The Strategy Toolbox #3
The 13 Fundamental Building Blocks of Strategy
Building Strategic Management into Your Competitive Advantage.
Strategy Is More Than A Collection of Strategic Analyses
The terms strategy, strategic planning, or strategic management are commonly equated with numerous popular analytical frameworks such as the SWOT Analysis, Porter’s 5 Forces, PESTEL Analysis, BCG Matrix, Balanced Scorecard, and Business Model Canvas. Altogether there are more than 100 commonly used analytical frameworks along with numerous variations thereof. Although these analytical frameworks each capture important strategic insights, they are not to be confused with strategy, strategic planning, or strategic management. Undertaking various (stand-alone) strategic analyses and compiling them into a detailed plan (document) does not mean that your company has a strategy, as is unfortunately often the case.
A strategy should instead be understood as a coherent set of decisions and actions that are collectively aimed at achieving a company’s ambition and objectives. For a privately-owned company, the fundamental objective is to create shareholder value in the form of economic profits. A company may also have other strategic objectives but ultimately economic profits are necessary to ensure its long-term survival. A company’s ability to create shareholder value is effectively a function of its competitive strength which is best measured by Return on Invested Capital (ROIC).
The conventional strategy paradigm assumes that it is possible to achieve sustainable competitive advantages, which fall into two broad categories: (1) Cost leadership, and (2) differentiation. However, sustainable advantages of limited relevance in dynamic environments where companies must continuously identify and exploit opportunities to capture and create shareholder value. In practice, it is the role of strategic management is to ensure a strategic fit between the company’s external and internal (strengths and weaknesses) environments (Figure 1). The fact that companies’ external and internal environments are dynamic and unique to each company has three key implications:
Strategic management should be understood as a continuous activity rather than an annual planning exercise.
The right strategic choices should be unique to each company’s context rather than generic positional choices.
Strategic planning should include both outside-in and inside-out perspectives to achieve strategic fit.
Figure 1. The Role of Strategic Management Is to Achieve Strategic Fit.
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The 13 Fundamental Building Blocks of Strategy
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The Strategy Playbook™ is our innovative approach to formulating corporate and competitive strategies based on 13 fundamental building blocks. The building blocks are fundamental in that they are relevant regardless of the characteristics of the business. Moreover, the building blocks are disaggregated into 42 key issues, each with an associated toolbox of strategy tools and analytical frameworks which can be tailored to your context. Build strategic management into your competitive advantage with The Strategy Playbook™.
Strategic Analysis. The objective of Strategic Analysis is to form and fact-based understanding of the company’s starting premises both from external (outside-in) and internal (inside-out) perspectives. Moreover, the objective is to synthesize the findings, outline key planning assumptions incl. development scenarios, and determine the appropriate approach for strategy selection considering the uncertainty of the decision-making. The higher the uncertainty, the more flexibility should be built into the decision-making as opposed to a more programmatic approach.
Strategy Selection. The objective of Strategy Selection is to outline the company’s overall strategic direction considering its stakeholders’ interests, determine the key strategic choices, and the strategic objectives against which the company’s achievements are measured agaist. In practice, there are two fundamental strategic choices: (1) Where
strategic intent, choices and objectives which form the starting premises for Strategy Execution (Chapter 4). Strategy Selection includes four building blocks (6-9) of which the first focuses on the strategic intent, the next two on the two fundamental strategic choices – where to play and how to win? The final one focuses on the strategic objectives against which success is measured. See Figure XX for a summary of Strategic Selection and the building blocks therein.
6.Strategic Intent. The objective of the building block is to analyse stakeholder expectations and articulate the company’s mission, business vision, values and guiding principles. The strategic intent forms the overall frame of reference against which the company’s strategic choices are determined.
7.Corporate Strategy. The objective of the building block is to determine where the company wants to compete in terms of both the target business portfolio and the competitive scope per business along with the methods for developing the company’s business scope incl. M&As, partnerships and/or internal activities.
8.Competitive Strategy. The objective of the building block is to determine the company’s business model, customer value proposition and how it positions itself relative to its competitors. Moreover, analyze the strength, nature and basis of competitive advantage and outline how to sustain the advantage.
9.Strategic Objectives. The objective of the building block is to summarize the company’s strategy narrative, determine the company’s performance dashboard against which success is measured, and outline the transformation roadmap for strategy execution. This forms the basis for performance planning.
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The Strategy Toolbox is a collection of articles concerning strategic thinking, planning, and management based upon the Strategy Playbook™. New articles will be published intermittently whenever I have something to share. I hope you find these articles insightful and please feel free to share them with your fellow strategists. Please get in touch to share your comments and ideas for future articles.
Meanwhile, have a great and productive day!
Rosendahl & Co. Growth Partners is a strategic advisory with the mission of helping great leaders make great impacts. We help our clients tackle their toughest business problems concerning strategy, M&A, and business transformation e.g., growth and restructuring. We offer different collaboration models ranging from coaching and proven concepts to tailored projects and interim leadership services.