StrategyAug 18, 2010

Seven Favorite Frameworks

Brad Buhl

I like to say that Management Consulting requires a combination of ambiguity tolerance and rational problem solving.And a fellow associate frequently quips when asked what he does, “I bring clarity to complex situations.”

My favorite work comes out of projects which are perceived as ridiculously complex, or stuck in the stratosphere of executive vision, and boiling the delivery down into simple steps which are both reasonable and actionable.The process of getting there frequently requires a framework, or methodology, of appropriate comparison in order to drive the right comparative results.

Below, then, are my seven favorite frameworks, from the treasure trove of Management Consulting:

Framework #1: Porter’s Five Forces

I’d be remiss if I didn’t mention the grand-daddy framework from Harvard strategy professor and respected author Michael Porter, who single handedly explained why economists were wrong in stating that competition among rivals drives profits to zero (okay, maybe an exaggeration, but the dude’s wicked smart).Porter developed a model of industry analysis, and his book Competitive Strategy: Techniques for Analyzing Industries and Competitors has become a must read for business strategy.

Briefly, then, the Five Forces for analysis include (by category):

·Supplier Power – including supplier concentration, importance of volume to supplier, differentiation of inputs, impact of inputs on cost or differentiation, switching costs of firms in the industry, presence of substitute inputs, threat of forward integration, and cost relative to total purchases in industry

Porter’s Five Forces

·Barriers to Entry – including absolute cost advantages, proprietary learning curve, access to inputs, government policy, economies of scale, capital requirements, brand identity, switching costs, access to distribution, expected retaliation, and proprietary products

·Buyer Power – including bargaining leverage, buyer volume, buyer information, brand identity, price sensitivity, threat of backward integration, product differentiation, buyer concentration vs. industry, substitutes available, and buyers’ incentives

·Threat of Substitutes – including switching costs, buyer inclination to substitute, and price-performance trade-off of substitutes

·Degree of Rivalry – including exit barriers, industry concentration, fixed costs to the value added, industry growth, intermittent overcapacity, product differences, switching costs, brand identity, diversity of rivals and corporate stakes

Framework #2: The Value Net

As an alternative to Porter’s Five Forces, Adam Brandenburger of Harvard Business School and Barry Nalebuff of the Yale School of Management explained not only “win-lose” but the “win-win”

The Value Net

scenario of “co-opetition.”Their book, Co-Opetition: A Revolutionist Mindset That Combines Competition and Cooperation: The Game Theory Strategy That’s Changing the Game of Business, is another must read in the business strategy section.

Within the Value Net, a complement is defined as any other product or service which adds to the attractiveness of the subject product.In my opinion, while Porter’s Five Forces is useful in determining business strategy within its given industry, the Value Net is most helpful in exploring entry into new products/services and industries.

Framework #3: The Project Prioritization Framework

Created by Credera’s own Justin Bell, the Project Prioritization Framework is especially helpful when running Agile projects (in both risk- and client-driven iterative development scenarios).Notes Justin,

Project Prioritization Framework

“The framework is based on a very simple and common sense premise.  You should prioritize and work on the projects that provide the highest (relative to other projects being considered) business value (measured in increased profitable revenue or decreased cost) and lowest cost.”

I don’t have room here to explain the Agile process and why the Project Prioritization Framework is a best practice fit, but the Agile Alliance explains in the Agile Manifesto values of:

·Individuals and interactions over processes and tools

·Working software over comprehensive documentation

·Customer collaboration over contract negotiation

·Responding to change over following a plan

When assessing the relative business value and technical cost of each project (or even project components), the Project Prioritization Framework is spot on.And in the Agile process, the tech gurus and business guys are in constant communication, changing project priority regularly.

Framework #4: SWOT Analysis

SWOT Analysis

Simply stated, the SWOT Analysis framework is a basis for developing competitive advantage.It assesses internal Strengths (S) and Weaknesses (W) against external Opportunities (O) and Threats (T).

Charting out the internal against the external in quadrants, then, the following competitive strategies can be developed:

·S-O Strategies play to a company’s strengths

·W-O Strategies must overcome company’s weaknesses

·S-T Strategies identify ways to use a company’s strengths against external threats

·W-T Strategies identify a company’s risk against external threats

Framework #5: The Strategy Matrix

At the risk of unabashed self aggrandizement, since this is a blog entry of my favorite frameworks, Favorite Framework #5 is my own, so you won’t see it elsewhere about it unless you hire Credera!The Framework came from an amalgamation of articles I’d read out of Harvard Business Review combined with a client need to look at their strategic values against operational decision making.

The Strategy Matrix

Using a traffic light approach to the matrix, each relative decision is highlighted with green (all systems are go), yellow (watch out for landmines) and red (what were you thinking) sections.The Strategy Matrix is helpful in strategy workshops and in defining the core, critical and commodity values of a business.

Framework #6: Force Field Analysis

Force Field Analysis

Yes, this is a Jedi Framework.The Force Field Analysis is a step beyond a traditional list of plus and minus points to a decision, or positive and negative aspects of a project.Force Field Analysis assigns relative numbers to each of the discreet points in order to come up with the ‘equilibrium’ of an issue.

Used to analyze influence, power and opposition, charting out Driving vs. Restraining forces of any given issue, with points given to each force as they are relative to each other is a great way to get to the bottom of political problems, as well as those more clear cut.

Framework #7: Affinity Diagram

Every use a bunch of sticky notes to categorize and group information?The Affinity Diagram, or KJ method (after author, Kawakita Jiro), is used to sift through data and let groupings emerge naturally, rather than according to already set categories.The Affinity Diagram method helps you look at data in new ways, and many times can reveal new patterns or ways of looking at business.I’ve even used the method, below, to brainstorm blog entries and categorize ideas.

Affinity Diagram

I’ve also used the Affinity Diagram framework in changing organizational perception of product (which usually focuses on technology and resources) to one of process (which usually takes portions of technology and resources).For example, rather than considering all of the cost considerations surrounding a billing system for customers, breaking apart all the activities associated with collections could lead to strategic business decisions surrounding market, partnership, or cost savings opportunities.

Putting It All Together

Putting together a business strategy analysis and plan could well involve all seven frameworks listed above.From looking at operational decisions on the Strategy Matrix to analyzing competitive threats using a SWOT Analysis, then looking at a given industry using Porter’s Five Forces and complementors using the Value Net, an organization can break down political hurdles using the Force Field Analysis and employ the Affinity Diagram to determine logical project groupings, which can be prioritized using the Project Prioritization Framework.

Click here to ask about Credera’s Business and IT Strategy offering, which uses a proven IT Strategic Planning Framework – an overarching framework which very well could use the seven listed above!