The Five Phases of Strategy Formulation and Implementation
Benjamin Tregoe, cofounder of the global consulting company Kepner-Tregoe, and the firm’s president Mike Freedman developed the five phases of strategic formulation and implementation. These five phases give you a good overview of the strategic journey.
The first phase is strategic intelligence gathering and analysis. As I’ve said before, strategy is about asking the right questions. In Freedman and Tregoe’s first phase, you have to first know which questions to ask, and then go and find the data that will help you answer the questions. There is more data available than ever before. The trick today is to know what data to use and what to ignore.
You should find the data that is going to help you figure out the trends and assumptions about your business. Any other data should be ignored.
When thinking about the future of your business, start with your external environment. What are the trends in society, government, politics, technology, and the economy that are relevant to you? Next look at the trends affecting your key players—your customers and suppliers. Look at your value chain. How will it differ in the future? What key success factors are going to be required? How will your industry change?
Look Inside
Next, pull together the data that helps you see the trends that relate to your company’s internal factors. What sells well, what doesn’t, and why? Which customers and markets are you successful with, and why?
Dissect your past strategies. Which strategies have worked and which haven’t? Which strategies were supported by your employees and other stakeholders, and which weren’t? How well did you implement previous strategies?
The goal is to get all the data you need to build the foundation of the remaining four steps of strategy formulation and implementation. In this phase, you have the information to put forward some assumptions about what your internal and external environments will look like in the future—and what you need to do to succeed. You’ll be able to identify potential problems on the road, but also potential opportunities.
The second phase is strategy formulation—that is, you choose the strategy you are going to follow. Start with the time frame. A strategy should have an endpoint. When you talk about the future, what time period are you talking about?
Your time frame is going to depend on forces inside and outside the organization. New regulations or changes in your industry are going to push you to achieve your strategies within a certain time frame.
A second defining factor are the basic beliefs of your organization. Your strategy must take place in the context of the company’s values and beliefs. Beliefs guide your organization’s day-to-day behavior and practices and build your organization’s culture.
Driving Force
Once you have the parameters of a time frame and know your basic beliefs, you can now decide on your driving force. The driving force is at the heart of Kepner-Tregoe’s formulation phase. It’s the driving force that tells you what products and services you are going to offer and what markets you will (or will not) serve. I described the driving force in detail in Chapter Nine.
Once you’ve chosen your driving force, you have to now align your products and services and your target markets with that driving force. You will not want to attack both new products and new markets at the same time. Let your driving force set your new priorities while maintaining your successful areas. The product or service driving force means you have successful products or services. Growth will come by selling those products in new markets. The market needs driving force requires you to focus on your markets and perhaps find new products or services.
The next step is to lay out the financial targets for the strategy. What do you expect in terms of ROI or profits? What will be your revenues?
The Product/Market Matrix
Close out phase 2 (strategy formulation) by creating a product/market matrix that lists current, modified, and new products horizontally across the top, and all the current, modified, and new markets vertically for each of those products. In each box decide on the degree of emphasis (from “high” to “not applicable” or “don’t pursue”). You now have a roadmap for your strategic profile.
Then move on to the third phase: strategy master project planning. In this phase, you’ll create a list of potential key projects (including existing key projects such as upgrading IT) based on the strategic profile and product/market matrix from phase 2, then analyze and prioritize every potential project. This pool of projects is your action plan for the strategy.
Strategy Implementation
Phase 4 of Freedman and Tregoe’s five phases is strategic implementation. This is the hard part. Pay attention to the details as you roll out projects (and add more projects as more resources become available). Everything is going to impact implementation. Do you have the right organization structure (see Chapter Twenty)? Is the information reaching the people it needs to reach?
One important issue to examine in this phase is culture. Are your culture and strategy aligned? Do the values and beliefs in your company support the decisions you’ve made about products, markets, and financial goals? Look at your performance goals. Are you rewarding people in a way that will encourage them to achieve the strategic goals you’ve set?
Communication is the final piece of the implementation puzzle (see Chapter Nineteen). If you are not communicating the strategy successfully, the strategy will die on the vine.
Monitor, Review, Updates
Phase 5 entails continuously monitoring, reviewing, and updating your strategy. Never let up. Your strategy may be well on its way and then could be derailed because you are not paying close attention. Are people achieving their strategic goals? Are the strategic projects accomplished in a timely manner, and are they yielding the expected results? Things change. If something in the environment changes, you may have to revisit some of your earlier strategic decisions. Also, some of the assumptions made when you were creating the strategy might prove to be wrong. In that case, you need to adjust your strategy or maybe go in a different direction.
Remember: The work of a strategist is never done.