Frameworks

Strategy was easy in the '70s. According to the Boston Consulting Group all you had to do was "milk your cash-cows, get rid of your dogs, and turn your question marks into stars". This well-known BCG matrix was perhaps one of the first strategic frameworks. It was effective because it provided people from different backgrounds a common language to use when analyzing problems.

Many other frameworks have followed. Perhaps the most famous is that of Michael Porter who analyzes organisations in terms of five competitive forces; competitors, customers, suppliers, substitutes and new entrants. Porter also set out numerous ideas about value chains. His latest works concentrate on country and regional competition.

I mentioned the need for an innovation value chain in an earlier article. This article investigates how you can use an anlysis of your present value chain to give ideas for places to innovate.

The starting point of the analysis is to describe your existing business within your existing industry. Any one of a number of frameworks can be used. You can even develop one of your own. The important thing to remember is that the framework helps to establish a common understanding of the organisation in its competitive environment. There is a lot of value in having the discussion with your teams in order to develop your own framework. Although this is time consuming.

I find the one suggested by Alex Osterwalder to be quite useful in financial services.

Clients are considered under the sub-headings of relationships, segments and distribution channels; products and services are considered under the sub-heading of offer; operations is considered under the sub-headings of resources and competencies, partner networks and known issues; finally an understanding of the financial implications to revenue and expenses.

This nine point framework lets you ask key questions of each item. "In respect of [each of the nine]: what can we learn from our competitors and other industries? What would our organisation and industry look like if we moved to this? Do we have the experience and capability to do this? What are our risks if we do nothing while others do this?"

For example, "In respect of distributing equities, what would our organisation and industry look like if we distributed over the internet? Do we have the experience and capability to do this? What are our risks if we do nothing while others do this? What happens to the revenue and expense cycle from doing this?"

So the role of the framework is not simply to describe what happens today, it helps focus our attention on what could happen into the future. It gives us a common language on which to base our discussions. The key questions for strategy are; Do we have the common language today to hold this discussion; Is it rich and diverse enough to consider the changes taking place around us; Do we have the desire to develop our own framework; Will doing so be beneficial or simply too time consuming?