Using Strategy Analysis to Define the Future
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Using Strategy Analysis to
Define the
Future
Strategy analysis
Strategy analysis is used to refine existing
plans, or build them if they do not yet exist.
It is a method that can be used at corporate,
business unit, and business function levels of
an organization to define clear, concise
strategic business plans, tactical business
plans or operational business plans.
"strategic is doing the right things -- tactical is
doing things right
Strategy Analysis
Managers who participate in strategy analysis
are decision makers at all organizational levels,
as well as staff who develop recommendations
for them.
It is their responsibility to ensure that business
plans are well defined and clearly understood.
By participating in strategy analysis, they use
their organizational knowledge to develop
business plans that incorporate that
knowledge.
Strategy Analysis
Strategy analysis can also be used to
develop a formal business plan rapidly if
no documented plan presently exists.
It defines the vision, mission, core
values, goals, objectives, strategies, and
key performance indicators of the
organization, and also defines business
functions and business function
accountabilities.
Strategy Analysis in Business Planning
At the corporate level, strategic business
plans provide guidance for the
organization, which comprises many
tactical business units and operational
functional areas:
• Tactical business plans are used to manage
each tactical business unit.
• Operational business plans are used to
manage operational functional areas, which
carry out many business functions.
Purpose of Strategy Analysis
It identifies business and project goals, with
business reasons for the project.
• It determines business functions to be
supported after implementation.
• It identifies technology strategies, showing how
technology can assist functions.
• It identifies business system requirements and
obtains higher management agreement that those
requirements are valid.
These specifications can all be expressed as
project goals.
Using Strategy Analysis
The Quality of Planning Statements
To be effective, a strategic plan must be clear and unambiguous.
We can test this as follows.
What is our business?
Who is the customer?
Where is the customer located?
What products or services does the customer want from us?
What does the customer consider as value?
What is the customer prepared to “pay”?
What will the business be, in the future?
What should the business be, in the future?
What is the key strategic thrust?
The Steps of Strategy Analysis
Strategy analysis has nine steps, These steps define the high-level horizontal slices
of the Zachman framework.
Step 1—Understand the mission and purpose.
Step 2—Identify the major business areas.
Step 3—Determine what has to be achieved.
Step 4—Identify issues representing opportunities or problems.
Step 5—Determine what will achieve or resolve the issues.
Step 6—Define Key Performance Indicators (KPIs).
Step 7—Identify the current functions that exist.
Step 8—Allocate functional responsibility to implement strategies.
Step 9—Define job responsibilities for each function.
Step 1—Understand the Mission and
Purpose
To understand the mission and purpose, we must
be aware of the environment in which the
organization operates and how the environment
will change in the future.
and how it will get there. It is the organizing
force behind every corporate decision.
Core values are factors that are important drivers
of decisions or activities. These can be
incorporated in the mission statement.
Step 1—Understand the Mission and
Purpose
It should clearly express:
• What the business is doing now;
• What is happening in the environment;
• What the business should be doing in
the future
• It should broadly indicate markets,
customers, products, and services.
Step 1—Understand the Mission and Purpose
Step 2—Identify the Major Business
Areas
From the understanding of the mission gained from Step 1, we will now analyze its
focus further to identify major business areas that should be involved.
These are based on the organization structure, as indicated by the Who column for the
Planner row [C4R1]
These nouns should enable us to determine what parts of the business are involved. For
example:
Develop, deliver, and support products and services which satisfy the needs of
customers in markets where we can achieve a return on investment of at least 20%
within two years of market entry.
Step 2—Identify the Major Business
Areas
Step 3—Determine What Has to Be
Achieved
Step 3 focuses on identifying and refining goals.
This depends on the policies set by management, which define “the rules of the
game.”
Policies are qualitative guidelines that define
boundaries of responsibility in the
organization;
Goals are typically layered hierarchically and
are made up of principal goals and
contributing key performance indicators (KPIs)
or CSFs.
Step 3—Determine What Has to Be Achieved
Goals and objectives are measurable targets. To
be measured, they must of course be quantitative.
They have three characteristics—measure, level,
and time:
• The measure defines what performance indicator
will be used for measurement.
• The level indicates what result value must be
achieved.
• The time specifies when that result should be
achieved.
Step 3—Determine What Has to Be Achieved
The statements they developed for the asset
growth, profitability, market share, and market
analysis CSFs
• Asset growth: “Monitor performance of all aspects
of our business so that each activity has a favorable
effect, directly or indirectly, on our mission ROI.”
• Profitability: “Monitor financial performance of
all activities to ensure that profit and cash flow
projections are achieved according to, or ahead of,
plan.”
Step 3—Determine What Has to Be Achieved
Market share: “Achieve the targeted
annual market share (expressed as …)
for the chosen market segments of
XYZ.”
• Market analysis: “Analyze existing and
emerging markets on a regular basis, to
assess market growth, potential market
size, and potential market competition.”
Step 4—Identify Issues Representing
Opportunities or Problems
When we know problems or threats that are barriers to,
or that impede, the achievement of goals—or when we
are aware of the opportunities or technologies that
enhance or facilitate their achievement—we can then
determine the most relevant strategies to follow for
those goals. Known as issues.
Issues can be internal or external to the organization.
As well as defining issues in this step, we can also list
the organization’s strengths and weaknesses.
Step 4—Identify Issues Representing
Opportunities or Problems
Profitability
“Monitor financial performance of all activities to
ensure that profit and cash flow projections are
achieved according to, or ahead of, plan.”
Issues:
Delayed financial reporting; poor financial control
High interest costs; poor cash flow management
Poor budget control
Step 5—Determine What Will Achieve or
Resolve the Issues
With this knowledge of issues (strengths, weaknesses,
opportunities, and threats) we have an agenda. We
know what has to be corrected or protected—this is
reactive.
We know where we should focus our strengths to
achieve opportunities or take advantage of
technologies—this is proactive.
The tendency of most organizations is to address their
problems to protect themselves against their threats
and correct their weaknesses. This reactive approach
places the organization at a disadvantage; at best it
will equal its competitors, not better them.
Step 5—Determine What Will Achieve or
Resolve the Issues
Instead the emphasis should be to identify
strategies that will realize the opportunities,
using technologies and strengths as competitive
weapons.
This proactive approach will enable the
organization to gain the initiative.
It can diminish the impact of problems,
threats, or weaknesses so that they are less
important.
It leads to aggressive strategies that focus on
competitive advantage.
Step 5—Determine What Will Achieve or
Resolve the Issues
We will now ask the XYZ managers to review each issue
listed in Step 4. They should ask the following questions for
each point discussed in that step:
What should we do to take advantage of the
opportunities?
What technologies are available to assist us?
What strengths can we use to help us?
What has to be done to resolve the problems?
What should we do to protect ourselves from the
threats?
What should we do to correct our weaknesses?
Step 5—Determine What Will Achieve or
Resolve the Issues
Step 6—Define Key Performance Indicators
A goal or objective statement must define the
performance measure clearly.
But rather than change the wording of level or time
for each change, we will instead cross-reference the
statement to key performance indicators (KPIs).
We will use KPIs to express the level and time.
Changes in either or both of these only need to
reference the relevant KPI.
KPIs cannot only be used to define goal achievement,
but also can monitor the effectiveness of strategies.
Step 7—Identify the Current Functions That
Exist
The refined strategic plans for XYZ are now
taking shape. But these plans are pointless
unless their implementation is well managed.
Specific managers must be given this
responsibility.
The final steps of strategy analysis focus on
assigning implementation responsibility for these
planning statements to relevant parts of the
business.
Step 7—Identify the Current Functions That
Exist
We first must be aware of the current functions.
We need to identify or define function responsibilities independently of how the
organization is currently structured. The managers provide us with a list of the current
functions of XYZ:
Corporate;
Finance;
Forecasting;
Marketing;
Sales;
Research and development;
Production;
Purchasing;
Personnel.
Step 8—Allocate Functional Responsibility
to Implement Strategies
This step helps us to establish action
plans for strategy implementation.
It allocates responsibility for
achieving goals and KPIs. A matrix is
developed, with each strategy on a
separate row and each function listed
as a column heading.
Step 8—Allocate Functional Responsibility
to Implement Strategies
Step 9—Define Job Role Responsibilities for
Each Function
Step 9—Define Job Role
Responsibilities for Each Function
The business function–strategy matrix in
Figure 3.6 also allows job role
responsibilities for each function to be
identified.
This is used to document the
responsibilities for each manager
appointed to a job role to manage these
functions.
Benefits of Strategy analysis
Strategy analysis is used to:
• Define business goals, issues, and
strategies.
• Address identified problems and
opportunities.
• Establish strategy and technology
requirements.
• Define functional responsibility and
accountability.
Benefits of Strategy Analysis
Strategy analysis is easy to learn and
use, yet it is quite rigorous.
It normally requires 3 to 5 days of
planning sessions by managers in a
business planning workshop to
develop tactical business plans in an
organization.
Benefits of Strategy Analysis
Produces clear, performance-based statements of policies, goals,
objectives, strategies, KPIs, and action plans (tactics).
• Implements business plans at all management levels.
• Produces a clear definition of quantitative goals and objectives.
• Defines KPIs for performance measurement of changing goals.
• Defines strategies to address opportunities and resolve issues.
• Defines objectives or KPIs so that strategies can be implemented
correctly and in a timely fashion.
• Defines tactics for implementation of plans at lower levels.
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