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How to use Strategy Tools in the right Way!

Strategy tools are used to take decisions and to simplify and visualize complex situations. They are ´intelligence boosters´ which help us to do the right things - e.g. to decide whether a particular product should be discontinued or if entering a new market makes sense or not.

Generally speaking, strategy tools can be used at different levels. E. g. a Portfolio Analysis can be used to evaluate strategic business units, different products or individual customers. The strong simplification power of this tool is both a curse and a blessing: It allows us to explain the world with 2 axes and 4 quadrants!

Special care is required when developing the popular SWOT analysis. Most SWOTs are generic and more or less interchangeable. ´Opportunities´ are often confused with ´Strategies´; ´new competitors´ and ´new technologies´ are usually given as ´Threats´; ´bad internal communication´ is in almost all cases cited as a ´Weaknesses´ (I have never seen a company where internal communication´ was not considered a weakness!); ´Strengths´ usually include a ´strong customer relationship´ and ´high quality´ - whatever that may mean!

This type of SWOT can be developed within 5 minutes and is of no use at all! By contrast, a professional SWOT is highly specific and represents a summary – the essence – of a deep analysis of a company´s external environment and its internal value chain. Still, at the end of the day, what is considered a ´Strength´ or a ´Weakness´, an ´Opportunity´ or ´Threat´ lies in the eye of the beholder and remains more or less subjective!

To use strategy tools effectively and efficiently, we recommend the following steps, bearing in mind that every tool can be used within the framework of a strategy process or separately.

1. First, we must decide what should be analyzed: Do we want to examine the organization´s internal set-up or its external environment? Which specific area is to be put under scrutiny and which tool is most appropriate for that purpose?

2. At what level do we want to carry out the analysis? Does it concern the whole enterprise, a strategic business unit or a specific product line?

3. Which facts and figures must be made available to make sure that the analysis is not only based on ´gut feel´?

4. Who should carry out the analysis? Cross-functional teams are very useful as they provide quite different perspectives and points of view.

5. How do we want to manage ´unpleasant truths´ which will perhaps be uncovered?

6. How do we use the results? Who should they be presented to and in which format? Finally, which recommendations can be extracted from the analysis?

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