Internal Assessment

There are three components of a good internal assessment:

• Strengths and weaknesses

• Resources

• Innovations and new ideas

The first thing you need is a clear assessment of what your company is really good at and its blind spots. Remember, strategy should leverage off your strengths.

To get an objective reading on your strengths and weaknesses, we suggest asking a selection of employees and managers to list the top three strengths and the top three weaknesses of the company. To ensure candor, it’s sometimes useful to have these submitted anonymously…

A particularly useful question is, “What are we better at than anyone else, and what are our unique capabilities that give us a competitive advantage?” The literature of strategic management ascribes a ponderous term to this notion (“Distinctive Competence”), but the idea is really pretty simple. It’s also important. Simply put, smart firms stick to doing things they can do better than other firms….

This doesn’t mean that you shouldn’t try to eradicate crippling weaknesses. Any great company is continually working on its weaknesses, always seeking improvement, and your basic strategy should play to your strengths. Do what you’re good at…

INNOVATIONS AND NEW IDEAS…

Make sure that your company is responsive to its own internal creative output. Examine what new innovations and new ideas are bubbling up in product development, research, design, and marketing. List all possible innovations that might come to fruition. Obtain estimates on how quickly the innovation could be made marketable, the level of resources required to complete its development, and the level of marketing required.

The last thing you want to do is kill new ideas and innovations just because they’re not planned. In fact, most great ideas are not planned, and if you introduce only products that are planned five years in advance, it’s unlikely that you’ll produce any breakthrough products.

The Three Legs of Setting Strategy:

VISION:

Core Values and Beliefs

Purpose

Mission

INTERNAL ASSESSMENT:

Strengths & Weaknesses

Resources

Innovations & New Ideas

EXTERNAL ASSESSMENT:

Industry / Market / Current Trends

Technology Trends

Competitors

Social & Regulatory

Macroeconomy & Demographic Trends

International

The first component of the strategy logic flow is industry analysis. To determine where to play, you must assess the industry landscape. You must ask, what might be the distinct segments of the industry in question (geographically, by consumer preference, by distribution channel, etc.)? Which segmentation scheme makes the most sense for the given industry today, and what might make sense in the future? And what is the relative attractiveness of those segments, now and in the future?

To make good choices, you need to make sense of the complexity of your environment. The strategy logic flow can point you to the key areas of analysis necessary to generate sustainable competitive advantage. First, look to understand the industry in which you play (or will play), its distinct segments and their relative attractiveness. Without this step, it is all too easy to assume that your map of the world is the only possible map, that the world is unchanging, and that no better possibilities exist. Next, turn to customers. What do channel and end consumers truly want, need, and value—and how do those needs fit with your current or potential offerings? To answer this question, you will have to dig deep— engaging in joint value creation with channel partners and seeking a new understanding of end consumers. After customers, the lens turns inward: what are your capabilities and costs relative to the competition? Can you be a differentiator or a cost leader? If not, you will need to rethink your choices. Finally, consider competition; what will your competitors do in the face of your actions? Throughout the thinking process, be open to recasting previous analyses in light of what you learn in a subsequent box. The basic direction of the process is from left to right, but it also has interdependencies that require a more flexible path through it.

STRATEGY LOGIC FLOW DOS AND DON’TS:

• Do explore all four critical dimensions of strategy choice: industry, customers, relative position, and competition.

• Do look beyond your current understanding of the industry, pushing to generate new ways of segmenting the market.

• Don’t accept that entire industries are or must be unattractive; explore the drivers of

different dynamics in different segments, and ask how the game could be changed.

• Do consider both channel and end consumer value equations; if only one of these constituents is happy, your strategy is a fragile one. A winning strategy is a win-win-win; it creates value for consumers, customers, and the company.

• Don’t expect either the channel or the end consumers to tell you what constitutes value;

that is your job to figure out.

• Don’t be blasé about your relative capabilities or costs; compare them with those of your

best competition, and really push to understand how you can win against them.

• Do explore a range of possible competitive reactions to your choices, and ask under what conditions competitors could block you from winning.