Strategy is about making informed choices with limited resources, in ways that strengthen your business. There’s no easy way to be sure that you have the right strategy, but there is a process that yields consistent results. In this post I’ll summarize a proven process for strategy development. Then I’ll describe each step in turn.

The seven key steps are these:

1. Problem definition – what’s the scope of the strategy? Who is the end customer for the information? What are the success criteria?
2. Environmental scan – get hold of every piece of information that’s easily available. Talk to people within your circle. Build up a basic education about the area in which you need a strategy.
3. Research plan – on the basis of the environmental scan, you’ll have an idea of what you know, and what you need to know. Make a plan to find out the things you need to know.
4. External research – through interviews, reading, and if necessary purchased research, gather the information you need in order to develop a strategy.
5. Hypothesis – given all the information you have from your environmental scan and research, develop an argument around solving the strategic problem you set out to address.
6. Validation – before you’re ready to make a firm recommendation, you need to test your thinking, internally and externally. This step will increase the credibility of your recommendations and begin the process of buy-in.
7. Recommendation – finally you’re ready to present your proposal. Good strategies are easy to understand, and are supported by experience, knowledge, and commitment.

A good strategy is actionable, and meets its goals efficiently. In most companies, strategy folds into a larger set of processes around budgeting and prioritization. But if you apply the seven-step plan described here, you will be in the best possible position to drive better decisions in your business.

Defining the Problem

A good problem definition is the best way to ensure focus throughout the project.

It’s not as easy as it may seem, because early in strategy development there’s a lot that isn’t known. Here are some tests for a good problem definition:

1. If you solve it, will it materially impact the business?
2. Is it scoped down enough that it can be solved in a reasonable amount of time?
3. Is there some evidence that the information required exists or can be created?
4. Is there an internal customer for the solution?

A good strategy problem is also one that will cause people to think outside the box – to explore new ideas and directions and perhaps to open new doors. Perhaps this is the difference between a strategic conversation and a tactical one – in the strategic space we’re trying to discover new territory, new opportunities, and new ways to work. In the tactical case we’re trying to improve our existing operations.

Another guide has to do with understanding what it is that you don’t know. For example in the semiconductor business, we know that designers are going to build more and more complex chips, but we don’t know what their technical solutions to dealing with that complexity are going to be. If we’re in the business of serving those customers with solution, understanding more about the customer’s preferred approaches to dealing with complexity is a great strategic question, because complexity creates demand, and solutions to complexity represent value.

Finally for this short piece, it’s worth mentioning metrics. A great strategic problem has a key business metric associated with it. Impact on market segment share is a great galvanizing thought for business people. Cost reduction, channel efficiency, customer reach, customer satisfaction all point to key metrics that can change a business for the better, and that are therefore good sources of strategic investigation.

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