Analyzing before strategizing: the litmus test for profitable growth
(As originally published in Business in Vancouver, 6 March 2012)
By Vincent Bryant, Leader, Performance Improvement Advisory Services, EY
Attracting and retaining customers and motivated employees, managing growth, improving margins and providing substantial returns for investors are multidimensional challenges facing Canadian companies this year. Add regulatory compliance, environmental impacts and global economic volatility to the mix, and building a strong evidence base and engaging key employees prior to making strategic decisions has never been more important.
Executive teams are constantly challenged to deliver more for less, improve resource utilization, maintain market differentiation, drive out inefficiencies and maximize opportunities for growth. But where to start? Adopting an effective strategy development process not only allows companies to objectively assess the challenges they face, it also helps them implement their strategic decisions and to build momentum within their business; collecting high-quality evidence is the first step to executing a successful strategy.
Too often, companies’ strategic decisions are based on insufficient, incomplete, subjective or low-quality information or on preconceived and hard-wired assumptions about the business and its industry. To avoid the “we don’t know what we don’t know” trap, companies can adopt simple-to-use analytical tools to produce relevant and objective evidence to encourage teams to participate and buy in to their company’s strategic plan. Most importantly, these tools can help teams understand their priorities and how they are able to contribute to the achievement of their company’s strategic goals. Achieving these two fundamentals should shape any company’s information-gathering and strategy-development processes.
Companies often unintentionally separate analysis and planning from execution — the strategic planners from the operational doers — when, in fact, these two parties should be joined together from the get go. Companies that separate analysis from execution risk developing a strategic plan that adds little or no value to their business. That’s why it’s important not only to perform analysis but to link it to your company’s execution strategy from the outset. Analysis is the means to an end — the end being a successful execution.
Taking a proactive approach to analysis can equip employees with the necessary information to think differently about their company’s market, sources of disruptive innovation, changing customer needs, competitor activity, economic trends and key customer segments. And that prevents disappointment, or worse — failure.
PESTLE (political and policy, economic, social, technological, legal and environmental) and SWOT (strengths, weaknesses, opportunities and threats)analysis are two well-established tools that enable teams to take a macro view of their external environment and internal business in order to identify potential areas of growth, profit improvement and operating model developments.
At the same time, these tools can highlight external risks and dependencies and bring to light areas that require more detailed attention. Take a significant supply chain weakness such as the high cost of supply against an industry benchmark or a high operating ratio compared to budget.
By performing a SWOT analysis, companies can identify problems such as these and dedicate their resources to determining the root cause of the weakness. On the external side, a PESTLE analysis may highlight the need to invest in mobile channels or focus on an emerging customer segment.
Above all, analysis provides decision-makers with a comprehensive assessment of what they need to do to best create and exploit market opportunities, understand and manage key risks and build a cost-effective operating model to deliver customer value to their target segments.
Sharing these tools throughout your company in facilitated sessions or workshops that provide a combination of leading-practice guidance, relevant research and constructive challenge can encourage participants to move out of their organization silos and apply their knowledge in innovative and thoughtful ways.
Strategy development is a great opportunity to identify latent potential within a company’s external market and internal business in order to build the collective knowledge of their talent pool. And in today’s competitive market, companies only stand to benefit from analyzing before strategizing — a process that can be a powerful catalyst for change and a crucial step towards successful execution.
Vincent Bryant leads EY’s Vancouver Performance Improvement Advisory Services team and teaches on the subjects of strategy execution and business transformation on the Executive Education Program at the UBC Sauder School of Business in Vancouver.