Strategic analysis and planning basics

Peter Strempel

A set of simple, widely used analytical tools can help teams and organisations analyse their strategic environments to work out whether new challenges and opportunities require new responses or changes in systems and practices.

Conducting such analyses and developing responses to the findings is often referred to as strategic planning. That terminology is often thought of as the exclusive domain of senior and executive managers, but the reality is that the methods are accessible to anyone in an organisational context.

Strategic planning does not require expensive resources, though an experienced facilitator can assist in workshopping analysis and planning. In carrying out such a function, I bring with me my full portfolio of skills, especially in Enterprise Architecture, which is a powerful strategic planning tool.

As a facilitator I am guided by the group, but can offer to lead discussion through a set of analytical tools and creative problem solving to address any new challenges and opportunities that arise from the analytical phase.

The methods described on this page include—

SWOT

SWOT diagram
FIGURE 1: A SWOT diagram showing action dimensions.

Most people are already familiar with SWOT analyses (see Figure 1 to the right).  The acronym stands for strengths weaknesses, opportunities, and threats.  It is a convenient and easy tool to use.  Just draw and quarter a square on paper or a whiteboard, and write in all the issues you can think of under each heading.

The illustration offers some generic suggestions of the types of issues that might arise.

In a team setting or workshop, the group might combine all individual ideas and list the best or most appropriate ones on a single diagram. Then consider how you will build on your strengths, capture your opportunities, address your weaknesses, and defend against, or defeat, any threats your organisation might be facing.

PESTEL

PESTEL diagram
FIGURE 2: PESTEL diagram with suggested impacts or influences.

PESTEL is an expanded version of the original PEST analysis, looking at factors in political, economic, social, technological, environmental, and legal dimensions to assess your organisation’s strategic position (see Figure 2 below).

The diagram shows your organisation at the centre, surrounded by factors that affect how your organisation can operate, compete, flourish, or decline. The idea is for you and your team to brainstorm factors for each of the categories suggested in the concentric circles that might affect your organisation in some way that could be addressed to reduce negative impacts and take advantage of opportunities.

The first order influences in the diagram include–

Political stability and policies affecting your organisation and your clients or customers.  Unstable political system always create greater uncertainty.

Economic conditions are about demand, supply, consumer confidence, and organisational budget certainties.  If the economic environment is uncertain or declining, it’s time to examine efficiencies.  If the economy is buoyant, it might be time to expand.

Social factors concern the demographics of your clients or customers: are they declining or rising; do they have spending power or not; are the demographics changing in areas like age groups? If your client or customer demographic is changing, your marketing efforts and range of services and products might have to change to keep pace.

Technological factors concern the efficiencies of industrial and process automation in your organisation and supply chain, but also among your competitors. This topic might also inlcude consideration of your client or customer use of technology to research and access or buy goods and services.

Legal factors concern regulations and compliance burdens such as licensing or tax costs, but also consumer legislation and international trade agreements.

Environmental factors could concern the natural environment, including the risks of natural disasters, changing weather patterns, carbon emissions costs, and the flow-on to insurance and the potential for more sustainable practices and products. Environmental factors could also relate to local business, social, and cultural environments.

These are only indicative examples.  Every organisation has its own particular areas of focus, risk, and opportunity.

Around these areas of influence are more complex combinations of impacts.

Political Economy refers to an overall national and international distribution of wealth as it affects your budget, profit margins, range of products and services, and the spending priorities of your clients or customers.  Similar to, but not quite the same as a mixture of economic conditions and political policies.

Socio-economic factors concern both demographic patterns, such as the change in the composition of households, and the consequent patterns of household needs, such as appliances, utilities, goods and services (consider, for instance, the difference in demand between a childless couple that may or may not be same-sex, living in a unit rather than a house, and a traditional family living in a suburban house).  Many other factors may apply under this heading.

Socio-technological factors are about the penetration of certain types of technology into the population.  Consider for example the massive shift in technology demand, supply, and service delivery since the introduction of the first iPhone in 2007.  Who would have guessed then how much business is today transacted with portable devices like phones, tablets, and even watches?

Techno-legal factors concern the regulation of technology itself, and the kinds of transactions it enables.  Consider, for example, legal requirements for privacy policies and practices, the impost of taxation at different levels for different kinds of technology transactions, and any opportunities or risks arising from technology transactions.

Risk management

Risk matrix diagram
FIGURE 3: The common risk management matrix, ordering priorities by number.

Some of the issues raised might well present you with multiple layers of opportunities and threats. To work out which of these are the most important ones to address, a risk matrix might be a good tool. Figure 3 on the right shows an example.

When using this technique, I list every influence I can identify, and then number them by priority. You can do this with risks as much as with opportunities; it is the prioritisation that gives you a list to act on.

If your list grows longer than three or four items, you might run into problems addressing them all. Keep immediate priorities short, and maintain the list of other issues for action if time and resources permit.

When doing this in a group, it is not unusual that a list of potential courses of action will include some of that appear to conflict with others, or to be mutually exclusive.  But instead of deciding on an either/or selection of responses, we want to capture all the best features of every idea mentioned.

There is a relatively simple way of doing that.

Dialectial synthesis

To combine the best of two apparently conflicting positions, Western scientists and philosophers have developed an idea often referred to as ‘dialectical synthesis’. This idea comes from various ideas about scientific enquiry and philosophical debate, as illustrated in Figure 4 below.

Dialectical synthesis diagram
FIGURE 4: dialectical synthesis works by combining the best features of diverse ideas to create a new set of ideas.

The diagram shows how ideas going back to the Enlightenment have focused on resolving apparent conflicts by adopting the best of the competing claims and arguments to create a new theory or practice.  The Thesis-Antithesis-Synthesis model is often attributed to the brilliant German philosopher Friedrich Hegel, but has its roots in English scientist Francis Bacon, and was mentioned in those words first by German philologist Johann Fichte.

The strength of the idea is demonstrated in many ways by the adaptation of Western liberal democracy to absorb and normalise ideas that were initially regarded as threats.  For example, the threat of communist dictatorship was countered by adopting social and welfare policies.

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Dialectics also works in business environments.  For example, the 1960s orthodoxy that computing is only for large organisations using mainframes and desktops was countered when innovative technology companies manufactured successively smaller computer chips to power hand-held devices. Those devices today have more computing power than was used to put men on the moon.

In summary, the above methods can be combined into a simple process any organisation at any size can take to discover and plan for its strategic environment.

I should emphasise that the methods and models shown on this page are not the only ones, and that any structured, disciplined approach to strategic planning will generate outcomes more significant than the sum of its components, because if the the people involved are led just a little, and encouraged, they will push the boundaries to discover new ideas and potential not even conceived of before the effort of analysis and planning.

What I propose as my value in this process is that I’ve done it a few times, and I can lead or moderate a group in workshops or planning forums to stay on track.

Contact me to discuss how I might help out to meet your needs.

See also my pages on enterprise architecture and knowledge management.