Historically there has been a strong similarity between how corporate people discussed strategy and how it is likened to the discourse on warfare strategy. Business strategy can be said to have emerged from the most general view of strategy. It is not clear when it was acknowledged as a subject in its own right, but some argue it was born in the 1960s.
Initially, corporate strategic planning corporates aimed at creating a “master plan” that was developed and then simply executed. These ideas worked on the assumption that the business environment was stable and long-term plans could be easily implemented. Consultants were heavily involved in guiding the strategic planning of companies by applying checklists. In short, the process consisted of the following steps:
- Strategy Formulation – setting the objectives of the organization (preferably numerical ones).
- Evaluation – assessing the internal and external conditions of the organization. It should be noted that this step was conducted in a very procedural manner by following pre-defined steps.
- Selection – comparing the different strategies by using different metrics for measuring returns and risk.
- Implementation – translating to the operational level by decomposing the strategy into actionable activities for short, medium and long term.
At the end of the strategy formulation process, a “master plan” had been created that had to be executed. This process was used extensively but was problematic. Firstly, these strategic planning processes were predominantly conducted by elite groups in organizations and as such, few outside of these groups were aware of the objectives or were even invited to share their perspectives. Furthermore, the process became more important than the content as they rigidly followed the “process”. The strategic planning was conducted at the higher levels of management, which created a dissonance with the operational management who in the end were supposed to implement these plans. This approach failed to consider the culture of the organization or allow for any flexibility. Companies started abandoning such approaches to strategic planning at the beginning of the 1980s. Gradually strategic planning started to focus more on the external environment such as market structures. History has taught us that strategies and approaches to strategic planning that focus too much on pre-planning based on assumptions of markets being certain and constant, are problematic. Rather adopting a dynamic process where we learn and make adjustments as we progress, is more effective.
Another lesson is that strategic planning does not only concern top management or an elite group of planners but rather all levels of the organization. Although the main approach of strategic planning has changed, some of the models developed in the past 50 years are still used today. They do have merit when used as complementary methods but not when they become the only method. For a digital business analyst, it is vital to adapt such methods to the digital context. By knowing about such methods, the digital analyst can use them, in adapted and often reduced forms, to serve his or her purposes. In the following posts, we will introduce some of the most common and well-known models used to analyze the external and internal environment and the business strategy of an organization.
Business Context
The problem/need/opportunity that the analyst is analyzing exists within an immediate context. At this level, there are technologies/information systems, business processes, data, and resources that are used in the current state. It is within this immediate context that the problems occur. However, these aspects exist within another context, that of the organization. The organization will have certain organizational strategies, business model, stakeholders, internal policies, and organizational structures and culture that in various degrees influence the immediate context of the issue being investigated. The organization itself exists within the context of its competitors and trends in their industry. Likewise, the competitors all operate within the context of their environment influenced by political, economic, social, technological influences and changes. Therefore, the external and the internal context, within which the problem or the needs exist, can have an influence on which alternative is the “best” or the “right” solution. As such, it is important to know the context within which a problem is to be solved. If an analyst is an employee of the company, they are probably aware of the business context. If that is not the case, it is helpful to understand the context by analyzing the business model of the company and the strategy they employ to gain or maintain their competitive advantage.
The business context can be analyzed by beginning with the environment and gradually working towards the core (the change initiative). A way to start would be to get better acquainted with the external context (existing outside the boundaries of the organization). Next is the competitive stage and industry trends, which concludes the external context analysis. The next layer is now within the organization but at a higher level. These factors may or may not be relevant to the issue at hand.
Oftentimes, some aspects are more relevant while others are insignificant. For instance, internal policies on how projects are set up and funded might be very relevant for larger projects. On the other hand, if the project concerns developing a mobile app as a portal for an existing service, it is less relevant. The influence is general and acts as guiding principles. At the core of the issue, it is no longer influences but actual aspects of the change initiative. Here, we leave context analysis and focus on the change initiative:
- The internal context analysis – context within the boundaries of the organization but outside of the scope of the issue – aims at getting a solid grasp of the following aspects:
- Analysis of the strategy the company has chosen to gain or maintain its competitive advantage in the marketplace.
- The business model the company has developed usually depicted as a model (canvas) that shows how they created and delivered value to their customers in a profitable way.
- Internal policies, guidelines, and templates put in place to increase efficiency by incorporating past experiences in their future work.
The context matters indirectly as it provides a framework for evaluating and determining the importance of different aspects of a problem and selecting solutions. Some companies have chosen a low-cost strategy to deliver products. For such companies, cost cutting and efficiency improving initiatives are the priority. All projects are influenced by this goal. This affects how a problem is analyzed (focusing on its costs over quality or variability) in terms of efficiency. Similarly, solutions that give the best efficiency gain, and cost the least are more attractive than others. Another example is internal policies. If the internal policy stipulates usage of specific methods for eliciting and managing requirements, the employees will know those methods better, documentation following these methods is better understood by others and there might even be templates, help guides and examples of how to use these methods. In such situations, the business analyst is more or less forced to apply such methods.
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