Last week, I shared the outline of my 6-Day Strategy process, which gives a fast, focused but robust approach to setting a compelling strategy for your business. The first question that any strategy review needs to answer is, “What is happening here?” and so the first step in the process is to understand your current position.

A good, honest diagnosis of your current and possible future situation is essential to the creation of a coherent and pragmatic growth strategy. In turn, this requires an open, honest and, as far as possible, fact-based assessment of your current performance and underlying performance drivers.

Ideally, you also need representation and input from across your business in the room and, if you’re the leader of the business, you’ll need to put your own views and thoughts to one side to start with – so that you don’t overly influence the discussion – and focus first, instead, on listening to others’ feedback and evidence.

The chart, below, is called the Strategic Position Assessment (SPA) and sets out the two key dimensions of your strategic health: the attractiveness of your markets and the strength of your competitive positions. As suggested by the chart, it is generally better to be advantaged in a poor market, than disadvantaged in a great market. Consequently, while you want to find attractive markets to operate in, the key to strategic success is building competitively advantaged businesses.

You can complete an SPA for your company by taking the following steps:

  1. Split your company into its separate business segments. A separate segment exists where it is a significantly different product, group of customers or competitor set. You will probably find that you have more segments than you thought. One company I worked with, for instance, ran three operating divisions, but when we’d finally segmented the business, we found that it operated 17 different segments!
  2. Rate the attractiveness of each segment’s market. You can do this by rating each of these four aspects of your market and then coming to an overall conclusion:
    • How large is the market? A £1 billion market is a lot more attractive than a £10 million market.
    • How profitable is the market? Does an average player make a reasonable profit and has the trend in profitability in the market been growing or declining in recent years?
    • What is the forecast growth rate for the market? Again, a market growing by over 5% annually, is more attractive than a market that is stagnant or in decline.
    • How attractive is the structure of this market? Is it easy or difficult for new players to enter the market? Is there over- or under capacity in the market? What is the balance of power between players in the market and their customers and suppliers? What is the threat to businesses in the market from new products, services and technologies?
  3. Determine the competitive position of each of your segments. Again, you can split this question into sub-questions to help you make an overall assessment:
    • What is the segment’s share of sales in its market? Are you a big player or a bit-part competitor?
    • What is the segment’s share of profits in its segment? You may find the answer to this question is very different from the answer to the first question!
    • Is the segment growing its sales and profits? And is it doing so faster or slower than the overall market?
    • What do customers think of you? And what is their level of loyalty? You should consider both customers and non-customers as you answer this question.
    • How good are the other key competitors in this market? Are they becoming stronger or weaker? Who is growing quickly (even if from a low base) and what threats do they pose?

Many of you will have good information to complete this work: financial reports, customer surveys, market assessments and competitor analyses. If you do, great. But even if you don’t, I’ve found that an honest and robust discussion of the questions I’ve outlined lead to new insights and understanding.

Whether you have good data or not, once you have taken both these steps, you can then plot each of your segments on the Strategic Position Assessment chart. The chart below is based on the results from one of my clients and the level of sales for each segment is shown by the size of its ‘bubble’. We also compared each segment’s current position to its position a few years earlier. That way, we were able understand and assess shifts and trends in performance and strategic position.

Developing the SPA will have developed a lot of discussion, but, once complete, you will need to set out the key issues and opportunities resulting from the analysis. Some will be very specific – How can we radically improve the competitive position of Segment C? How can we do more to accelerate the growth of the advantaged Segment B? – while others will result from taking a broader view, e.g. What options do we have for managing our relatively large number of disadvantaged segments?

Finally, once you’ve completed your long list, determine your short list of key strategic issues and opportunities. These are the critical challenges (both negative and positive) that, once addressed, will have the biggest impact on the future success of your business.

That’s the first step complete. But you’re not quite ready to dive straight into developing your strategy. Next, you will need to think through the future possibilities for your business, its customers and its markets. I’ll share a blog post on this second stage of The 6-Day Strategy with you very soon.

If you would like more ideas on developing and delivering growth strategies that work, please just download my free e-book, How To Be A Strategic Leader

It has 15 powerful lessons and a whole load of practical ideas and tools to help you and your team develop, lead and deliver high-value strategies.

© Stuart Cross 2020. All rights reserved.