Understanding Strategic Business Planning for Business Analysts.
Talk at the BA World Conference.
Firstly we’ll look at the business environment.
The surroundings of the business has a huge impact on the outcome of any strategy.
Now an organisation may operate in a…..positive environment.
But what if it is operating in a…..negative environment?
Well then it may have detrimental effects to the business.
An organisation would be a smart company if they took good note of their surroundings.
Take for example….professional golf.
(show golf ball)
Professional golfers are not only good at accurately taking a swing and controlling the speed and height of the ball, but they also take into account how the environment affects their game.
Pro golfers even look at the type of grass used on the golf course they are playing at.
For example, certain types of grass will affect the size of a scuff mark or divot and your ability to create one.
Divots are the amount of grass that shoots out after you hit the ball. It is very annoying to have to fix and also if your ball lands in someone else’s divot.
Some grasses, such as bent grass, have a thinner and more delicate blade structure than most other grasses while their root structures are also more vertical.
Together these traits mean that these grasses more easily produce divots.
On the other hand, the Bermuda and fescue grasses that can be seen on a large number of golf courses in Queensland make it tougher to produce divots. These grasses feature wider and tougher blades.
PEST Analysis (political, economic, social and technical) is a technique we use to analyse the business environment.
But it can be very time consuming to do, and you would be forever finding new factors which may have little or no affect on your organisation’s strategy.
So what we need to do is go back to the fundamentals:
In making a profit, the firm needs to create value for customers. This requires an understanding of the customers:
Who are they? What do they like? Why do they buy?
In creating value, the goods and services are acquired from suppliers. So an understanding of the suppliers is required:
Who do they also supply to? What do they supply? How can we develop a better relationship with them?
Next, your organisations ability to generate profit from value creating activities depends on the competition and how intense it is, this then relies on an understanding of your competition:
Who are they? What are they good at? What aren’t they good at? Who are their customers? Why are they in business?
So your organisations business environment is formed by its relationship with three sets of players in the game:
Customers, suppliers, and competitors.
This is its industry environment.
So a key part in understanding the game being played is the ability to read your customers and know how to satisfy their needs depending on changes in the business environment.
Professional golfers for example, read the grass by taking into account the characteristics of the putting grass used. This understanding enables them to be able to determine the ‘influence’ on their ball – that is, what factors will impact the direction and distance they require from a stroke.
There are two factors which influence their ability to read the grass – slope and grain
Most greens are designed with some slope so they can drain away water and any green may include a number of slopes to influence your putt.
Grain refers to the tendency of a species of grass to grow in a certain direction.
Because greenkeepers rotate mowing patterns, a uniform pattern of grain generally is not established.
Still, it’s valuable to understand the impact of grain.
Grain has a tendency to run in the direction of the natural form of the land - away from hills and toward places where creeks and ponds naturally occur.
Exposure to sunlight at only certain times is another factor. For example, Bermuda grass has a tendency to grow toward the sun.
A professional will know whether they are putting the ball against the grain or not, and will change their style to suit.
So the solution to the problem of environmental change is to understand your markets characteristics, that is, what are your customer’s underlying needs, rather than what are the specific products your customers need.
Now we have just been talking about strategy and the external environment.
Strategy is also concerned with matching the firm’s resources and capabilities to gain a competitive advantage.