26 Feb 08 Strategy Tools: Are you using the “Killer Apps”?

There are a few tools that I use when working with clients that have the capability to deliver really highly geared results – these approaches really do change people’s attitudes about their customers, the power of their competitors and how their businesses really work. The frameworks for these tools can be found in most strategy textbooks – but the problem is that many organisations seem to just have run out of the time needed to even think about using them.

Even during the ubiquitous annual planning cycle there seems to be a temptation just to jump into creating financial targets without taking a more fundamental look at both the health of the organisation itself and what’s going on in the outside world.

Some of the “highly geared” tools that I have found are worth making time to apply include:

(a) Scenario Planning. Not as commonly used as one would expect – especially now that we’re in a more uncertain economic climate and working in a globally connected – and therefore potentially more fragile – world. Projecting a range of possible future business environments challenges the status quo, changes minds and helps to develop more resilient business plans.

To be fair, there are good reasons why scenario planning isn’t used more widely. There is a range of methodologies and traditional approaches to scenario building involve a lot of time on the part of key personnel. Just how these obstacles can be overcome will be tackled in one of my next Executive Briefings. But just taking a look at publicly available scenarios and projections can quickly change thinking. Take a look at Shell’s scenarios and the work of the World Economic Forum’s Global Risk Network to start you off.

(b) Product Portfolio Analysis. Yes, I’m talking about some of the dear old friends such as the “Boston Box” with its “Cash Cows”, “Stars”, “Question marks” and “Dogs”. The Boston Box still has its place now – emphasising in quite simple terms the need for a balanced portfolio of products and the fact that all products usually have a lifecycle. Like any tool, it’s best used in conjunction with others and I frequently apply a portfolio tool examining market prospects, internal capabilities and profitability in a year on year visual display. It’s an excellent tool to summarise the results of the various workstreams that together make up the strategy process. But these visual tools really come into their own as decision making aids and communication tools.

(c) Competitor analysis. Practically every time I take a client or a group of delegates through a structured competitor modelling workshop they admit that their view of the competition has changed as a result of the analysis. As a twist to conventional competitor profiling, take a look at the real decision makers in a competitor organisation (usually the executive directors). Read up about how long they’ve been in position, what they’ve done and importantly where they were before, what they achieved and who they may have worked for who could in turn have shaped their thinking. Now you have got inside their minds and got a grip of their personality you can second-guess the boardroom conversations.

(d) Activity based costing (ABC). I like to include simple ABC exercises when I’m helping an organisation. Yes, I know it’s an old tool, but again it’s one that may be gathering dust on the shelf. I like to understand costs and customer lifecycles – this helps me to get a view of which products and customers are the most profitable. In the vast majority of cases I find that the products and customers that managers think are making money aren’t the real contribution generators. Using the 80/20 rule, the strategy process needs to find the 20% of customers that make 80% of the profits (and the ones that we pay to do business with!).

So these are four of my “killer apps” – are you using yours?

Tags: planning tools, portfolio analysis, scenarios, strategy tools

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