Academics and consultants have developed a lot of strategic planning tools and strategic planning models to help business owners and managers to develop better strategies that win in the marketplace.
As my differentiation blog develops, I will be introducing more and more of these strategy models but the purpose of these page is to provide an overview of the strategy tools and to give you easy access to more detailed information. (This article was originally posted on my Differentiate Your Business blog which has closed after it was hacked.)
Why Strategic Planning Models & Tools Are So Useful
- Strategy models provide a common focus point for discussion. The best strategies come of from the insight of applying the strategy tools and the discussions that happen within the management team and not as a direct result of using the planning model.
- Strategy models provide a common reference point. You can see a set of conditions or even a particular symptom and you can relate it back to the rest of the strategy model to understand more about what is happening at the moment, what is happening and perhaps what will happen.
I want to be clear, the strategic planning tools are not the end in themselves, they are a way to help you to reach your main objective, developing a strategy that creates a competitive advantage so you achieve your goals and beat your competitors.
As you work through the strategy models, you are looking for insight on how you can improve and leverage the Six Step Profit Formula.
Perhaps the attractiveness of your market is moving in a way that will demand a response from you (good or bad)?
Or is what it takes to win in the market changing as customers needs, wants and priorities change?
Or is perhaps there a better way to create the customer value appearing on the horizon? If you can get to it first, before your competitors, than you have the opportunity of a significant competitive advantage.
Popular Strategic Planning Models Tools
Strategy models and tools come in a variety of different sizes and situations:
- Models to help you to understand your strategic environment
- Models to help you to establish competitive advantage
- Models to help you to assess your strategic direction
- Models to help you to implement strategy
- Models to help you to assess your overall strategy.
Strategic Planning Models To Help You To Understand Your Strategic Environment
The most famous strategic planning models and tools to look at the winder industry and economic environment are:
Michael Porter’s Five Forces
This is perhaps the most famous strategy model as it takes an industrial economics based approach to understanding what makes an industry attractive or unattractive.
Michael Porter Five Forces – this summary links through to more detailed explanations of the five forces.
For wider environmental scanning and for understanding how the five forces may change in the future, the versions of PEST analysis are very helpful. To confuse things there are slightly different acronyms – PESTER (the one I tend to use), PESTEL, STEP
One strategy consultancy combined the five forces and PEST analysis strategy models to create a SKEPTIC which I thought was clever.
The Life Cycle Model
A strategy model to show you general trends of evolutions from beginning to end.
Probably its most famous version is the product life cycle which goes through the introduction, growth, maturity and decline stages which can be useful for thinking about demand trends.
It can be widened from products to industry life cycles where a new product creates a new industry with a repeat of the main stages and with an extra stage squeezed in between growth and maturity – shakeout.
I’ve also widened out the life cycle model to look at underlying customer / consumer needs. There may be a personal computer industry at the moment but it is currently the best way to solve the customer need of creating, sharing and managing information.
Strategic Planning Models To Help You To Establish Competitive Advantage
Rivalling the Five Forces as the most famous strategy model is another from Michael Porter, the generic business strategies of competitive advantage:
- Lowest cost
The Value Chain
In his follow up book, Competitive Advantage, Michael Porter introduced the value chain for helping managers to analyse and build competitive advantage based on low cost or differentiation.
As an extension of Porter’s generic strategies, the value disciplines – operational excellence, customer intimacy and product innovation – are an interesting alternative strategic planning model.
Fore more details see the Value Disciplines
Customer Value Maps
Strategy as positioning becomes much clear if you map out the relationship between perceived customer value and price.
For more details see Customer Value Maps and the general concept of customer value.
Strategy Canvas or Customer Value Attribute Maps
Customer value and the entire concept of differentiation gets a lot more specific when you use what the authors of Blue Ocean Strategy call a strategy canvas and I call a customer value attribute map. This strategy tool makes clear the critical dimensions that you’re competing on and the relative performance of your business compared to competitors.
For more details see Strategy Canvas
Key Success Factors
One of the important characteristics of good strategy is focus and working on your key success factors, key factors of difference and your critical success factors gives you that focus.
Fore more details see Key Success Factors
Strategic Planning Models To Help You To Assess Your Strategic Direction
Competitive Advantage Matrix
While competitive advantage is the goal of strategy, some industries are much more amenable to creating strong, sustainable advantages than others.
For more details see Competitive Advantage Matrix
Bowman’s Strategy Clock
You can get a very clear understanding of where you are using the customer value strategy models and the strategy clock helps you to consider the options of where you can move to in the future.
For more details see Strategy Clock
Ansoff Growth Matrix
This strategic planning model is a 2 x 2 matrix looking at existing and new customers and existing and new products to map out a way to grow the business.
For more details see Ansoff Growth Matrix
SWOT analysis is a strategy tool which can be used independently or it can be used to gather and communicate the outputs from all the other different strategy models.
For more details see SWOT analysis
Few businesses are “pure” with a focus on one product-market so while portfolio based strategic planning models are usually seen as corporate strategy tools, I think they can be useful for:
- looking at the standard recommendations
- competitive intelligence and the pressure your competitors may be facing if part of a group. I’ve certainly worked for subsidiaries that were not regarded as core to the group’s future and had their investment rationed.
For more details see BCG Growth Share Matrix – not yet written
I’m planning to start with the most famous and then cover McKinsey/GE and the A D Little variations of the portfolio planning strategy models.
Strategic Planning Models To Help You To Implement Strategy
McKinsey 7 S Framework
Strategy consultants McKinsey developed the 7 S model to help focus attention on all the issues needed for strategic change.
For more details see McKinsey 7 S Framework
The Balanced Scorecard
Very popular performance management system which has become a key tool for implementing strategy throughout a business.
For more details see The Balanced Scorecard.
Strategic Planning Models To Help You To Assess Your Overall Strategy.
The SPACE Matrix
This is one of my favourite strategic planning models is useful at the start of the strategy planning session and at the end to sense check your strategic decisions. It is the Strategic Position & Action Evaluation matrix, better known as the SPACE matrix.
For more details see SPACE Analysis
What Strategic Planning Models Are Missing Or Which Do You Find Most Useful & Insightful?
My blog and main interest in strategy is in competitive strategy and not corporate strategy, so I won’t be covering many of the corporate strategy models unless I think they can be used to provided guidance at the business level.
What strategy tools have I missed?
Which strategy models do you find most useful and insightful?