & the concrete goals against which we can measure our progress?
- Across the potential field available to us, where will we choose to play and not play?
- In our chosen place to play, how will we choose to win against the competitors there?
- What capabilities are necessary to build and maintain to win in our chosen manner?
- What management systems are necessary to operate to build and maintain the key capabilities?
The key is to have five answers that are consistent with one another and actually reinforce one another. To create a strategy, Lafley and Martin say, you have to iterate — “think a little bit about Aspirations & Goals, then a little bit about Where to Play and How to Win, then back to Aspirations & Goals to check and modify, then down to Capabilities and Management Systems to check whether it is really doable, then back up again to modify accordingly. While it may sound a bit daunting, iterating like this actually makes strategy easier.”
Since strategy is making choices that allow you to win. To make the best choices, you must have a deep and thorough understanding of the internal and external environmental factors that affect your organization. When you have accurate information about your context, you can make the kind of good choices that give your organization a competitive edge and allows it to win.
THE 3 STEPS OF STRATEGY CREATION
Strategy creation may be done in the following 3 steps:
- Choose your mission, vision, & goals,
- Analyze your internal and external context and environment, and
- Identify, evaluate, and choose the best strategic options and pursue them.
As with the five questions of strategy above, these three steps are iterative.
We will look at each process and recommend some tools that will help with it.
|The Five Choices of Strategy||Helpful Activity|
|Why & When? Why: What are the winning aspirations for your organization & the concrete goals against which we can measure our progress? The when goes with your goals.||Choose Mission, Vision, & Goals|
|Where? Across the potential field available to us, where will we choose to play and not play?||External Analysis|
|How? In our chosen where to play, how will we choose to win against the competitors there?||Identify, Evaluate, and Choose the Best Strategic Options|
|Who? What capabilities are necessary to build and maintain to win in our chosen manner?||
|What? What management systems are necessary to operate to build and maintain the key capabilities?|
STEP 1: CHOOSE MISSION, VISION, AND GOALS
Here, you choose your Purpose, Mission, Vision, Core Values, and Goals. Note that purpose is different from mission, vision, and values even though they are closely related.
Here you also define the concrete goals against which you can measure your progress. To accomplish your goals, you come up with objectives (and activities).
How do you come up with goals? You take your mission statement and turn it into goals and objectives that you want to accomplish. The goals you choose would depend on what is going on inside and outside your organization. You may establish goals to accomplish over the next three years or so. Then you would identify how these goals will be reached by coming up with objectives and activities with responsibilities and timelines.
STEP 2: ANALYZE YOUR INTERNAL AND EXTERNAL CONTEXT AND ENVIRONMENT
Here, you get a deep understanding of your organization and your environment.The external environment determines how you will need to develop your internal capacity to face the environment you are operating in. As such it makes sense to start with the external analysis first.
A) External Analysis – Analyzing the Playing Field
The external analysis is an analysis of the playing field. The analysis helps you to choose where to play or the competitive field. But what is the playing field? Where to play or playing field choices occur across several areas such as:
|Geography||In what countries or regions will you seek to compete? An organization can compete locally, nationally, internationally, in the developed world etc.|
|Product Type||What kinds of products and services will you offer?|
|Consumer Segment||Which groups of consumers will you target? In what price tier? Meeting which consumer needs? Your consumer segment can be defined by demographic segments, price, etc.|
|Distribution Channel||How will you reach your customers?|
|Vertical Stage of Production||In what stages of production will you engage? Where along the value chain? How broadly or narrowly?|
The above choices, taken together, form the strategic playing field or where to play for the organization. The external analysis helps us be able to make choices about our playing field. Before choosing the where to play, you need to do some preliminary study. After that, you continue to study further. This should remind us of the fact that there is a feedback loop that involves going back and forth and allowing new choices to influence older ones and vice versa.
An external analysis is important for:
1) Startups that need to choose “Where to play” or existing businesses that need to choose a new “Where to play” so that they can expand.
2) Existing companies that need to thrive and so need to continue to have their hand on the pulse of the external environment that they do business in—an environment that is always changing.
The external analysis includes:
- General Environment Analysis
- Industry Analysis
- Competitor Analysis
- Consumer, Customer, and Stakeholder Analysis
1. General Environment Analysis (Environmental Scan)
For environmental Analysis, you need to look at the following trends. Changes in any of these trends in your business environment can create great opportunities for you or cause significant threats. It’s important to stay abreast with them. All of them won’t necessarily apply to your situation to the same force. However, it is important to follow them.
|Sociocultural Trends||Changing demographics, Psychographics, Change in lifestyle, Societal attitudes, Household size, family, gender, etc.|
|Technological Trends||New technologies that could be used now by your organization; new technologies in the works that will radically impact your industry; new technologies used by your competitors that could give them an advantage; the direction of technological research by governments, universities etc. Can you take advantage of that? Impact of technology on where people can work, e.g. work remotely. Are their existing technological hubs that you could work with or learn from?
Are there any other technological factors that you should consider?
|Economic Trends (Macro & Micro) / Environmental trends||Macroeconomic Trends – taxation, interest rates, savings rates, Currency exchange rates, international trading blocks, fixed-trade agreements, trade deficits, budget deficits. This is both national and globally.
Microeconomic Trends – Income distribution, etc.
Environmental – Changes in the environment that will impact your organization.
|Politico-legal (Political & Legal) Trends||National and local governments, European union, G-7,
Consider: Elections (local and national), possible change in government, things happening in the legal system that might affect the environment; things happening in congress like pending legislation or changes in tax laws that might affect your organization; parties most likely to win next elections and how their views may affect your organization; organized crime and other crime rates, the rule of law, property rights; corruption and its impact on your organization; etc.
Tools for this:
1. STEP or PEST Analysis—PEST Analysis is a common and easy to use tool that helps you analyze the Political, Economic, Socio-Cultural, and Technological changes in your business environment. This is key to understanding the “big picture” forces of change that you’re exposed to, and, from this, take advantage of the opportunities that they present. STEP analysis is important for the following reasons: “PEST Analysis is useful for four main reasons:
- It helps you avoid starting projects that are likely to fail, for reasons beyond your control.
- It helps you to spot business or personal opportunities, and it gives you advanced warning of significant threats.
- It reveals the direction of change within your business environment. This helps you shape what you’re doing, so that you work with change, rather than against it.
- It can help you break free of unconscious assumptions when you enter a new country, region, or market; because it helps you develop an objective view of this new environment.”
2. Porter’s Diamond—This tool helps us to understand how global competition is likely to play out and how business conditions in one country differ from those in another. You can read more about Porter’s diamond in Michael Porter’s book, The Competitive Advantage of Nations.
2. Industry Analysis
Now you need to study your industry to understand the current operating environment to accurately predict the future direction of the industry. You want to know where things are moving. If the General Environment Analysis were studying the global weather patterns, the industry analysis would be studying the weather patterns in your city. Ask: What new opportunities are arising? People who understand the times take advantage of them and get ahead of everyone else. What future scenarios are likely in your industry, and how will these impact the work that you do?
Tools for this:
- Porter’s Five Forces
- TOWS Analysis: TOWS analysis is the SWOT analysis in reverse. It can help you with your internal and external analysis because it uses information learned during the SWOT analysis to develop a strategy that maximizes strengths and opportunities and minimizes weaknesses and threats.
Note: Make sure that your strategy is aligned with changes taking place in your operating environment, not working against them. The external environment and factors are usually beyond your control, so if your strategy requires that you try to change anyone of these elements, you may have a long, exhausting, unprofitable battle ahead of you. It’s often not worth it.
3. Competitor Analysis
You need to understand how your products and services compare with competitors’ products, and what your competitors’ capabilities are. How easy, or difficult, is it to enter your market? What alternatives do customers have?
Tools for this:
- USP Analysis: Your Unique Selling Proposition (USP) is the unique thing that you can offer that your competitors can’t. It’s your “Competitive Edge.” It’s the reason why customers buy from you, and you alone.
- Competitive Intelligence. “Competitive intelligence is the systematic monitoring of your competitors’ actions to determine what they’re currently doing – and what they’re likely to do in the future. By gathering this type of information, you improve your own decisions, both strategically and tactically, and you get a better understanding of your own competitive position.” Mind Tools
Note that 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 organizational success.
4. Consumer, Customer, and Stakeholder Analysis
Strategy is making choices that will allow you to win and winning is usually defined in terms of how well you satisfy your customers, consumers, and stakeholders happy. Every organization has stakeholders that it must satisfy to be successful.
To be effective at satisfying stakeholders, you must know your stakeholders well.
You need to identify your clients and stakeholders.
- And who are the key stakeholders in your success?
- What do they want?
Tools for this:
Stakeholder Analysis: This will help you uncover these interests, needs, preferences, positions, etc. of your key stakeholders.
The Adaptation Cycle
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change. In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment.” Charles Darwin
Organizations that win are the ones that adapt to change best. They are sensitive and observant to the changes in the environment and adapt to them. They watch the waves of nature and surf them instead of getting drowned in them. In their book, Forces for Good, authors and speakers Leslie Crutchfield and Heather McLeod Grant say that adaptive organizations go through four stages in what they call the adaptation cycle.
** Notice that the adaptation cycle is simply a different rendition of Plan, do, study, Act (PDSA) that is commonly used in quality improvement (QI) projects in many industries.
B) Internal Analysis – Know Your Organization
Deep organizational understanding. You need to have a deep understanding of your organization. What capabilities are necessary to build and maintain to win in our chosen manner? What management systems are necessary to operate to build and maintain the key capabilities?
You need to analyze your organization and examine your:
- Capabilities – Capabilities are those things you must do exceedingly well in order to deliver on your aspiration, where-to-play, and how-to-win choices. What capabilities do you have right now? What capabilities must be in place for you to win?
- Structures and Systems—What structures and management systems do you have in place? What structures must be in place for you to win?
- Resources – What resources do you have? What structures and management systems need to be in place? Which do you currently have?
- Liabilities and weaknesses.
Tools for this:
- The SWOT Analysis: This tool helps you discover your Strengths, Weaknesses, Opportunities, and T It’s easier to win when our strategy focuses on our strengths without exposing our weaknesses.
- Core Competency Analysis: This study will help you identify your unique strengths and help you use them to position yourself well for success.
STEP 3: IDENTIFY, EVALUATE, AND CHOOSE THE BEST STRATEGIC OPTIONS AND PURSUE THEM.
Strategy is choice. It is about making choices that allow you to win. How are you going to win on the playing field you have chosen or are choosing?
Choosing a how to win is not something you simply write down with little thought about it. You must evaluate it and make sure that you can beat the competition and win. There is always going to be resistance or opposition. It comes from both the external and internal environment. It can come from traditional competitors or from other sources of opposition. Jesus said something that is worth remembering here: “Whoever is not with me is against me, and whoever does not gather with me scatters” Matthew 12:30. There are different types of competitors. Some want to kill you or your organization and get you out of business, others simply want to beat you but aren’t necessarily out to kill your cause, some simply get in the way of you doing things that help you win. They don’t intend to hurt you but because they slow you down, they actually are working against your efforts. As we have weaknesses, opposing or resisting forces have weaknesses as well. Choosing a where to play and how to win always go together and are the heart of strategy. To ensure that you make great how to win choices, you must understand your competition, other sources of opposition, and your own capabilities. As you consider all these, you must choose to avoid the paths where the fight will be too great that you are destroyed. You must also avoid the paths that you may fight and eventually win but at a cost that is not worth the fight. If you brainstorm, think, and seek alternatives hard enough, you will often see that there are usually ways to come up with a how-to-win that allows you to win little pain that the obvious paths. Before you choose a where to play and how to win there, you must ask: Can I win against the competition on that field? Am I able to handle the demons there?
“A prudent person foresees danger and takes precautions. The simpleton goes blindly on and suffers the consequences.”
A) Identifying Strategic Options
Strategy is choice. To make good choices, we need good information. In stage 1, we collected and analyzed good information that helps us understand our internal and external context. The next step is to brainstorm and come up with different options that you can pursue to win. The mistake we often make is to think that there is only one way to win. In reality, there are many different paths that we can take to get to our destination. We want to come up with many options so that we can choose one that will maximize our strengths, reduce competition, and minimize our weaknesses. Here are some fundamental activities that can help you make this decision.
1. Brainstorm Options
You need to brainstorm options. You can do this alone but it’s best done with a team. If alone, simply let ideas flow. Write any ideas that come to mind about options you can take, even if it seems crazy. This is not the time to judge merits. Simply write ideas down. Reserve judgment for later. In a group setting, do the following:
- Encourage even the stupidest ideas
- Don’t judge anyone’s ideas. Celebrate every idea even if it’s stupid.
- Encourage people to write down their ideas and then exchange the paper with their neighbor to read them. This prevents people from looking up to the leaders or more reputable people.
- Use the organization’s mission and vision to guide your brainstorming.
2. Examine Opportunities and Threats
By now, you have already done the SWOT Analysis. Brainstorm more ways to maximize your opportunities and minimize your threats. In fact, you may even be able to turn your threats into opportunities.
3. Solve Problems
As part of your brainstorming process, think about solutions to prevailing problems in your organization. Ask yourself: Why are you having the problem? Why have past attempts to solve it failed or why has a resolution not been attempted until now? How can you solve the problem now? How can you prevent the problem from happening in the future?
Tools that can help here:
- Root Cause Analysis,
- The 5 Whys, and
- Appreciative Inquiry
B) Evaluate and Choose the Best Options to pursue
After brainstorming, you need to evaluate the options and choose the best ones to pursue.
– Evaluating each option in the light of the context and environment and our mission, vision, and goals. How will each option fare within the context of both the internal and external environment?
Tools like Risk Analysis, Failure Modes and Effects Analysis, and Impact Analysis can help at this stage.
– Evaluate each option on the basis of financial viability. Tools like Cost-Benefit Analysis, Break-Even Analysis, Decision Matrix Analysis, Net Present Values (NPVs), Internal Rates of Return (IRRs), and Decision Trees can be helpful here.
Choose the Best Way Forward
Strategy is choice. It is choosing to do some things and not other things. It is choosing to say yes to a few things and no to many things. Now that your evaluation is finished, choose a few key options that are best for your organization and pursue them. Make sure you don’t choose too many. Because many people are afraid of choice, they tend to choose too many options to cover all bases. What this does is avoid the hard choice and spreads our resources too thin.
** Make sure the choices you make are consistent with your organization’s mission, vision, and core values. If you need to update your winning aspiration, then definitely do it. You want to make sure that you win in an area that supports your purpose.
Stop Distinguishing Between Execution and Strategy
“Stop Distinguishing Between Execution and Strategy! It’s impossible to have a good strategy poorly executed. That’s because execution actually is strategy – trying to separate the two only leads to confusion.” Roger L. Martin,
Read these HBR articles by Roger L. Martin to know why:
Two key points to remember developing a strategy
- The planning process is at least as important as the planning document itself.
- Strategy creation is an iterative process. The planning process is never “done” — the planning process is a continuous cycle that’s part of the management process itself.
Consider establishing a Board Planning Committee to review and help guide the strategy development process.
“There are many different ways to develop a strategy. The process used depends on the nature and needs of the organization, the reason for the developing the strategy, the types of priorities faced by the organization, the rate of change outside and inside the organization, the ways that decisions are made in the organization, the expertise of people doing the strategy development, the extent of external research needed to do the strategy development, and the personal preferences of the organization’s leaders and the facilitator(s) of the strategy development process.” Managementhelp.org
DEVELOPING YOUR LIFE STRATEGY
The techniques discussed above are good for creating a strategy for your personal life, your family, your team, business unit, and your entire organization. I encourage you to start practicing by answering the following questions about yourself.
- What are your mission, vision, and goals?
- Analyze your internal and external context and environment.
- What broad trends do you see in your environment?
- How can you monitor, adapt, and exploit these external factors to help you grow?
- What capabilities do you have that set you apart? What are your core competencies?
- What is your SHAPE? SHAPE stands for Spiritual values, heart passions, abilities and talents, personality, and experiences.
- What are you passionate about?
- What talents and abilities to you have?
- What is your personality?
- What are your experiences?
- Personal SWOT analysis: What are your personal strengths, weaknesses, opportunities or threats?
- Identify, evaluate, and choose the best strategic options to pursue that match your strengths well with opportunities in your environment while minimizing the negative impact of your weaknesses and external threats.
- What are you capable of achieving if you put your mind to it?
- Who can you recruit to help you succeed?
- What are your stakeholders (people who are important to your success)
- What options do you have?
- Which of these should you focus on?
Some people call a life-strategy a life plan. I prefer the terminology life strategy because it is more dynamic. A strategy is different from a plan. Michael Hyatt and Daniel Harkavy’s book, Living Forward, provides a good place to start to create an effective “life plan”.
- G. Lafley and Roger L. Martin, Playing to Win: How Strategy Really Works
- Duane Ireland, Robert E. Hoskisson, and Michael A. Hitt, Understanding Business Strategy: Concepts and Cases, 2nd Edition.
- Aubrey Malphurs, Planting Growing Churches for the 21st Century
- Rick Warren, Purpose Driven Church
- Peri H. Pakroo, JD, Starting & Building a Nonprofit: A practical Guide
- https://hbr.org/2010/05/the-five-questions-of-strategy/ Accessed on 03/25/2015
- Michael Hyatt and Daniel Harkavy, Living Forward: A Proven Plan to Stop Drifting and Get the Life You Want
 https://hbr.org/2010/05/the-five-questions-of-strategy/ Accessed on 03/25/2015
 A.G. Lafley and Roger L. Martin, Playing to Win: How strategy really works (Boston, MI: Harvard Business Review Press, 2013) 57 – The table is a representation of information on that page.
 http://www.mindtools.com/pages/article/newTMC_09.htm Accessed on 03/27/2015