Tools for Strategic Thinking

Introduction

The following tools will assist boards’ environmental scanning and strategic thinking processes. While this guide is directed at board members, the skills are also relevant for chief executives and staff.

SWOT analysis

The systematic review of Strengths, Weaknesses, Opportunities and Threats is one of the most basic and powerful strategic thinking tools available. It should be used regularly by the board when analysing its operating environment and the continuing relevance of its purpose, strategic outcomes and key results. Having identified the strengths, weaknesses, opportunities and threats, the board and management should work to build on the strengths and opportunities and either eliminate the weaknesses or turn them into strengths. Strategies to address the threats should also be developed.

The STTEPP analysis

The STTEPP analysis (and variations on it) is an adjunct to the SWOT analysis, focusing on particular elements of the external environment. STTEPP is an acronym for Social, Technological, Trade, Economic, Physical and Political. These are the six features of the external environment within which most organisations operate. Directors explore each of these as they have an impact on the organisation’s future operations, helping to determine its future viability. The board has to look constantly to the future and be prepared for known or anticipated changes.

Where are we on the curve?

Social philosopher and organisational behaviour expert Charles Handy has described how organisations have a natural ‘wax and wane’ cycle. Handy uses the ‘Sigmoid Curve’ (following page) to show how organisations develop and then decline if they do not reinvent themselves. In his view, organisations are never at greater risk than when they are performing reasonably well.

Point A is where Handy advocates that an organisation should be looking to launch a new curve. At Point A, while it is doing well, it has the resources and the energy to get the new curve through its initial explorations and floundering before the first curve starts to dip. Unfortunately, all the signals coming into the organisation at that point are that everything is going fine, that it would be folly to change a proven formula. It is only at Point B on the first curve, when disaster is looming, that there is real energy for change. And at Point B it may be too late – resources are depleted, energy is low, existing leaders are discredited.

The best organisations recognise the inherent logic of the Sigmoid Curve and are continually self-critical and oriented to actively seek out self-improvement opportunities.

From time to time your board should be asking: “Where are we on the curve?”

Where is your organisation today?

The demand-capability matrix

The vertical axis of the demand-capability matrix represents demand for the organisation’s offerings. The horizontal axis represents its capability to respond to demand. Several criteria for capability can be used, including resource capability, alignment with mission and values, etc. Each programme or service is first placed on the vertical axis, marking the point on the axis where there is agreement about demand. The same process is followed using the capability criteria for the horizontal axis. Where the two marks intersect represents where the programme or service is currently placed on the matrix.

Demand-capability matrix

Capability = Ability to resource for effective outcomes

Demand = Programme and service demands

This tool helps board members appreciate strengths and weaknesses in the organisation’s offering(s).

The discussion that flows from using this tool should not be used to instruct the chief executive how to manage the various programmes and services. However, the board may recommend that the chief executive examine a programme’s ongoing viability if it’s shown to be weak.

Scenarios

“The supreme act of warfare is to subdue the enemy without fighting... use strategy to bend others without coming into conflict. He who can look into the future and discern conditions that are not yet manifest will invariably win. He who sees the obvious wins battles with difficulty; he who looks below the surface of things wins with ease.”

– Sun Tzu, Chinese philosopher and strategist

Scenario thinking is perhaps the most advanced and most demanding of all the strategic thinking tools.

By developing scenarios, the board creates possible combinations of future events against which its thinking can be tested. While each scenario should be markedly different, it should also be feasible. The environmental factors should be both within and beyond the organisation’s control. Although various board members will argue about ‘reasonable likelihood’, the debate around this question is essential in itself.

The whole board, an individual member, or a small group with executive support constructs a description of possible external conditions and events to form a picture of the future. A second scenario can then be created, painting a different future. It is useful to describe a third scenario representing a straight-line projection of how things are now.

These scenarios should avoid taking a best-case/worst-case approach. This limits the board’s thinking and is often biased towards the best-case result. Each scenario should be equally plausible before it is tested. Testing is essentially just asking the question, “What if...?” The board and chief executive analyse each scenario, testing the organisation’s responses and capability against each.

The advantage of board involvement in scenario planning is its external perspective.

Brainstorming

Brainstorming is so widely used that it is often assumed everyone knows how to do it. There is some value in briefly restating some of the key rules for the process. These are designed to ensure that the brainstorming process is effective:

• Accept all ideas offered by participants.
• Don’t analyse ideas as they arise.
• Stop the brainstorming when the ideas dry up.
• Check that everyone understands what is meant by the phrases on the flipchart.
• Arrange the ideas into logical groupings.
• Debate their significance.
• Rank in order of significance.
• Decide what action to take.