strategy

Strategic Thinking
Strategic Thinking Jonathan Poland

Strategic thinking is the process of considering the long-term direction and needs of an organization, and developing plans and strategies to achieve its goals. It involves analyzing the organization’s strengths, weaknesses, opportunities, and threats, and making decisions about how to allocate resources to achieve its objectives.

There are several key components of strategic thinking:

  1. Vision: This involves defining the organization’s long-term goals and aspirations. It requires leaders to think creatively and consider what the organization could achieve in the future.
  2. Analysis: This involves analyzing the organization’s internal and external environment to identify strengths, weaknesses, opportunities, and threats. This helps leaders understand the context in which the organization operates and the challenges and opportunities it faces.
  3. Strategy: This involves developing plans and strategies to achieve the organization’s goals. It involves identifying the resources needed, the roles and responsibilities of different team members, and the timeline for implementation.
  4. Implementation: This involves putting the strategies into action and allocating the necessary resources. It requires strong leadership, clear communication, and a commitment to continuous improvement.
  5. Evaluation: This involves regularly monitoring and reviewing progress to ensure that the strategies are on track and achieving the desired results. If necessary, the strategies should be revised and adjustments made to ensure success.

Effective strategic thinking requires the ability to think creatively and critically, to analyze and interpret complex information, and to make informed decisions. It helps organizations align their resources and efforts towards a common vision, and can lead to increased efficiency, competitiveness, and success.

Strategic Planning Techniques
Strategic Planning Techniques Jonathan Poland

Strategic planning is the process of defining an organization’s direction and making decisions on allocating its resources to pursue this direction. It involves setting goals, analyzing the competitive environment, and identifying external and internal factors that are favorable or unfavorable to achieving the goals. Effective strategic planning requires strong leadership, clear communication, and a commitment to continuous improvement. It helps organizations align their resources and efforts towards a common vision, and can lead to increased efficiency, competitiveness, and success. The following are techniques that are commonly used to plan a strategy.

Benchmarking
Benchmarking is the comparison of your metrics with a competitor or industry average. For example, a firm may consider how much its spending on innovation or technology relative to its industry.

Budget Planning
In many cases, strategy formation is closely tied to an annual or quarterly budget planning process.

Business Analysis
Validating the assumptions that underlie your strategy with business analysis techniques such as voice of the customer or statistical analysis.

Business Cases
A business case is a formal proposal for a strategy that includes analysis of benefits, costs and risks.

Business Models
A business model is the framework that an organization uses to capture value. In most cases, a strategy adds products, services and capabilities to an existing business model. Occasionally a strategy may also seek to transform a business model or enter new industries.

Business Plans
A business plan is a proposal for a major new initiative such as entering a new market or transforming a technology platform. Business plans are most typically targeted at investors in new businesses but can be developed internally where due diligence is required.

Capability Analysis
Describing your organization as a set of capabilities and identifying gaps that represent a competitive weakness or new capabilities that represent a potential advantage.

Competitive Intelligence
The practice of gathering information about competitors, markets, products, industry trends and customers. Competitive intelligence is a fundamental input for strategy planning.

Estimates
Developing preliminary estimates for strategic plans using a high level estimation methodology such as reference class forecasting.

Financial Analysis
Analysis of financial metrics such as return on investment and payback period.

Forecasting
Strategy planning often requires forecasts such as predictions of market demand.

Goal Planning
A goal is a desired outcome. Strategy is primarily driven by goals in the context of the opportunities and threats that exist in the market. It is common to define goals as a starting point of strategy planning.

Goal Setting
Goal setting is a means of strategy implementation that sets goals for your organization, departments, teams and individual contributors.

Management Accounting
A collection of accounting techniques that support management decision making and optimization.

Market Analysis
An analysis of market conditions such as size, growth rates, demographics, influencers and trends. Important to industries such as technology and fashion that experience a high rate of market driven change.

Mission and Vision
Mission and vision are fundamental statements of why you exist and where you are going. Organizations with a strong sense of identity and purpose tend to develop more effective strategies.

Prioritization
In most cases, an organization develops far more strategies than it’s possible to execute due to constraints such as budget and time. As such, prioritization is a critical strategy planning step that decides what gets done. A strict ranking of priorities typically achieves more than a rating system.

Risk Identification
It is common for strategy planning to involve early phases of risk management such as risk identification with estimates of impact and probability.

Scenario Planning
Scenario planning is the practice of planning tactics in advance.

Strategic Drivers
Strategic drivers is a broad term for everything that influences a strategy including mission, vision, goals, values, principles, competition, regulations and markets. Listing out strategic drivers is a basic step in strategy formation.

Structured Decision Making
The use of a process for strategic decision making such as steps that allow your entire organization to provide strategy proposals with a system of prioritization and approvals.

Structured Planning
The use of a process for strategic planning that might include information gathering, strategy formation, estimation, business cases, reviews, decision making points, budget approvals and goal setting.

Swot Analysis
An evaluation of current strengths, weaknesses, threats and opportunities.

Target Operating Model
A vision for the future capabilities of your organization.

Mission Statement
Mission Statement Jonathan Poland

A mission statement is a statement of purpose that defines the goals and values of an organization. It is a statement of what the company stands for, and what it aims to achieve. A mission statement should be clear, concise, and memorable, and should provide a sense of direction and purpose for the company and its employees.

The importance of a mission statement cannot be overstated. It serves as a guiding principle for the organization, and helps to define its values, goals, and purpose. A mission statement helps to communicate the company’s vision and direction to employees, stakeholders, and customers, and helps to create a sense of purpose and meaning within the organization.

There are several key elements that should be included in a company mission statement. These include:

  1. Purpose: A mission statement should clearly articulate the purpose or reason for the company’s existence. This should go beyond just making a profit, and should include a sense of social or environmental purpose.
  2. Values: A mission statement should reflect the values and beliefs of the company. These values should guide the company’s actions and decision-making.
  3. Goals: A mission statement should outline the company’s goals and objectives. These should be specific, measurable, attainable, relevant, and time-bound.
  4. Customers: A mission statement should identify the company’s target customers and describe how the company aims to meet their needs.
  5. Differentiation: A mission statement should differentiate the company from its competitors and explain how it is unique.

In order to create an effective mission statement, it is important for a company to carefully consider each of these elements and create a statement that reflects the company’s values, goals, and purpose. A mission statement should be reviewed and updated periodically to ensure that it remains relevant and aligned with the company’s direction.

Overall, a company’s mission statement is an important tool for defining the purpose and direction of an organization. By clearly articulating its values, goals, and purpose, a company can create a sense of meaning and purpose for its employees and stakeholders, and differentiate itself from its competitors.

Capability Analysis
Capability Analysis Jonathan Poland

Capability analysis is the process of evaluating the capabilities of an organization, system, or process in order to identify its strengths and weaknesses. This analysis helps organizations understand their current capabilities and identify areas for improvement in order to meet the needs of their customers, stakeholders, and other relevant parties.

There are several approaches to capability analysis, including SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis, gap analysis, and benchmarking. These approaches involve identifying and analyzing various factors that can impact an organization’s capabilities, such as its resources, skills, processes, and technology.

SWOT analysis involves evaluating an organization’s internal strengths and weaknesses, as well as external opportunities and threats. This can help organizations identify areas where they have a competitive advantage or disadvantage, and identify opportunities for improvement or areas of potential risk.

Gap analysis involves comparing an organization’s current capabilities to its desired state or target capabilities. This helps organizations identify the gaps between their current and desired capabilities, and develop a plan to close those gaps.

Benchmarking involves comparing an organization’s capabilities to those of its peers or competitors in order to identify areas of relative strength and weakness. This can help organizations identify best practices and areas for improvement.

Capability analysis can be a valuable tool for organizations seeking to improve their performance and achieve their goals. By understanding their current capabilities and identifying areas for improvement, organizations can develop strategies to enhance their capabilities and achieve success.

Here are some examples of capability analysis:

  1. A company conducts a capability analysis to identify its core competencies and determine how they align with its business strategy. For example, a manufacturing company may identify its capability in producing high-quality products as a key strength.
  2. A team within an organization conducts a capability analysis to identify the skills and expertise of its members and determine how they can be leveraged to support the team’s goals. For example, a marketing team may conduct a capability analysis to identify which team members have expertise in social media marketing and how that expertise can be used to support the team’s marketing efforts.
  3. An individual conducts a capability analysis to identify their own strengths and weaknesses and determine how they can develop their skills to support their career goals. For example, a salesperson may conduct a capability analysis to identify areas where they need to improve their skills, such as negotiating or closing deals, in order to advance in their career.
  4. An organization conducts a capability analysis to identify potential areas for expansion or growth. For example, a software development company may conduct a capability analysis to identify the technologies and platforms it has expertise in and determine if there are opportunities to expand into new markets.

Economic Advantage
Economic Advantage Jonathan Poland

A competitive advantage is a feature or characteristic that allows a company to perform better than its competitors in a particular market. Economic advantage refers to the underlying economic foundations that give a company an advantage over its competitors, such as access to natural resources, a skilled labor force, or favorable financing terms. Both competitive advantage and economic advantage are important for businesses seeking to differentiate themselves from their competitors and achieve long-term success. The following are a few types of economic advantage.

Economies Of Scale
The tendency for cost per unit to drop as you produce more of a product or service. Economies of scale is often due to dilution of fixed costs such as factories and shared costs such as marketing.

Economies Of Scope
Efficiencies related to offering a wide variety of products and services. Costs such as operational expenses can be shared across multiple products. It is also possible for multiple products to leverage assets such as a brand. In some cases, economies of scope is related to customer preferences for a variety of choices such as the thousands of items offered by a large supermarket.

Information Asymmetry
A situation where you have better or faster information than others in the same market or industry.

Absolute Advantage
The ability to produce more than your competitors with each unit of resources such as labor, capital and land. For example, the ability to grow more grapes per acre of farm. Generally translates into a cost advantage.

Bargaining Power
Bargaining power is the ability to influence in negotiations. It is often related to how much you have to lose if an agreement isn’t reached. In other words, you tend to have a better position when you have little to lose.

Barriers To Entry
Barriers to entry is how difficult it is for new competitors to enter your market.

Critical Mass
The volumes needed to be efficient or for a product to catch on.

Market Power
Market power is the ability to affect the market price for a product or service. Usually restricted to large competitors that dominate a market. In some cases, the price of a major competitor acts as a price umbrella that impacts everyone in a industry.

Network Effect
The network effect is the tendency for the value of a product, service or technology to be proportional to the number of people who use it.

Switching Barriers
Switching barriers are the obstacles that your customers face to switch from your products or services to a competitor.

Economies Of Density
Locating in a dense urban environment such as in a city or within close reach of multiple cities allows more efficient access to labor, resources and customers.

Trade Secret
Trade Secret Jonathan Poland

A trade secret is a type of carefully guarded information that gives a company a competitive advantage in the market. In order to be considered a trade secret, the information must be unknown to competitors and must have the potential to contribute to the company’s future revenue. This can include things like proprietary processes, recipes, formulas, or business strategies.

Trade secrets are different from other forms of intellectual property, such as patents, which are registered and publicly disclosed. Because trade secrets are not publicly disclosed, they can provide a company with a long-term competitive advantage if they can be effectively protected from being revealed to competitors.

To protect trade secrets, companies must take steps to maintain the confidentiality of the information and prevent it from being disclosed to outsiders. This may involve measures such as limiting access to the information, requiring employees to sign non-disclosure agreements, and implementing secure storage and communication systems.

Overall, trade secrets are an important consideration for companies that want to maintain a competitive advantage in the market. By carefully guarding and protecting their trade secrets, companies can ensure that they have a unique and valuable asset that sets them apart from their competitors. The following are common types of trade secret.

Formula
The formula for a product. Some types of products, such as food are required to display ingredients on the label in most jurisdictions. However, this is usually a high level list of ingredients that leaves the exact formula a secret.

Process
A process such as a cooking process that results in an advantage such as a unique flavor.

Design
The design of a product or service. It can be difficult to keep designs secrets for long as they can typically be reverse engineered.

Methods
Methods such as an algorithm or calculation that improves decisions, operations or products.

Tools
A tool that improves work results such as a propriety design tool that improves productivity and quality.

Automation
Propriety systems and robotics that automate work to improve efficiency and quality.

Patterns
A reusable solution that applies to multiple designs, systems or processes.

Know-how
The ability to solve a problem that the competition isn’t able to solve.

Switching Barriers
Switching Barriers Jonathan Poland

Switching barriers are factors that make it difficult or inconvenient for customers to switch from one product or service to another. These barriers can take many forms, including costs, contractual obligations, risks, and disruptions to service. From a seller’s perspective, switching barriers can help prevent customers from leaving and allow the company to charge higher prices. Some companies may even intentionally create barriers to switching, such as by imposing fees or making it difficult to close an account, in order to make it harder for customers to leave.

From a customer’s perspective, switching barriers can be a source of frustration and expose them to higher prices, unfair terms, reductions in benefits, or degradation of service. In some cases, industries with high switching barriers may be subject to government regulation in order to protect consumers from unfair practices.

Overall, switching barriers can have significant implications for both buyers and sellers in a market. Customers may face barriers to switching that make it difficult for them to find the best product or service for their needs, while sellers may use these barriers to maintain their market position and charge higher prices. In many cases, it is important for customers to be aware of switching barriers and be prepared to take steps to overcome them in order to find the best product or service for their needs. The following are some common types of switching barriers.

Learning
The time and expense of learning about a new product or service. If you purchase a new type of mobile device, you need to learn its interfaces.

Integration
The requirement to get a new product or service working with everything else you own. For example, importing your data into software.

Configuration
The need to configure and customize the new product or service.

Development
The need to create things for the new product or service. For example, the need to develop software to use a new database product.

Productivity & Efficiency
A decrease in productivity and efficiency due to the process of learning and integrating a new product or service. For example, a salesperson works more slowly after switching to a new type of sales automation software.

Business Disruption
The potential for your customer services, marketing or operations to go offline as you make changes or switch over.

Risks
Risks associated with a new product or service. If you try a new shampoo, you may risk a bad hair day.

Cancellation Fees
Penalties charged by your current provider such as a cancellation fee. It is common for firms such as telecom companies to attempt to increase switching costs to retain customers, even if they are dissatisfied. Firms with high switching costs may have little incentive to improve customer satisfaction.

Strategic Advantage
Strategic Advantage Jonathan Poland

A strategic advantage refers to a position that gives a company an edge over its competitors and makes it likely to outperform them in the long term. Strategic advantages can take many forms, including a unique product or service offering, a strong brand or reputation, efficient operations, access to valuable resources or networks, and the ability to adapt to changing market conditions. Companies that have a strong strategic advantage are often well positioned to succeed in their market and achieve long-term growth and profitability.

To build and maintain a strategic advantage, companies must engage in ongoing strategic planning and analysis. This may involve assessing the company’s strengths and weaknesses, as well as identifying opportunities and threats in the market. Companies may also need to make investments in areas such as research and development, marketing, or operational improvements in order to maintain their strategic advantage. By continuously evaluating and improving their strategic position, companies can ensure that they are well positioned to succeed in the long term.

Overall, strategic advantage is an important consideration for companies that want to achieve long-term success in a competitive market. By continuously assessing and improving their strategic position, companies can gain a valuable edge over their competitors and set themselves up for long-term growth and profitability. The following are common types of strategic advantage.

Talent
The talent of your people including at the governance and executive management level.

Relationships
Relationships with stakeholders including investors, governments, partners, customers and the communities in which you operate.

Home Country
The country where you are located. For example, a lower tax rate can be a significant advantage over the competition as it allows you to invest more of your profits back into your business.

Processes
Your business processes such as a production line that produces high quality items at low cost.

Capabilities
Things that you can do. For example, a firm that is able to consistently design products and services with high perceived value.

Organizational Culture
The norms, expectations and symbols of your organization. For example, a firm where people take pride in their work.

Brand
How well your brands are recognized and your reputation.

Business Model
How you capture value. For example, a company that provides a two-sided market versus a firm that sells its own products.

Products & Services
The position, quality and unit cost of your products and services. For example, the cheapest organic coffee on the shelves.

Costs
Your overhead and unit costs. All else being equal, a firm that spends 5% of revenue on general administration has an advantage over a firm that spends 30%.

Productivity & Efficiency
The amount of output you produce for an hour of work or unit of a resource such as energy.

Knowledge
Your know-how, designs, methods and information capabilities. Includes things like intellectual property, data and the talent of your people.

Scale
A large firm tends to have more brand recognition and lower unit costs due to economies of scale. A small firm can typically change more quickly. Generally speaking, a firm that is large enough to achieve significant market share without becoming slow to change has a significant strategic advantage over both the small and the slow.

Capital
Capital including things like land, facilities, infrastructure and equipment. For example, a hotel with beachfront access to a popular beach.

Sustainability
Your ability to keep up with the changing values of society and to manage risks to your firm and the greater community.

Relative Advantage
Relative Advantage Jonathan Poland

Relative advantage refers to the extent to which a company’s product, service, or offering is superior to those of its competitors. It is a measure of the relative strength of a company’s offering compared to those of its competitors in the market. Companies that have a strong relative advantage are more likely to attract customers and achieve success in the market.

There are many factors that can contribute to a company’s relative advantage. These may include the quality and features of the company’s products or services, the value they offer to customers, their reputation and brand recognition, and the efficiency and effectiveness of the company’s operations. Companies that have a strong relative advantage in one or more of these areas are likely to be more competitive in the market.

In order to maintain or increase their relative advantage, companies must continuously assess and improve their offerings, as well as monitor the competitive landscape. This may involve conducting market research to understand customer needs and preferences, investing in new technologies or processes to improve efficiency, and building strong relationships with key stakeholders. By focusing on these efforts, companies can ensure that they are well positioned to compete in their market and achieve success.

Overall, relative advantage is an important consideration for companies that want to succeed in a competitive market. By continuously assessing and improving their offerings and monitoring the competitive landscape, companies can ensure that they have a strong relative advantage and are well positioned to attract and retain customers.

Nations
A nation that has a lower opportunity cost in a particular industry relative to other nations. For example, a nation that can produce cranberries at $4 a bag as compared to a nation that produces them at $10 a bag. Another example is a nation that produces shoes that fetch an average price of $110 when another nation’s shoes fetch $5 a pair on average.

Organizations
Business capabilities, talent, knowledge, processes, infrastructure, tools and resources that allow an organization to produce superior results in a particular area. For example, a solar panel manufacturer with the lowest unit cost at a reasonable level of quality.

Products
A product that is viewed as superior by customers such that it commands a premium price and high market share.

Services
A service that fulfills a customer need better than the competition. This can include niche advantages such as a school in Tokyo that has a strong English program relative to all local competition.

Commodities
In the case of commodity products and services, cost is the primary type of relative advantage and a producer with a lower cost may dominate the market by competing on price.

Individuals
The relative strengths of individuals in a competitive situation. For example, a job candidate with more industry experience versus a candidate that appears to be more open minded and flexible.

Service Quality Jonathan Poland

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Positive Risk Jonathan Poland

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Fixed Costs Jonathan Poland

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Implementation Jonathan Poland

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Forward Thinking Jonathan Poland

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Professional Skills Jonathan Poland

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Business Transformation Jonathan Poland

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Micromarketing Jonathan Poland

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Net Nuetrality Jonathan Poland

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