How to Choose a Strategic Framework
by Tom Wright, on Nov 13, 2019 11:20:30 PM
Strategic frameworks are great for helping you to create and execute strategy. But choose the wrong one, and you could end up wasting a lot of time and effort. Worse still, the wrong strategic framework could sow confusion and disengagement throughout your organization.
If you've ever worked at a large corporation, it's likely that you've already encountered at least one of the most popular strategic frameworks - the Balanced Scorecard. Many large organizations use the Balanced Scorecard as part of their performance management process. But if you were to ask:
Why did my organization use the Balanced Scorecard, and what tangible benefits did it bring?
Could you answer that question? This article is all about helping you to choose the right strategic framework for your strategy, and understand how to get the most from it.
What is a Strategic Framework?
A strategic framework is a tool that will assist you at a specific stage of the strategic management cycle, most commonly during the strategy formulation and evaluation stage. Usually, strategic frameworks will require you to categorize your goals into a series of groupings. The strategic framework that you choose should therefore reflect the overall outcomes that you want to achieve.
A strategic framework would usually be a component within your overall Strategy Model - though it's important to note that you don't necessarily need a strategic framework to have a complete Strategy Model.
Should You Even be Using a Strategic Framework?
Strategic frameworks are great tools, but they aren't strictly necessary when it comes to formulating and executing strategy. If you're struggling to come up with an effective set of goals, then you should absolutely give strategic frameworks a try. But if you're comfortable with your vision and your plan for getting there - it may be that adding a strategic framework into your Strategy Model only serves to confuse people.
If your organization is new to strategic planning, or has a low degree of strategic maturity, you might want to hold back on full implementation of a strategic framework. That doesn't mean that you can't 'sense check' your plan against a strategic framework - but you don't necessarily have to communicate the framework aspect to your wider team, if you think it risks confusing them.
The Benefits of a Strategic Framework to Strategy Formulation
The benefits of a strategic framework generally apply to two key elements of the strategic management process. The first of these elements is strategy formulation.
Strategic frameworks help in the formulation stage by giving you a 'template' for categorizing your goals. This template then prompts you to think about the different components of the outcomes that you want to achieve.
For example, McKinsey's Strategic Horizons is a great strategic framework to use for organizations who are trying to boost their innovation (more on that later). The framework essentially requires you to categorize your activities as one of 3 'horizons' - which can be simplified to 'short term', 'medium term' and 'long term'. By having those 3 categories in front of you when you create your plan, it requires you to consider whether or not your goals are going to serve the short, medium and long term innovation needs of your organization.
Using a strategic framework in the formulation stage of your strategy helps ensure that you don't miss anything and provides a great sense-check for the robustness of your strategy.
The Benefits of a Strategic Framework to Strategy Implementation
The benefits of a good strategic framework aren't limited to formulation. Once you've started to execute your strategic plan, you'll start to have data about which of your goals you're hitting and which are lagging behind.
Applying a strategic framework at this point helps to analyze where your current strengths and weaknesses are as an organization.
For example, the Stakeholder Theory requires to categorize your goals by which of your key stakeholders will benefit the most from that particular goal (more on that later). For example, say you have a goal of 'Launch a new online customer service portal' - the key stakeholder that will likely benefit the most is 'Customers'.
By applying a strategic framework when looking at the progress of your goals, it can help you get a sense (in the case of Stakeholder Theory) of which of your stakeholders you're serving the best. Not by virtue of the presence of the goals in your strategy, but by virtue of which goals you're actually achieving.
In turn, these kinds of strategic insights can help you make adjustments either to your strategic plan, or to the resources that you're investing in your different goals, to ensure that the outcomes you're achieving line up with your overall vision.
Choosing the Right Strategic Framework
Now that we've identified the benefits of a good strategic framework, let's turn our attention to which strategic framework is best for you.
The answer to this question is going to come down to what problem you're trying to solve by implementing a strategic framework. To make things easier, we'll be focusing on 5 of the best strategic frameworks out there, and telling you which one is best for your set of circumstances.
Note, that we won't be going into the detail of each strategic framework in this article, but for each one we've linked to a more detailed article that explains the framework and how to implement it, so be sure to follow those links for any strategic framework that piques your interest!
The following diagram is a rough guide to help you select the best strategic framework for your strategy:
The x axis of the graph above refers to whether you're looking for a strategic framework that is more focused on formulation (far left) or execution (far right).
The y axis is designed to represent what stage of maturity your organization is at - if you're a younger organization (or team) and trying to grow aggressively you'll be towards the bottom, whereas if you're a more mature organization looking to do 'more of the same but better' you'll be towards the top of the y axis.
Let's dive into each of our strategic frameworks in more detail:
McKinsey's Strategic Horizons
The best strategic framework for organizations looking to grow aggressively, but who want a framework that balances formulation and execution equally.
It's no secret that I love the McKinsey's Strategic Horizon framework. I love it because of all the strategic frameworks out there, it does the best job of straddling both formulation and execution.
This strategic framework requires the creation of a set of long-term goals focused on innovation (Horizon 3), then set out the main goals that you're working on today (Horizon 1) and finally create a set of 'bridging activities' (Horizon 2) for how to get from today, to your ideal future state.
This elegant approach to strategic planning not only helps you to ensure that you're being ambitious (Horizon 3), but also forces you to be realistic about your current business priorities (Horizon 1) and ensures that you have activities in place to help you bridge the gap (Horizon 2).
That's not only useful for strategy formulation, but it also helps with strategy execution as well. Once you start building up tracking data for your goals, you'll get a sense of how effective you're being across each of the 3 horizons. Nailing your Horizon 1 goals, but failing miserably on your Horizon 2 goals? That's a major problem for your strategy - and McKinsey's Strategic Horizons will help you identify that early.
The best strategic framework for organizations who want to keep growing quickly, but already have a good sense of what they need to focus on.
Value Disciplines sits around the middle of our graphic, as it does a pretty good job of touching all the bases when it comes to strategy.
In a nutshell, Value Disciplines requires you to categorize your goals into one of three categories:
- Operational Excellence
- Customer Intimacy
- Product Leadership
The idea being that as an organization, you should primary be focused on just one of the three in order to ensure focus and success.
This approach is helpful for formulation, since it forces you to be razor-focused on ensuring that the majority of goals sit in just one of the quadrants. It also brings benefit to the execution phase however, since over time it's very easy for organizations to lose focus, and applying Value Disciplines on an ongoing basis helps you catch that kind of strategic drift nice and early.
From an organizational maturity perspective, you might want to start off with a slightly more aggressive strategic framework such as Ansoff's Matrix before graduating to something like Value Disciplines as your organization matures. This is because Ansoff's Matrix deals with strategy formulation at a higher level than Value Disciplines.
The best strategic framework for organizations who aren't specifically focused on growth, and have a clear idea of who they need to serve.
Stakeholder Theory is a nice strategic framework that tends to be popular amongst charities, non-profits and government organizations. That's because Stakeholder Theory doesn't really help much with formulation, nor does it help much with trying to grow your business aggressively. But what it does help with, is keeping you laser-focused on ensuring that you're delivering on goals that meet the needs of your primary stakeholders.
Stakeholder Theory is a great way to help you connect your strategy to your culture, as it helps get everyone on the same page about why your organization exists and who it serves.
The Balanced Scorecard
The best strategic framework for organizations who have a clear sense of purpose and want to optimize their efficiency around delivering financial goals.
Despite being arguably the most popular strategic framework, the Balanced Scorecard is really best suited for larger, more mature organizations. That's because the primary aim of the Balanced Scorecard is to help you optimize all aspects of your operations around driving better financial returns.
The Balanced Scorecard is actually quite sophisticated, although people often over-simplify it to be a simple list of categories into which your goals fall:
In reality, the Balanced Scorecard is all about correctly working through your Customer, Process & Knowledge goals in order to optimize your Financial goals.
As such, it can help you with strategy formulation, but only if you already have a good sense of who your target market is, and what your overall strategy is (check out Ansoff's Matrix or McKinsey's Horizons if you're looking for a strong formulation framework for earlier-stage organizations).
Rather, the Balanced Scorecard is well suited to organizations who are mature, and looking for a tool to constantly optimize execution towards meeting their financial targets.
The best strategic framework for organizations early-on in the formulation stage who are looking to grow aggressively and with razor-sharp focus.
Ansoff's Matrix is almost entirely a formulation tool. It requires you to make a firm decision about whether you want your strategy to be:
- Market Development
- Market Penetration
- Product Development
Each of these strategies is different and each describes a high-level way of aligning your organization. You should arguably be focused on one and one alone, especially in the early stages of your organization's maturity.
This makes it a great formulation tool, but less useful for execution - since almost all of your goals will fall into one category, which won't give you much insight when you overlay the progress of your goals.
So, What's the Best Strategic Framework for you?
Hopefully the above graphics and explanations will help you to select the right strategic framework for your needs. Remember, you may not even need a strategic framework if you find that none of the above resonates - and that's ok!
Don't forget to click the links in the article to dive deeper into each strategic framework and if you've got any questions, comments or feedback - just add it below :)