The focus of “The Question of Strategy” Series 1 was on what strategy is and what it is not. I explained that strategy is not a goal, a vision, a purpose, a mission or a plan. Strategy is about choosing the path that will make organisations win in their market.

Series 2 looks at how to develop a strategy. Again I am sharing my experience of developing organisational strategies, not only for profitmaking companies, but also for non-profits like churches and other public sector entities. In reality, most organisations do not develop strategies from scratch unless it is a new venture. They review their current strategies. In reviewing their strategies, organisations follow a similar strategy development process as if they are starting new ventures. In this series, I will share a step-by-step strategy development process.

Step 1: Conduct strategic assessments

Step 1 is about assessing the external and internal forces that impact your strategic direction.
Let’s start with the external environment.

Global environment assessment:

Here you start by evaluating the external environment which is made up of global factors like the war in Russia and Ukraine and recently the Israeli-Gaza conflict. Other global factors include but are not limited to global risks as reported by the World Economic Forum, climate issues and technological developments. We are in a global environment and therefore whatever happens in that space affects countries and companies. Your company may depend on the global supply chain and trade in foreign currency, thus making it important to assess how this increases your company risk exposure to develop and manage mitigation factors. The other element of assessment would be to zoom into your particular industry at a global level to understand the competition and size of the market.

Continental or Regional Environment Assessment

With this external environment you need to conduct at a continental or regional level. For instance, you may need to assess the situation in Africa regarding the political, economic, social, technological, legal and environmental, acronym for PESTLE. You can further assess the regional market of selected target countries such as East Africa or Southern Africa. If you have an Africa strategy, such an assessment is even more important.

National environment assessment

The national environment assessment brings you closer to your home ground. In most instances, this is where your company is based, whether in South Africa, France, Kenya, the US, Brazil or Botswana. Using the same PESTLE tool, you should be able to assess how political developments like elections may affect your strategy. Assess the economic situation in terms of GDP, inflation, interest, and economic policies. The social analysis will indicate the level of poverty, crime, demographics and the implications of migration. Whilst technological assessment should reveal the impact of new technologies like AI, robotics and IoT. Legal assessment should shed light on regulations and legislation as they affect your industry. Lastly, environmental assessment, which has become a
major topic on how to deal with climate issues and how your company will address that. There is a move for more disclosure for companies on their Environmental, Social and Governance (ESG) strategies.

Conducting industry research is also necessary to understand the market you are in. This may include the size of the market, competitors, trends and new technologies.

The external environment assessment should assist you with identifying two things, opportunities and challenges. What opportunities are there that one can take advantage of? Are there opportunities for partnerships, M&A, new markets, expansion, new technologies etc? The second is on challenges, to define the risks or threats that can impact your organisation. Risks such as supply chain disruptions, foreign currency fluctuations, conflict, coup, competition etc.

Conducting a strategic assessment is a daunting task that should be outsourced to external experts. Your role is to make sense of the analysis and how it impacts your strategy.

The second part is to conduct an internal environment assessment.

Internal Analysis

This is what is also known as internal situation analysis.

The use of SWOT analysis is one popular and useful tool to conduct internal situation analysis. SWOT stands for Strengths, Weaknesses, Opportunities and Threats.

What I have observed is that although this is a good analysis tool, in most instances organisations don’t use it properly. You will find organisations coming with a long SWOT list of issues that will not make them win, there’s no point in saying that our strength is capital, but fail to demonstrate how will you use that capital to win, will it just sit in your balance sheet or will you use it for new products or M&A.

SWOT should be conducted critically and should be linked to how the list will assist in driving your strategy. The other observation is that each SWOT element is not followed with an action plan. If you
uncover that AI capabilities are your weakness, what action are you going to take to address that? The other problem is not clearly understanding what should fall under each element. Strengths and Weaknesses are your internal issues, whilst Threats and Opportunities are external issues that are beyond your control.

Besides the use of SWOT analysis, you can conduct an organizational performance and strategic review on specific areas of the business. This could include your financial review, operational review, human capital and ESG review.

Internal situation analysis aims to establish where the organisation is at concerning the changing environment and its capabilities to respond to compete and win. Organisations especially in the tech industry no longer wait for a year to review their strategy, it is a continuous process to ensure that they stay relevant and in business.

Step 2: Developing or aligning the strategy

Strategy development is informed by the organization’s vision, mission, purpose and goals. Where there is a need to respond and align following the strategic assessments, organizations usually review their vision, mission, purpose and goals.

Step 2.1: Review vision, purpose, mission and goals

The starting point should be, given the current challenges, opportunities, strengths and weaknesses, will we reach our vision? Will our mission take us where we need to go? Is our reason for existence still relevant? Are our goals achievable?

In answering those questions, a review takes into account the report from the global, continental and national strategic analysis. It also looks at the organisational situation analysis in terms of its strengths and weaknesses, threats and opportunities and other organizational reviews. A new vision would then be crafted clearly articulating the new strategic direction. Similarly, a mission and purpose are reformulated including the setting of new strategic goals. This process will then lead to the development of strategic choices.

Step 2.2 Developing strategic choices

Here the organizations will identify and make strategic choices of where they would like to compete and how they will win. This process defines the strategic direction that the organisation is taking. One organisation can opt to be a niche player in broadband or tower space. The others can decide to enter the fintech market. Whilst another can expand beyond the borders of the country and be an African player. The point here is about focus. Focus where you have a better chance of winning, rather than trying to be everywhere.

Step 2.3 Formulating strategies

Based on the strategic choices, clear strategies are formulated. Some organizations use strategic pillars, others use acronyms to articulate their strategy. For instance, Telkom uses the acronym PIVOT which stands for Partnerships, Integrated Solutions, Victory in Broadband, Operational Efficiency, and Technology Innovation to articulate their strategy.

After strategy development, it is then that strategic, financial, risk management and other plans are put in place to ensure the achievement of the strategy. In the public sector, Corporate Plans and Annual Performance Plans are submitted to respective departments, Treasury and Parliament Portfolio Committees.

Strategy development requires deep and robust strategic thinking about one’s challenges and opportunities in both the external and internal environment. Strategy development is continuous taking into account the changing landscape and the need to review and change tactics. The process should be as inclusive as possible.