Strategic Planning Frameworks … How well do you know your arenas and canvases from your disciplines and lifecycles? … Ansoff to Porter, Hofstede to Kearney, Bartlett and Ghoshal, Hambrick and Fredrickson, Treacy and Wiersema?
September 1, 2022
There are hundreds of ways to explore your market, your customer and competitive context, and your business opportunities. I can already hear a collective yawn at the words Ansoff matrix or Porter 5 forces analysis. Consultants thrive on theme, MBAs survive on them.
Some will argue that the whole idea of strategic planning just doesn’t work in a world of relentless change, volatility and uncertainty. Yet in a world of incredible challenge, there is also infinite opportunity, so make choices, while retaining an agile mindset and deployment, still matters.
Don’t a slave to box-filling frameworks, but do use them to spark curiosity and creativity, to map out a path towards a future you seek, to embrace changes all around, to create a positive debate in your teams, and the courage to move forwards.
Here’s what you should, of course, know … but its always worth bringing them together, and considering which to use:
Porter’s Five Forces Model
Michael Porter’s Five Forces model is probably the best-known strategy framework out there. It is especially used when analysing industries. The Five Forces model helps determining how competitive an industry is based on five different factors: the rivalry among existing competitors, the threat of new entrants (potential competitors), the threat of substitute products (alternatives), the bargaining power of suppliers, and the bargaining power of buyers. If these forces are strong, competition can be considered high. In that case, a company might want to think twice before entering that specific industry. According to this framework, industries with little competition allow for greater margins and are therefore more attractive to enter.
Hambrick and Fredrickson’s Strategy Diamond
Unfortunately, Hambrick and Fredrickson’s Strategy Diamond hasn’t received the attention it deserves. The Strategy Diamond is an attempt to explain what strategy truly means and is a great framework to distinguish the different elements that make up a good strategy. According to this model, a strategy consist of five essential parts that together should form a unified whole: Arenas, Vehicles, Differentiators, Staging and Economic Logic. For each element concrete and deliberate choices have to be made on what to do and more importantly what NOT to do. In addition, choices made within one element should reinforce and match choices made in the other four elements. Only that way companies can achieve a sound and sustainable strategy.
Treacy and Wiersema’s Value Disciplines
The Value Disciplines framework builds upon the key message of Porter’s Generic Strategies (i.e. companies should have a clear focus in what they want to be known for and what they want to excel in). If a comany tries to excel in multiple (often contradicting) disciplines, it is likely to end up stuck somewhere in the middle. Treacy and Wiersema propose three value disciplines from which companies can choose from in order to become a market leader: Product Leadership (the best and most innovative product offering), Operational Excellence (the cheapest products through a cost-efficient production process), and Customer Intimacy (amazing customer service and customer relationship management). Choosing each one of the disciplines has tremendous consequences on how the company should be operating in terms of structure, processes and culture.
Ansoff Matrix
There are different ways of growing a business. Igor Ansoff identified four strategies for growth and summarized them in the so called Ansoff Matrix. The Ansoff Matrix (also known as the Product/Market Expansion Grid) allows managers to quickly summarize these potential growth strategies and compare them to the risk associated with each one. The four growth strategies are Market Penetration (offering more of the existing products to existing markets), Market Development (offering the existing products to new markets), Product Development (offering new products to existing markets) and Diversification (launching new products in new markets). The idea is that each time you move into a new quadrant (horizontally or vertically), risk increases.
BCG Growth-Share Matrix
The Boston Consulting Group’s product portfolio matrix (also known as BCG Growth-Share Matrix) is designed to help companies consider growth opportunities by reviewing its portfolio of products or business units in order to decide where to invest and where to divest. The matrix is divided into four quadrants based on two factors: market growth and relative market share. The four types of business units (or products) are Dogs, Question Marks, Cash Cows and Stars. Most business units start off as Question Marks with a relatively small market share in a high growth market. Depending on how well the unit and the industry is doing, it might end up as a Star or Dog. Eventually when industry growth is flattening, the unit becomes a Cash Cow that can be ‘milked’ in order to invest in more promising businesses. The BCG Matrix is therefore a great tool for portfolio analysis and corporate strategy purposes.
Macro-level Frameworks
Hofstede’s Cultural Dimensions
Hofstede’s cultural dimensions theory is a framework for cross-cultural communication, developed by Geert Hofstede. It describes the effects of a society’s culture on the values of its members, and how these values relate to behavior, using a structure derived from factor analysis. Over the years, this study led to six cultural dimensions on which nations can be ranked: Power Distance, Individualism/Collectivism, Masculinity/Femininity, Uncertainty Avoidance, Long-term/Short-term Orientation and Restraint/Indulgence.
More information: https://www.hofstede-insights.com/product/compare-countries/
Source: Hofstede, G. (1984). Culture’s Consequences: International Differences in Work-Related Values. Beverly Hills CA: SAGE Publications.
Porter’s Diamond of National Advantage
The Porter Diamond is a model that is designed to help understand the competitive advantage nations or groups possess due to certain factors available to them, and to explain how governments can act as catalysts to improve a country’s position in a globally competitive economic environment.
Source: Porter, M.E. (1990). The Competitive Advantage of Nations. New York: Free Press.
PESTEL Analysis
Originated as PEST Analysis, this framework is used in the early phases of strategy development to describe the landscape and environment in which a firm operates (PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal). Note: It is sometimes transformed into SLEPIT (Social, Legal, Economic, Political, Intercultural, Technological), STEEPLE (Social, Technological, Economic, Environmental, Legal, Ethical) and DESTEP (Demographic, Economic, Social, Technological, Environmental, Political). This tool is especially useful when starting a new business or entering a foreign market. It is often used in collaboration with other analytical business tools such as the SWOT analysis and Porter’s Five Forces to give a clear understanding of a situation and related internal and external factors.
Industry-level Frameworks
Industry Life Cycle
Source: Porter, M.E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. The Free Press
Porter’s Five Forces
Porter’s Five Forces analysis is a framework that helps analyzing the level of competition within a certain industry. It is especially useful when starting a new business or when entering a new industry sector. According to this framework, competitiveness does not only come from competitors. Rather, the state of competition in an industry depends on five basic forces: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products or services, and existing industry rivalry.
Source: Porter, M.E. (1979). How Competitive Forces Shape Strategy. Harvard Business Review
Value Net Model
The Value Net Model is an alternative to Porter’s Five Forces and recognizes the importance of competitors’ as well as complementary products in the industry. The model focuses on the four main groups that influence a company’s direct environment: Customers, Complementors, Competitors and Suppliers. Customers and Suppliers are described in similar terms to Porter’s model. Competitors however entails the Existing Rivals, New Entrants and the Substitutes in this model. The Complementors are a new element to the model.
Source: Brandenburger, A.M. & Nalebuff, B.J. (1996). Co-Opetition: A Revolution Mindset that Combines Competition and Cooperation. Crown Business.
Corporate-level Frameworks
Acquisition Integration Approaches
This framework distinguishes four different approaches to Acquisition Integration or Merger Integration depending on a company’s need for Strategic Interdependence between the acquirer and the target firm and the need for Organizational Autonomy: Preservation, Symbiosis, Holding and Absorption.
Source: Haspeslagh and Jemison (1991). Managing Acquisitions: Creating Value Through Corporate Renewal
A.T. Kearney Strategic Chessboard
A.T. Kearney proposes four distinct strategic approaches using these two dimensions—predictability and a company’s ability to shape or adapt to its industry.
More information: http://www.atkearney.com/paper/-/asset_publisher/dVxv4Hz2h8bS/content/playing-on-the-new-strategy-chessboard/10192 or https://www.kearney.com/strategy-and-top-line-transformation/article?/a/the-a-t-kearney-strategy-chessboard
Source: A.T. Kearney (2010). Playing on the New Strategy Chessboard.
BCG Growth-Share Matrix
The BCG Matrix (also known as Boston Box) is a framework to help decision making on existing product lines. Developed in the 1970s, it has been used to evaluate how a company should think about its portfolio based on two criteria: the relative market share of a product and the market growth rate resulting in four archetypes: the Dogs, Question Marks, Stars and Cash Cows.
More information: https://www.bcgperspectives.com/content/articles/corporate_strategy_portfolio_management_strategic_planning_growth_share_matrix_bcg_classics_revisited/
Source: Henderson, B. (1970). Growth-Share Matrix. BCG Perspectives.
GE/McKinsey Matrix
The GE McKinsey Nine-Box Matrix offers a systematic approach for the decentralized corporation to determine where best to invest its cash. Rather than rely on each business unit’s projections of its future prospects, the company can judge a unit by two factors that will determine whether it’s going to do well in the future: the attractiveness of the relevant industry and the unit’s competitive strength within that industry.
More information: http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/enduring-ideas-the-ge-and-mckinsey-nine-box-matrix
Source: McKinsey & Company (2008). Enduring Ideas: The GE–McKinsey Nine-box Matrix. McKinsey Quarterly.
McKinsey 7S Model
The McKinsey 7S Framework is a management model developed by business consultants Robert Waterman Jr. and Tom Peters in the 1980s. The 7 S’s are Structure, Strategy, Systems, Skills, Style, Staff and Shared values. The model is most often used as an organizational analysis tool to assess and monitor changes in the internal situation of an organization. The model is based on the theory that, for an organization to perform well, these seven elements need to be aligned and mutually reinforcing. So, the model can be used to help identify what needs to be realigned to improve performance, or to maintain alignment (and performance) during other types of change
More information: http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/enduring-ideas-the-7-s-framework
Source: McKinsey & Company (2008). Enduring Ideas: The 7-S Framework. McKinsey Quarterly.
Strategy Diamond
The framework (developed by Donald Hambrick and James Frederickson) puts the economic logic at the center of the analysis. Five dimensions are analyzed: Arenas, Vehicles, Differentiators, Staging and Economic logic. Strategy is about making important choices, and the real power of the Strategy Diamond is that it integrates important choices into a bigger picture instead of as a piecemeal approach.
Source: Hambrick & Fredrickson (2005). Are You Sure You Have a Strategy? The Academy of Management Executive.
Business-level Frameworks
Ansoff Matrix
There are different ways of growing a business. Igor Ansoff identified four strategies for growth and summarized them in the so called Ansoff Matrix. The Ansoff Matrix (also known as the Product/Market Expansion Grid) allows managers to quickly summarize these potential growth strategies and compare them to the risk associated with each one. The idea is that each time you move into a new quadrant (horizontally or vertically), risk increases.
Source: Ansoff, I. (1957). Strategies for Diversification. Harvard Business Review.
Bartlett and Ghoshal’s Matrix
An often used framework to distinguish multiple forms of internationally operating businesses is the Bartlett & Ghoshal Matrix (1989). Bartlett and Ghoshal clustered these businesses based on two criteria: global integration and local responsiveness. The resulting quadrants can be labelled with businesses having a: global strategy, transnational strategy, international strategy or multidomestic strategy.
Source: Bartlett, C.A. & Ghoshal, S. (1989). Managing Across Borders. The Transnational Solution. Boston: Harvard Business School Press.
Business Model Canvas
The excellent work by Alex Oesterwalder opens the door to companies that need to rethink their business model. It offers a practical step-by-step process to find new ways to create value and analyze a company’s current model.
More information: http://www.businessmodelgeneration.com/ or http://alexosterwalder.com/
Source: Osterwalder et al. (2004). The Business Model Ontology: A proposition in a Design Science Approach.
OLI Paradigm/Eclectic Paradigm
The OLI Paradigm is a tool that helps management choose between several foreign market entry-mode strategies such as exporting, licensing and Foreign Direct Investment (FDI). According to this framework, a company needs three advantages in order to be able to successfully engage in FDI: Ownership advantage, Location advantage, Internalization advantage. If any of these advantages is not present, management might want to choose different entry-mode strategies such as exporting or licensing instead. The framework was initially developed by John Dunning in 1979 under the name Eclectic paradigm. Dunning draws upon theories such as the internalization theory and the transaction cost theory to validate his framework.
Source: Dunning (1979). Toward an Eclectic Theory of International Production: Some Empirical Tests. Journal of International Business Studies.
Porter’s Generic Strategies
Porter’s Generic Strategies describe how a company pursues competitive advantage by positioning itself in between its rivals. There are three generic strategies for competitive advantage: Cost Leadership, Differentiationand Focus. A company chooses to pursue one of two types of competitive advantage, either via lower costs and thus a lower price or by differentiating itself along dimensions valued by customers to command a higher price. A company also chooses one of two types of scope, either focus (offering its products to selected segments of the market) or industry-wide, offering its product across many market segments. Combined these strategies offer four potential ways of companies to position themselves. Companies that try to excel in all of these ways would end up somewhere ‘stuck in the middle’, according to Porter.
Source: Porter, M.E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Harvard Business Review.
Profit Tree
The Profit Tree is a simple but very effective way to structure a company’s revenue and cost streams. It allows a company to see where improvements can be made in case of profitability issues.
SWOT Analysis
SWOT Analysis (Strenghts, Weaknesses, Opportunities and Threats) is a structured method to analyze both internal and external factors that are likely to affect a company’s success. This framework needs little introduction as it has been used and overused in virtually every strategic planning discussion. It needs to be combined with the TOWS matrix to gain additional insights.
Value Chain Analysis
A systematic approach to analyze your value chain, and identify where to create the greatest value for the customer.
Source: Porter (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Simon and Schuster.
Value Disciplines
In their book ‘The Discipline of Market Leaders‘ M. Treacy and F. Wiersema argue that no company can succeed today by trying to be all things to all people. It must instead find the unique value that it alone can deliver to a chosen market. Companies can choose between Product Leadership, Operational Excellence and Customer Intimacy.
Source: Treacy, M. & Wiersema, F. (1993). The Discipline of Market Leaders. NY: Addison-Wesley
VRIO Framework
VRIO Framework (formerly known as VRIN) is a business analysis tool that helps assessing the internal sources of sustainable competitive advantage and is therefore part of the Resource-Based View (RBV). According to this model, resources and capabilities should have four attributes that lead to sustainable competitive advantage. Resources should be Valuable, Rare, Inimitable and Organisation-wide supported: VRIO.
Source: Barney. (1995). Looking Inside for Competitive Advantage. Academy of Management Executive.
Product-level Frameworks
AIDA Model
The AIDA Model is a well-known marketing tool to help base advertising decisions on for customers in different stages of the decision-making process. In every stage marketeers will have to adapt their marketing campaigns in order to help customers move from one stage to the next.
Source: Strong, E.K. (1925). Theories of Selling. Journal of Applied Psychology.
Marketing Funnel
The Marketing Funnel is a great tool that helps visualizing the customer journey or the path that prospects take as they become more familiar with your company and products, from awareness to purchase to (hopefully) the advocacy stage.
Technology Adoption Life Cycle
The Technology Adoption Life Cycle describes the adoption or acceptance of a new (technological) product or innovation, according to the demographic and psychological characteristics of these 5 distinguished adopter groups.
Source: Rogers, E.M. (1962). Diffusion of Innovations. New York: Free Press of Glencoe
Product Life Cycle
The Product Life Cycle (PLC) is a marketing framework that helps visualizing and understanding the sales evolution of a product category over time.
Source: Levitt (1965). Exploit the Product Life Cycle. Harvard Business Review.
Management-level Frameworks
Blake and Mouton’s Managerial Grid
Blake and Mouton proposed a two-dimensional Managerial Grid based on a manager’s concern for production (task-oriented) and concern for people (relationship-oriented). Each axis on the grid consists of a nine-point scale with 1 meaning a low concern and 9 a high concern. Depending on a manager’s score on each of the two axis, you can assign different types of management styles to managers.
Source: Blake, R. & Mouton, J. (1964). The Managerial Grid: The Key to Leadership Excellence. Houston: Gulf Publishing Co.
Fiedler’s Contingency Model of Leader-Situation Matches
Fiedler believed that people’s natural leadership styles are fixed and cannot be changed (easily). The most effective way to handle the situation is to change the leader itself based on certain situational factors or to change the situation to suit the leader. Fiedler’s Contingency Model helps determining what type of leader is most suited for what type of situation.
Source: Fiedler, F.E. (1967). A Theory of Leadership Effectiveness. New York: McGraw-Hill.
Hersey and Blanchard’s Situational Leadership Styles
Hersey and Blanchard developed a theory (Hersey and Blanchard Situational Leadership Theory) that suggests that the most effective leadership style is affected by the circumstances leaders find themselves in. The model helps leaders deciding on what type of style is most effective with a certain type of follower.
Source: Hersey, P. and Blanchard, K.H. (1969). Life cycle theory of leadership. Training & Development Journal.
Kotter’s Eight Steps of Change (Management) Model
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