In a for-profit company, for which competition and profitability are important, your goals will differ from those of a nonprofit or government department. Likewise, objectives for a department or team will have a different scope from objectives for your organization as a whole.
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:
- Analyzing the context in which you’re operating.
- Identifying strategic options.
- Evaluating and selecting the best options.
We’ll look at this process, and review some useful tools that can help you develop your strategy.
Stage 1: Analyzing Your Context and Environment
In this first stage, you ensure that you fully understand yourself and your environment. Do the following:
- Analyze your organization
- 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.
- Analyze your environment
- Now you need to examine your current operating environment to predict where things are moving. Are there exciting opportunities that you should pursue? What future scenarios are likely in your industry, and how will these impact the work that you do?
- PEST Analysis, Porter’s Diamond, and Porter’s Five Forces are great starting points for analyzing 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.
A TOWS matrix can help you with your internal and external analysis. This framework combines everything you learned in your SWOT Analysis (TOWS is SWOT in reverse), and then applies it to developing a strategy that either maximizes strengths and opportunities, or minimizes weaknesses and threats.
- Analyze your customers and stakeholders
- Your strategy defines how you’ll win, and winning is typically framed by how well you satisfy your customers. For-profit companies must keep their customers and shareholders happy. Governments, nonprofits, 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 subpopulations can we reach cost-effectively?” and “What is our optimal Marketing Mix?”
- Analyze your competitors
- In a traditional for-profit company, 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?
- Our article on 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 in our article on 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 organizational success.
Stage 2: Identifying Strategic Options
In Stage 1, you developed an understanding of how your organization 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.
- 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 organization’s mission statement, but, depending on your role in the organization, 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 maximize your opportunities, minimize 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.
- 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 analyzed 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.
- Grid 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 organization’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 organization’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.
There’s a lot of debate and disagreement about the best way of developing a strategy. Don’t be afraid to adapt this approach to your own, specific circumstances!
It’s no good developing a strategy if you don’t implement it successfully, and this is where many people go astray.
See our articles on VMOST Analysis and the Balanced Scorecard for ways of bridging the gap between strategy development and implementation, and our Project Management section for the techniques you’ll need to use to implement strategy successfully.
Your strategy tells you how you’ll achieve success, no matter how that success is defined. And whether you’re developing a strategy at the personal, team or organizational level, the process is as important as the outcome.
Identify your unique capabilities, and understand how to use these to your advantage while minimizing threats. 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.
Steps to Cloud Computing strategy:
1. Move from issues to choices: Often this is the most difficult step in the process because if you do not correctly identify the issues that you are trying to solve, then no matter how successful the implementation of the strategy, the issue will persist. The trap is that strategic planning tends to be calendar driven and focused on things like “declining profits.” Your best option here — to ensure that you are not just investigating data — is to convert your issue into “two mutually exclusive options.” This will focus the team on what must be done next.
2. Generate strategic possibilities: Once you understand the choice, then you can move to the possibilities that you might consider. Be certain to have a broad enough range of options to ensure an inclusive range of genuinely new possibilities. The status quo ought also to be investigated as there is always the possibility that no Cloud strategy will be adopted.
3. Specify conditions: Ensure that — for the solutions being proposed — every one understand what conditions must be true for the specific option to be strategically sound. Moving someone from “that will never work,” to “what would have to be true for me to accept this offering” are completely different conversations. Even a condition like, “a provider must be able to provision a production ready server in under 5 minutes” (which is not really realistic in most enterprises because most employ work-flows that require approvals and such) should be captured at this stage.
4. Identify barriers: There is always someone in the group who is convinced that none of the options are good enough. It is important to ensure that, regardless, you identify which conditions are least likely to hold true. The reasoning behind this is that the research that must go into exploring the viability of a condition may be quite extensive – especially with complex issues; so it is important that you only focus on conditions that have a possibility of playing out.
5. Design tests: For each key barrier that you identify, it is important to devise a test that will be deemed “valid and sufficient” to garner or generate commitment. This ought to be written into the RFP as the tests need to be conducted ahead of product selection.
6.Conduct the tests: When you start to run through the testing scenarios or barriers, it is important to run through the least likely first as the testing process is the most labor and time intensive. This will allow more time for the barriers that stand a chance of making it.
7. Make your choice: Review your key conditions in light of the test results in order to reach a decision. The old approach would have two or three executives, who had already made up their minds, battling it out — which leaves the skeptics to almost immediately start to undermine the decision.