Strategic Reviews — Typical Content and the Most Common Mistake Management Makes

“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.”
Donald Rumsfeld, Former US Secretary of Defense

“Just one more question.”
Lt Columbo, San Francisco Police Department

In our last post we covered how critical it is to learn the lesson of the great detective, and treat a strategic review as an investigation. In this post, we look at the basic areas to cover in a review, and where companies classically miss valuable insights by not adopting this inquisitive mindset.

If it’s going to be useful, a strategic review should cover a minimum of five areas:

1. Positioning at a macro level—this classically consists of some measure of market attractiveness and some measure of competitive positioning

2. Positioning at a micro level—this review covers the buying process, routes to market, purchase criteria, company performance against those criteria, performance versus competitors, customer purchase intentions, and switching

3. A review of financial performance by business unit or product or geography

4. An assessment of the risks and opportunities the company faces

5. Strategic decisions about where and how to compete as a result of the investigation

In addition, management might then want to look at some specifics or angles or hypotheses it wants to test, such as market appetite for a new product. Management may also want to put together projections and a business case to support the decision making and subsequent planning process.

This list above is over-simplified, but you get the gist.

The fatal mistake to make with strategic reviews is to stay at too high a level, be too assumptive and too generic. Without asking that next question, leaving all the difficult stones unturned, you’re left with a strategy built on limited and superficial knowledge, Mr Rumsfeld’s known knowns. You never get to the unknown unknowns where the insights lie.

When management adopts this high-level mindset, our five review areas above tend to play out as follows:

1. Management defines its markets too broadly and so is in no position to understand properly the size, growth or any other measure of attractiveness of its different businesses’ markets. Also, without a tightly-defined view of which markets it is competing in, management doesn’t understand who it is really competing against for its most important business

2. With a high-level mindset, positioning at micro level is barely covered - it appears to low level for strategic work. As a result, management misses critical information about customer budgets and spend intentions, revenue security, requirements for service improvements, and other tangible, useful facts

3. Financial performance by business unit/product/geography, etc ends up being confined to Board KPIs and familiar numbers, with the consequence that some very common and vitally important drivers of economic value and returns are missed completely in analysis

4. With excessively superficial and generic information from areas 1-3, the range of risks and opportunities becomes much too broad and irrelevant. Management is then faced to many poorly-defined risks to know how to mitigate them, and has an excessively long list of nonspecific opportunities that it can only guess how to prioritise

5. With no new insights raised to challenge assumptions, the strategy ends up being very close to that inside the CEO’s mind prior to the review. Unless the CEO has incredible prescience, there is only a slim chance of this being the best strategy for the business

In the rest of this series, we cover how the investigative mindset gives us more insight and clues in areas 1-3. With this deeper and more accurate level of knowledge, management can make more valuable decisions and take more relevant actions.


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Latitude Partners Ltd
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www.latitude.co.uk

For the full text of this series email steve@latitude.co.uk