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In this video, I would like to introduce a few other strategy tools.

In this class we're focusing our attention

on Porter and, and the SWOT analysis method.

Not because those are the only tools but

just because we have a limited amount of time.

So, I just wanted to introduce you to a few other tools.

I'm not going to, I'm not going to really use them to analyze our case situation.

I'll just briefly go, go over these, but I wanted you

at least be aware of a few others and you can, you

know, then it's sort of a starting point for some independent research

on, on various methods for, for different, different types of strategic analysis.

Hopefully.

So, one method is called PEST.

PEST stands for political, social, economic, and technological,

and it's designed primarily to look at macro-level factors.

so, we're really looking at sort of the broad business environment,

when we're asking things like the political environment you're dealing with,

you know, what do we think the economic factors are that matter you

know, major workforce trends or unemployment, inflation, things like that.

Socio-cultural factors within a particular

business environment or technological factors.

You can think of this really being applied very

similar to the way that you would use SWOT analysis.

You would basically use these headings to help organize some of your thinking.

And identify risks to strategy implementation.

There's lots of variations you know, when you, along

that lineage or, or the tradition of SWOT analysis.

There's also an acronym called the SLEPT which

adds the, SLEPT would add the, basically just adds legal.

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Legal considerations to this.

There's one called PESTLE.

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These are all various, just little acronyms for the various headings, so it

adds, specifically,

environmental.

Well, I know there's one called TECOP.

Believe that's technological, economic, commercial, organizational and political.

So, there's lots of different approaches but they're, they all kind of have this

feel of being in the tradition of the SWOT approach.

And certainly, the way you apply them is that way.

Another, interesting tool is the BCG Matrix.

The BCG Matrix was developed by the Boston

Consulting Group, that's where it gets its name.

It's also referred to as the Growth Share Matrix or Product Portfolio Matrix.

And what you do with this is you look at market growth and market share for, you

assess various business units according to market growth and market share.

Were growth indicates both

the, sort of current I guess, but importantly, potential scope

for growth in that business segment of yours and what that implies

then is, potentially, a need for investment or a potential use

of financial resources that, presumably, are coming out of our your operations.

Share indicates, kind of of thinking about the share of the market, indicates

some potential source of cash, so if you're thinking about categorizing

your business units, a business unit that has a large market share is generating

lots of cash that can go into various uses.

A business unit that's assessed as having large market, market growth potential

would be potentially a a, a use of

that cash or income, because you would be investing in, in that business line.

So, there are four different categories.

The, the, the category down here.

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Is, you have a high market share, but low growth.

Low growth potential.

So, what we call this is, a cash cow.

And what a cash cow does is it just

generates lots of cash that can be used elsewhere.

Now, presumably, what you want to do over time is move all of your business

units, the basic idea here is that ultimately, if you are trying to return

some value to financial claimants like creditors

and equity holders, you would want to move

all of your business units eventually in the general direction of being a cash cow.

Because that's when they're throwing off basically

more financial resources than they are using.

So, there is some sense in which over time everything is, is you're

trying to manage everything to wind up in, in this quadrant down here.

The other quadrants include a high

market share, but high need for cash, high growth area, so high need for cash.

So, you have a high market share, it might be financing itself, but it's not really

throwing off lots of extra resources and that's

what we call a star, a star business.

Which you know, to me, is a little bit

ironic because you don't really want things just to

be stars unless you just like running, you know,

empires, which, I suppose, some business leaders aspire to do.

If you're really running the business to return,

return value to the owners, ultimately you're trying it.

You're trying to move down to this cash cow position.

Okay, another

another type of business unit might be assessed as

a dog, because you have relatively low market share.

I'm sorry.

Relatively low potential for growth and relatively low market share.

So, with this one, you are going to, you know, either

find a way to cut costs and maybe have a small,

you know, or cut costs and gather market share.

And maybe turn it into a cash cow.

Or you might just think about divesting the thing eventually.

So, basically, you know, those would be the kind of two

options, is, cut costs, or cut this business line out altogether.

In the literature, you'll typically see just thinking

about cutting it out altogether because presumably, if it's

a dog, you're really far behind other market leaders

in that, in that business line or business segment.

And then the last one is they

actually creatively just characterize with this question mark.

This is the one that, where you have a

low market share but you actually identify a high potential.

So, presumably, you're either going to, it's going to become a

dog and be gone, or it's going to become you know,

a star where you can gain more market potential, and then,

hopefully over time, it will become one of your cash cows.

So, that's how you make use of thinking about

different business lines using the Boston Consulting Group Matrix.

Another tool that I don't know if it's maybe a liberal

use of the word tool, is, is just a, an approach, is scenario planning.

And thinking about characterizing potential future states of the world, but

more in a narrative framework rather than just purely numerical forecasts.

So, this is obviously a very old idea for thinking about preparing for the future,

it presumably has been done in many cultures

over centuries you know, maybe going back to the very earliest stages

of us communicating with each other and, and thinking about the future.

Modern scenario planning has its roots in work done for the

U.S. Department of Defense at the Rand Corporation in the 50s.

And, what I believe is the strength of scenario

planning, is that you tend to come up with stories.

Number one, you tend to come up with stories, and there's a benefit in that.

Because not everyone is, sort of, motivated

and highly sensitized to purely technical analysis.

So, having a narrative is actually very

useful for change management and for communication.

But importantly, they're not just stories, they tend to be internally consistent.

So you wind up telling a, a story

of a very tough business environment in the future.

And what I mean by internally consistent is

the tough business environment kind of it makes sense.

Tough business environment means there's going to be

lots of competition, or maybe our inputs are costly.

That's the kind of thing.

And what that means in more of a, a, you know, if

you were to do an analysis in a purely technical way, then

the way you would achieve internal consistency in your analysis is you

would have to be careful to ensure that certain assumptions are correlated.

So, if, you know, when I tell a story that the business environment is

going to be bad, and then I have lots of bad things like high

input costs mean, you know, maybe a lower quality workforce because we might be

forced having to to cut, cut some of our, our search and, and compensation policies.

And maybe if the high input, if the input cost are high that means

actually there's going to be some minimum amount

beyond which we can't really cut our prices.

Which means actually it's going to you know, scare away some demand because of

the high prices, so actually there's a lot of different assumptions in that in that

scenario I just described and if you want to do it in a purely

technical way, one method you might think

of using is called Monte, Monte Carlo simulations.

But importantly, in the Monte Carlo

simulations, in these more technical approaches

to forecasting, you would have to explicitly go in and say make sure.

Hey, did I correlate my demand to somehow my price to

somehow, you know, my statement about input costs and all of that.

You'd want to make sure that your model was internally consistent.

So, you can achieve, you can achieve coherent scenarios in both purely

technical approaches like Monte Carlo or through these narrative approaches,

but sometimes it's a little more intuitive to to in least, compliment your

technical approaches or forecasting with these, with these narrative scenarios.

Probably the most the best known modern proponent

of scenario planning is Shell, the Shell Oil Company.

And if you go to their website and you look

for their future scenarios, they describe these, you know, long-range

forecasts of what the future might look like, and they

tend to have what we expect the world to be.

And then some kind of very tough, difficult scenario that we

want to make sure our strategy is robust to, and also some

sort of very positive, optimistic scenario, that we want to make sure

our strategy would put us in a position to take advantage of.

That's the advantage of scenario planning is, is is creating

believable states of the future world to then ask, that what you do

is, then you ask about the scenario

you're, or the strategy you're, you're developing.

Is my strategy able to actually be robust

and profitable in all of these different scenarios?

And then, we have something called the balanced scorecard, and

the balanced scorecard, I think of as really more of a strategy execution

tool, and for me, in particular, it's a, it's a good communication tool.

The balance score card was developed by Kaplan

and Norton in, at Harvard in the 90s.

It's designed to measure a broad spectrum of organizational effectiveness.

So, the innovation of the balance score card is to

include multiple perspectives beyond simply

measurable economic and financial criteria.

You know, you will think about well, one kind

of acronym that's, that's sort of in the same spirit of the Balanced Scorecard

you say it would be 3Ps, people, profit, and people, planets,

and profit or whatever order you'd, you want to put them in.

But the idea is to basically keep in mind

the broader set of stakeholders in the, in the business.

And I think that's why it's particularly useful for

communication because you know ,what you want to do is,

you, when you're running a business, you want to

be clear and coherent to all of the stakeholders.

So, no one, sort of, you don't wind up with a

set of stakeholders who really are pulling the organization in a

different type of, type of direction, so it sort of organizes

and communicates to all of the stakeholders the very broad set of

goals and objectives that you have.

In that sense, it, it is more of a, not

only a communication tool but a, but an implementation tool.

A place to kind of warehouse and update all of

your goals and objectives and measures, and things like that.

So, those are just a couple of different types of

strategy development and implementation tools that you could make use of.

When you're thinking about business planning.

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Other Strategy Tools

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