The process of strategy begins with understanding the current state and diagnosing an organization of its current conditions. For that reason, this begins with reconfirming what is the value proposition of the organization. What product they provide, who is the customer, what is their value to the customer, and why are they different? Starting with a value proposition that clarifies what value the organization creates for a customer. A prime example is that of Hewlett Packard (HP), which provides technological solutions to small-to-medium business. This service helps entrepreneurs to efficiently run their business. Unlike technical services from Dell, HP provides dedicated consultants. These consultants partner with small companies to provide a free IT service to a capital-limited organization.
Thus, the definition of value is how the organization plays in the market place. Where does the organization play in terms of other businesses? Do they sell to consumers or to businesses? If they do sell to businesses, what types of businesses and what do they do with the products?
This leads to where is the marketplace and where do they sell the products. Is it a company of consultants that sells at conferences or do they sell tangible products online? Do they have a brick and mortar store or do they sell both online and in-person? Does the company only sell to distributors or channel partners and don’t even interact with the end-users? These are the basic questions that businesses know and have infrastructures in place to operate in this manner, and it is the key to revisit these topics during strategic sessions as they may provide insights into new routes to market and possible beneficial opportunities.
The next evaluation factor is competition and who is the company’s competitor. There are three key competitions. The first being the perfect competition where there are numerous small firms battling for market share but there is not an individual firm that has significant power in the market nor can any firm influence pricing. Modern-day examples would be the restaurant industry where there are too many separate entities to control the market.
The second competitor is the oligopoly where there are a handful of firms that dominate the market. In this model, the firms use their power to increase pricing and maximize profit margins. Modern-day examples would be Home Depot, Lowes, and Ace Hardware in terms of home-improvement shopping. The last competitor is the monopoly. A modern example of a monopoly is Google and their dominance of internet search where they control 95% of the market. Google dictates then how to set industry pricing.
The goal of an organization is to have a blue-ocean monopoly with a revolutionary product that has no equivalent or competition, but this is rare. The key elements of evaluating competition are understanding their business in-depths. What they are strong at, where they are weak at, and where are the gaps between what they offer and what their consumers want. If they are a publicly-traded company, then their annual reports will provide a level of understanding of what is their strategic direction. Once an organization understands the competition’s strategy they are able to then attack the new gaps that are opened when they shift directions.
The strategy team will start to understand potential vantage points in the strategy based on the analysis of the competition. The strategy team then bolsters their analysis by factoring in available resources. Resources can be all-encompassing from talented people and capital to assets and natural resources needed for production. Resources influence the strategy by highlighting what is feasible and not. For example, if a potential strategy is to maximize automation development throughout the organization but there is a limitation with being able to hire software developers, then this may make the strategy unrealistic until the resource issue is fixed.
The last evaluation area in organizational diagnosis is culture. Culture is a combination of four intersecting areas that define the organization. It begins with the environment where work is completed, the values of the organization, how people are treated, and the overall mission of the organization. The second evaluation area is the operational flow of how work gets completed and how raw materials are transformed and sold to its consumer. The third area is the team dynamic of how the individuals in the organization treat each other, how they work together, and how inclusive are they of each other. Lastly, leadership behaviors are evaluated to understand the organization’s decision-making processes and how much control is exerted throughout the organization.
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