One of the aspects of strategy development that puts many executives off is the amount of data analysis that seems to accompany it. In most cases, however, this ‘boil the ocean’ approach simply adds to the level of work rather than to the level of insight or the quality of the final decision.
The good news is that strategy development doesn’t have to work that way.
You need neither to ‘boil the ocean’ trying to find the perfect solution or simply go with your ‘gut feel’. Focusing your analysis on your key hypotheses will help you make informed decisions with pace and confidence.
When I work with my clients I find I can increase the speed and effectiveness of the work by focusing first on the executive team’s opinions. We call these hypotheses or assumptions, but the premise is the same: if we start with an answer we usually get to a better solution faster, even if it is different to the one we started with.
The process I use is summarised in the chart above, which I call The 4A Framework. Whatever issue you are seeking to resolve the process you follow is the same:
- Frame The Issue. You do not tend to carry out an engineering survey of your home without first having a question you’re trying to answer. Yet, many strategy processes undertake analysis without any reference to specific questions. Before you begin your analysis sit down with your team and identify a list of specific issues and opportunities that you wish to better understand and resolve, and agree some specific questions. For example, a common strategy question is “How can we best grow profits in our markets?”
- Alternatives. Your next step is to set out what your broad alternatives are. Taking the question of growing profits you may quickly sketch out four alternatives: (1) Grow sales volumes, (2) Raise prices, (3) Reduce production costs, or (4) Reduce business overheads.
- Assumption. In order to focus your analysis, you should then take a view as to which alternative (or combination of alternatives) is likely to be the best solution. Using the example, you may make an initial decision that the first alternative, growing sales volumes, is your preferred way forward. You may know, for instance, that there are still many customers you haven’t reached and there are sectors of the market you don’t currently serve.
- Analysis. The critical difference between a strategy based on hope and one based on insight is the quality of the supporting analysis. The next step is therefore to ask yourself what needs to be true for you to be able to grow volumes by reaching new customers and entering new sectors of the market. Be specific. What is that you must achieve if you are to succeed, and what evidence can you obtain – from research, trials or performance data – that they are within your reach?
- Assessment. The final stage is to make an informed choice based on the analysis you’ve undertaken, balancing risk and return. If your first hypothesis does not appear to be as attractive as you first thought, you will need to consider one or more of the other alternatives, but at least you have not simply ‘boiled the ocean’ in a search for any answer.
© Stuart Cross 2012. All rights reserved.