Bain Business Article: Strategy Development with Value Innovation ...

To develop a robust business strategy, businesses must follow a strategy development process that starts with a agreed upon set of beliefs around its current situation and identified strategic challenges. The next steps , on a high level, include forming what the future vision of the organization is and then going into the details of planning how to get to that state. To properly gauge and analyze your strategic challenges, you must begin with a comprehensive current state understanding of your situation. Proper strategy development involves more than a focus on maximizing profitability. Strategy is about value innovation, strategy is about selectivity, and strategy is about business agility.

Strategy development process has evolved through 5 key stages over the years. Strategy development started with a focus on financial planning in the 1950s, moving to sustainable planning in the 1960s, to strategic planning in the 1970s and eventually to a focus on strategic management in the present day. Changes to strategic mindset represent a changing landscape, new thought leaders, and emergence of disruptive technologies and changes. A lot of competitive strategy is also hinged on ideas in the 1970s, where the focus was around thinking strategically to out maneuver competition and the business frameworks of alternative strategies, portfolio analysis, and the BCG Growth Share Matrix were developed. In the current day, the strategic development theme is on integrating strategic planning and implementation with a stress on the key concepts of core competencies, strategy planning and execution, and balance scorecard analysis.

Today, there are two pillars around strategic management. Henry Mintzberg opts for an organization, bottom-ups approach to drive the strategy development process that adheres to organizational configuration. Mintzberg also advocates a transformation of business practices, where management recognizes the need and has the ability to manage organizational business operational transformation. In organizational configuration, the organization engages in behaviors based on adaptation to business surroundings.

Within the strategy development process, it is always critical to conduct rigorous market analysis. There are also a number of market place analysis variables, including market size development, pricing changes, product development, market place characteristics, market force structure, and historical trends. Understanding how to do a market analysis involves supply analysis and demand analysis, which includes segmentation and segment analysis, understanding consumer buying behavior, and trend analysis. Proper business market analysis involves defining the market and the study scope, understanding the core industry issues, and planning effectively. It is important to understand what makes a market unique, such as a high degree of regulation, high industry fragmentation, and importance of R&D. There are a number of market ecosystem-based evaluation variables, including ones that are socio-demographic, economic, political, technological, and current trends.

A critical exercise used in strategic planning is scenario analysis. Oftentimes, the scenario planning process is performed in a workshop environment, where decision makers, upper management, subject matter experts, and third party consultants, are gathered in a 4 day off-site conference to decide on various future state situations. Scenario planning is also called scenario thinking and scenario planning analysis. Scenario planning is used to help businesses plan for and make flexible future estate strategic plans. An important task in the scenario planning framework is defining the primary axes of uncertainty within the context of a scenario map.

Strategic thinking of modern business organizations has been shaped by military strategists since the beginning of organized warfare. Sun Tzu preached to know and attack the enemys strategy. In Sun Tzus Art of War, he wrote about five fundamental factors in military strategy and each of these factors can be directly translated to terms of business strategy. Sun Tzus thoughts about the factor of terrain, if we were to take that into the context of companies competing today, translates to markets, industry structures, market positions, and Porters Five Forces. Sun Tzu hinted at indirect strategies when he said that winning without fighting is the highest of skill on the battlefield.

Joseph Bower believes that the strategic planning and financial budgeting process is at the heart of the strategy development process. Resource allocation based strategy planning and budgeting is a bottoms up driven way to identification and selection of business priorities. Organizational context is comprised of organizational governance and the org structure, basis of performance metrics and incentives, and the managers core beliefs and strategic frames. Bower defines strategic intent as the observable and communicated official strategy. Capital market context is also broken down, which is defined as demands and influence of sources of capital, such as funds. Within the RAP business framework, when we look at market context, we are evaluating the demands of those customers that make up the major sources of revenue, as well as technological development. This framework is called the Resource Allocation Process RAP business framework.
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