5 of the Best Strategy Frameworks for your Organization

There are literally hundreds of strategy frameworks out there, ranging from simple to extremely complicated. This can make choosing the best strategy frameworks for your own organization very hard. We’re going to talk through 5 of the best strategy frameworks, to help you decide which is right for you.

First things first though – let alone the best strategy frameworks, why do you even need a strategy framework? The main reason is to help keep you focused on your goals. There are 3 key steps in implementing a strategy framework. Each of these steps will help you to focus more deeply on your strategy:

Step 1: Choosing the right framework

We’ve picked out 5 of the best strategy frameworks below, and for each one have outlined why they’re useful. We’ve also provided examples of what types of organizations might use them. A key part of choosing the right framework is self reflection about your own organization. What are you trying to achieve? What are your main strengths and weaknesses? All these factors will play heavily into your selection of the best strategy framework.

Step 2: Applying the framework to your goals

As you go through and create your strategic plan, think carefully about each goal you create. How does each goal fit into your chosen framework? You may even find that some goals don’t fit at all. While creating goals for your strategy, apply your strategic framework to the goals you’ve created. This process will force you into thinking deeply about alignment between your goals, strategic framework and overarching vision.

Step 3: Reviewing your plan against your framework

Tools like Cascade help you to analyze how well aligned your strategic plan is with your strategy framework. Cascade allows you view the percentage of goals in your overall strategy sitting in each element of your framework. This will help you determine the amount of focus you’ve giving each element in your strategic framework.

There are other benefits to implementing a strategy framework. This includes helping your people understand how their own goals fit into the bigger picture. For this article we’re going to assume that you’re already sold on the idea of using a framework for your strategy. Instead, we’ll move on to looking at what we consider to be the best strategy frameworks out there.

Before you start choosing your framework, claim your FREE 14 day trial of Cascade

Cascade is the complete strategy execution platform and will help you to implement your chosen framework and much more. Easy to use, incredibly powerful and trusted by some of the largest (and smallest) brands in the world. Pricing starts at $29 per month

Update: We added two new Frameworks to our list:

The VRIO Framework &

The Stakeholder Theory

1. McKinsey’s Strategic Horizons

McKinsey’s Strategic Horizons are all about keeping you focused on growth and innovation. This strategy framework requires you to categorize your goals into 3 different ‘horizons’:

  • Horizon 1: Core Business

    This encompasses the activities that are most closely aligned to your current business. Most of your immediate revenue making activity will sit in horizon 1. If you’re a retailer, this include the day-to-day goals associated with selling, marketing and serving your product/customers. Your goals in horizon 1 will be mostly around improving margins, bettering existing processes and keeping cash coming in.

  • Horizon 2: Emerging Opportunities

    Emerging opportunities are about taking what you already have, and extending it out into new areas of revenue-deriving activity. There may be an initial cost associated with your horizon 2 activities. However, these investments should return fairly reliably based on them being an extension of your current proven business model. Examples of this could include launching new product lines or expanding your business geographically or into new markets.

  • Horizon 3: Blue Sky

    Your blue sky horizon 3 goals will be all about taking your business in new directions. These may be unproven and potentially unprofitable for a significant period of time. This would encompass things like research projects, pilot programmes or entirely new revenue lines that require significant upfront investment.

Whilst there’s no hard and fast rules, we advise clients to aim for a 70/20/10 split between the 3 horizons. This will change based on your risk appetite and resource availability.

Why this is one of the best strategy frameworks:

McKinsey’s Strategic Horizons is a great strategy framework. This is because it keeps you focused on constantly growing your organization and creating future revenue streams. Many organizations become fixated on driving their current profit margins. This is great for the short-term but the lack of diversity introduces significant risk to your business. This may be from changes in the market, customer demand or competitive activity.

What kind of organizations might use McKinsey’s Strategic Horizons:

This is a very versatile framework, and is applicable to the vast majority of organizations and industries. The framework is particularly popular among fast-growing organizations such as startups who need to maintain a fine balance between their cash-flows and their growth rate.

2. Value Disciplines

The Value Disciplines approach works on the assumption that an organization is most likely to excel at what it is already good at. You’re encouraged to choose one main value discipline for your organization and ensure that you have sufficient components in your strategy driving towards this discipline. By dividing your strategic goals into one of the disciplines below, you can make an honest assessment about whether your strategy aligns to your stated competitive advantage / focus.

  • Operational Excellence

    An organization that focuses on operational excellence will aim to provide its customers with high quality products or services at competitive prices with low barriers to purchase. You would focus internally on the streamlining of processes – making as few errors as possible and minimizing superfluous services. Standardizing and increasing economies of scale are part of this procedure. Examples of such organizations are: Dell, Wal-Mart, IKEA, Federal Express, EasyJet and RyanAir.

  • Customer Intimacy

    Your organization feels that its customers are the most important aspect of its business. You would continuously work to meet the customer’s requirements and deliver bespoke solutions and one-on-one solutions where you focus on a long-term customer relationships. Obtaining a once-only large transaction is less attractive than creating a long-lasting intimacy bond with customers. In order to excel at this strategy, you would need to use an intensive Customer Relations Management (CRM) process. Examples of such organizations are: Home Depot, Staples, Ciba-Geigy, Kraft and Frito-Lay.

  • Product Leadership

    An organization that focuses on product leadership will always strive for product development and product innovation. It will want to be the market leader of the specific product and /or service. You would strive to create a continuous stream of innovation that is in demand with both loyal and new buyers. You would invest a lot in R&D and would have a flexible structure to stimulate the performance and creativity of your employees. New and innovative products are often ‘better, smaller, faster, trendier and cheaper’ than their previous iterations. Examples of leading companies are: Apple, Bang & Olufsen, Philips.

Why this is one of the best strategy frameworks:

Value disciplines is one of the best strategy frameworks out there. It’s all about focus, focus and even more focus. When you apply this strategy framework, you acknowledge that you will likely only truly excel in one type of business model. You divert all of your energy into this approach – thus maximizing resources and minimizing distractions.

What kind of organizations might use Value Disciplines:

Again, this flexible framework is applicable to a wide range of industries and products. If your business is by definition already firmly in one of the disciplines, then this model could arguably add less value. For example if you’re a consulting firm, it’s likely that your focus will naturally be on customer intimacy – so the additional focus introduced by the framework might be of limited value. If you’re in an industry where the same product is being sold multiple ways (such as airlines) then the value discipline approach will make more sense and help you to differentiate more strongly.

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3. The Stakeholder Theory

Whilst not a well known model in the broader business world, the stakeholder model looks at strategy a slightly different way. It looks in terms of bringing the focus back onto adding value for specific groups of people:

  • Group 1: Employees

    Goals that directly enhance the well-being of employees would fit into group 1. This could be direct financial goals such as salary increases or intangible benefits to this group such as training and facilities.

  • Group 2: Customers

    Goals and outcomes that benefit customers – such as product improvements or increased accessibility would fall into group 2.

  • Group 3: The Community

    Most organizations bring an element of community benefit such as job creation. Others go much further and are entirely dedicated to improving the local community. Such goals would fall into group 3.

  • Group 4: Shareholders

    Whilst this model is popular among not-for-profits, many profit-making organizations also adopt the stakeholder model. The component of their goals that go toward directly enhancing the bottom line would fall into group 4.

  • Group 5: Society

    You could look at group 5 as an extension of group 3 (community). Goals that will bring benefits to broader society (people who aren’t customers and aren’t in the local community) would be categorized here. This includes major technology advancements, research or environmental work for example.

You can add more groups to the list as you need – there are no hard and fast rules.

Why this is one of the best strategy frameworks:

The nice thing about the stakeholder model is that it’s both extremely flexible as well as easy-to-understand for employees and other people outside of the organization. It’s also often extremely motivating to see a clear link between your work as an employee and direct benefit being realized by another human being.

What kind of organizations might use The Stakeholder Model:

Not-for-profits and academic institutions do really well with the stakeholder model. Often, the grants and funding upon which they rely are directly tied to them being able to demonstrate benefit to stakeholders in the real world, so this model comes in handy when applying for this kind of financial support. The model is also extremely ‘outward friendly’ – meaning that organizations who use the stakeholder model often like to publish their pie charts and results on their public website. The purpose behind this is to help prove what a positive impact they’re having on their stakeholders.

4. The Balanced Scorecard

We couldn’t do a round-up of the best strategy frameworks without mentioning the balanced scorecard – arguably the most popular strategy execution model on the planet. The balanced scorecard is built on the premise that your businesses strategy should be equally divided into the 4 quadrants below:

  • Customer

    This quadrant is about understanding and improving your customers’ satisfaction and their requirements from your organization and what it delivers, whether it’s products or services.

  • Financial

    The financial quadrant should include all of your goals related to improving your bottom line or other key financial KPIs (such as liquidity or margin).

  • Internal Business Process

    This quadrant is around measuring and improving your critical-to-customer process requirements and measures internally.

  • Knowledge, Education, and Growth

    This quadrant (also sometimes known as the people quadrant) focuses on how you educate your employees, how you gain and capture knowledge, and how you use it to maintain a competitive edge against your competitors.

The key to success with the balanced scorecard, and the thing which many organizations overlook, is that setting goals within these quadrants is not enough on its own. For organizations to find success using the Balanced scorecard, clear numerical KPIs should be created for each quadrant of the scorecard. The KPIs for each quadrant should also be regularly tracked and reviewed. Balancing goals between the quadrants is important, but balancing outcomes is what the balanced scorecard is really all about.

Why this is one of the best strategy frameworks:

Depending on your needs, you can implement the balanced scorecard as simply or complexly as you like. Its popularity means that there are tons of help resources out there, as well as highly trained consultants that can help you implement it within your own organization. From our own internal research with clients using Cascade, we do indeed see a strong correlation between the success of a strategic plan, and how evenly balanced it is across the 4 quadrants.

What kind of organizations might use The Balanced Scorecard:

For a long time, the business world has viewed the balanced scorecard as one of the best strategy frameworks around. The balanced scorecard is very attractive to medium size organizations and above (partly due to it’s popularity with consultants). Company boards are well used to seeing their strategy reported using the balanced scorecard, so usually little explanation is required. You may find that your strategy naturally falls across these 4 quadrants as you define your focus areas – in which case you could implement an additional model alongside the balanced scorecard and get the benefit of both.

5. The Ansoff Matrix

The Ansoff framework is specifically geared to organizations who are trying to aggressively grow sales volumes. At the very least those who have identified this as a particular focus area. It may be too specific for your entire business strategy, but if you have a highly targeted strategy around growth, it packs a punch as one of the best strategy frameworks. The Ansoff matrix is divided into 4 main components:

  • Market Development

    This is all about selling more of your current product or service to a different or expanded group of people. Examples of strategies that would fit this part of the matrix would be international (geographic) expansion, or new sales channels such as online.

  • Market Penetration

    In this part of the matrix, you’re trying to sell more of your current product to the same people – but in larger quantities. For example, you may be more aggressive with your marketing but in the same target groups, or you may offer incentives for people to buy more of your product in exchange for a discount.

  • Product Development

    This is all about developing new products to sell to your current customer base. For example, makers of sports shoes have aggressively developed products such as sports clothing to sell to the same group of people who were originally just buying shoes.

  • Diversification

    Diversification entails selling new products to new markets, and is arguably the riskiest component of the Matrix. The risk is clear in that you’ll likely have little knowledge of either the product or the market. However, the possible gains in diversifying are often large.

Your risk appetite will largely dictate which of the components of the matrix you will attack. The order of risk (from low to high) being: Market Penetration, Market Development, Product Development, Diversification. Typically, organizations would not choose to attack all 4 components of the matrix without significant resources available to them.

Why this is one of the best strategy frameworks:

People often see ‘growth’ as a single part of their strategic plan. The Ansoffs Matrix however, forces you to think more deeply about exactly how you’re going to achieve that growth. Arguably it also helps you to focus on just one or two elements at a time.

What kind of organizations might use The Ansoff’s Matrix:

The is one of the best strategy frameworks for organizations who want to build a strategy around growth specifically. It usually won’t apply to startups until they enter a more mature phase of their business. This is because each component of the matrix requires resources to execute, making it better suited to SMEs and Enterprise. Especially big enterprises nearing peak performance in a niche market or geography and are ready to take the next step.

Which are the best strategy frameworks for your organization?

We’ve tried to give some guidance under each framework as to when it might be applicable and for whom. One additional thing to consider is what your long-term vision for your organization really is. Often you’ll be able to draw a correlation between the language and tone of your vision statement (assuming you’ve invested the time in creating a really good one) and the best strategy frameworks for you. Let’s look at a couple of examples:

If your vision statement is filled with concepts of growth and innovation – you might find that McKinsey’s Strategic Horizons is the best strategy framework for you. Arguable The Ansoff’s Matrix could work well also.

If your vision statement is more about solidarity and robustness – then something like the Balanced Scorecard might be more appropriate.

How about if your vision statement is more focused on a particular aspect or niche? Value Disciplines is definitely worth a look.

And finally if your vision statement is grand on a societal level and more focused on people – try out the Stakeholder Model.

Of course, we’re just scratching the surface of what’s available in terms of the best strategy frameworks here – but in our experience of working with over 3000 companies who’ve tried out our strategy platform Cascade, the 5 frameworks above stand out as the best.

Before you start choosing your framework, claim your FREE 14 day trial of Cascade

Cascade is the complete strategy execution platform and will help you to implement your chosen framework and much more. Easy to use, incredibly powerful and trusted by some of the largest (and smallest) brands in the world. Pricing starts at $29 per month

Showing 3 comments
  • Nitin Kapoor
    Reply

    Very well compiled article giving a quick introduction to ‘strategy’.

  • Sweety
    Reply

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    • Maddy Mirkovic
      Reply

      Thank you, glad you find it useful! If you have any suggestions on topics you’d like us to cover, please let us know.

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