In Seven Steps to a sound strategy, I outlined the elements of an effective strategy process. The first step is defining the problem.
It’s not as easy as it may seem, because early in strategy development there’s a lot that isn’t known. Here are some tests for a good problem definition:
- If you solve it, will it materially impact the business?
- Is it scoped down enough that it can be solved in a reasonable amount of time?
- Is there some evidence that the information required exists or can be created?
- Is there an internal customer for the solution?
A good strategy problem is also one that will cause people to think outside the box – to explore new ideas and directions and perhaps to open new doors. Perhaps this is the difference between a strategic conversation and a tactical one – in the strategic space we’re trying to discover new territory, new opportunities, and new ways to work. In the tactical case we’re trying to improve our existing operations.
Another guide has to do with understanding what it is that you don’t know. For example in the semiconductor business, we know that designers are going to build more and more complex chips, but we don’t know what their technical solutions to dealing with that complexity are going to be. If we’re in the business of serving those customers with solution, understanding more about the customer’s preferred approaches to dealing with complexity is a great strategic question, because complexity creates demand, and solutions to complexity represent value.
Finally for this short piece, it’s worth mentioning metrics. A great strategic problem has a key business metric associated with it. Impact on market segment share is a great galvanizing thought for business people. Cost reduction, channel efficiency, customer reach, customer satisfaction all point to key metrics that can change a business for the better, and that are therefore good sources of strategic investigation.