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.

The Long Road to the Logic Flow – Roger L. Martin

In 1987, Eaton Corporation hired us to do just that: work with its various divisions to teach them how to create great strategies. I was dispatched to Battle Creek, Michigan, to work with their truck axle business. As I went through the first training session, I became painfully aware that I was teaching the Eaton managers a series of analytical tools related to strategy, rather than a holistic process for creating strategy. I found myself asking, how exactly does customer analysis relate to competitor analysis to relative cost analysis to five-forces analysis?

We all ultimately want to find the strategy that is best for our business. Rather than asking individuals to find that answer for themselves and then fight it out, this approach enables the team to uncover the strongest option together. A standard process is characterized by arguments about what is true. By turning instead to exploring what would have to be true, teams go from battling one another to working together to explore ideas. Rather than attempting to bury real disagreements, this approach surfaces differences and resolves them, resulting in more-robust strategies and stronger commitment to them.

... good strategies start with massive amounts of quantitative analysis—hard, difficult analysis that is blended with wisdom, insight, and risk taking.

A good strategy will always identify critical holes, competitive weaknesses, and the potential to fill them with tactical acquisitions.