Hi there! If you’re just starting out in business analysis, it may be daunting because you’ve no idea how to approach your workshops or deliverables.
The thing is, there is a standard set of techniques that a business analyst employs in his or her work. 3 of the important business analysis techniques that I often employ have to do with strategy.
What is the current state of a business? Where does the business want to go and how does it get there? Essentially, what does ‘success looks like to an organization’? These are some of the questions that BA strategy techniques try to answer
What is Business Analysis?
Before we delve into the three techniques I mentioned above, it’s useful to first understand what business analysis is.
Business analysis is the process of assessing an organization’s structure, processes, technology, and capabilities to identify and define solutions to roadblocks that impede the achievement of organizational goals. It helps a company adapt to changing business and regulatory environments and grow in the manner defined by management.
Actually, there are two broad types of business analysis.
One is the strategic type of analysis (which is what we’ll cover in this article). The other type is business systems analysis – which has to do with gathering and testing requirements for the implementation of IT systems.
The latter type of BA tends to be a lot more common out there – and is a role I play day to day in my job.
However, in this article, I want to concentrate more on the strategic type of business analysis and show you three techniques which help in this type of work.
Let’s now move on to these three important BA techniques.
The first business analysis technique we’ll discuss is strategic analysis.
Strategic analysis is used by organizations to identify the options that it has to deliver products and services that meet the needs of its customers and grow revenue.
When you distill it down to simple terms, a company’s main goal is to make profits. In any given situation, there may be many ways to do this. One could try to invent a new robot cleaner for the home, be middleman in a transaction and earn a commission, write a book, open a restaurant, etc.
Strategic analysis helps the CEO of a company decide which course of action to take, taking into account the resources (i.e. money, people, time) that are available on hand.
One of the key toolkits for strategic analysis is Porter’s Generic Strategies.
Porter’s strategies state that there are three basic strategic options for a company to for gaining competitive advantage. What are they? They are: Cost Leadership, Differentiation and Focus.
Companies that follow a Cost Leadership option can either gain market share by lowering prices while maintaining profits. This is made possible by reducing costs in the company to a level below that of competitors.
Other companies follow a Differentiation strategy. These companies win market share developing products that have unique features that are valued by their customers.
Another set of companies will follow Focus strategies. A Focus strategy involves application of Cost Leadership or Differentiation within niche markets. By concentrating on niche markets, the company can compete in ways that other broad-based players cannot.
To choose between the options, companies usually perform a SWOT analysis to identify strengths, weaknesses, opportunities and threats in the market. This can be couple with a Five Forces Analysis to understand the nature of the industry better.
Porter’s generic strategies can be applied to any industry. Of course, there may be other tools out there for strategic analysis that you’ve come across – Porter’s approach is not the only one out there.
2. Strategy Definition
Once the strategy analysis has been carried out, the CEO should then choose ONE strategic option. Many companies may try to hedge their bets by doing a bit of this and a bit of that – that typically doesn’t work well.
Perhaps you’ve chosen to compete based on Differentiation. How do you then bring the strategy down one level lower? Well, you DEFINE the strategy. This means that you spell out the specific steps to take in executing the strategy.
Some of the useful questions to ask when defining a strategy include:
- What are the overarching strategic objectives that we have? These should be aligned to the strategic option chosen chosen earlier.
- For each strategic objective, what are the strategic imperatives that can be carried out to meet the objective? Imperatives refer to action steps and projects that can be implemented to achieve the strategic objective.
In defining a strategy, it’s also important to take into consideration the the external and internal environment. For example:
- What are the competitors out there doing?
- Are they are legal or regulatory restrictions that we the company needs to comply with?
- What are the customers saying? Do they have feedback on how to improve the way the company operates?
Once a company’s strategy is defined, it is defined, it is important that it is documented and circulated to all levels of employees in a company. Look at some examples out there, e.g. Starbucks. The company prides itself in serving the best coffee and having the best customer service around the world.
Walk into any Starbucks in any city in the world and you’re assured of the same level of customer service and product quality you’d expect to get at home. That is a perfect example of a clearly defined strategy with a tone “set at the top” and cascaded downwards to all levels of the company.
The next step after strategy definition is to consider the actual implementation of the strategy. Before we delve into this topic, let it be known that implementing a strategy is tough. Very tough.
And most organizations don’t manage to get it right. Sadly, this is something I’ve observed in my many years as a business consultant – many executives “speak” strategy but fail to get it executed beyond diagrams, blueprints or presentation slides.
Typically, for each of your strategic imperatives, there are three things to take into account during implementation:
Aligning each of your strategic imperatives along these dimensions provides a good framework to ensure nothing gets missed out.
Let’s look at an example.
A company (e.g. say a private bank) has already defined, as part of its 3-year business strategy to grow revenue by 20% from its operations in Southeast Asia – covering Singapore, Malaysia, Thailand and Indonesia.
It has identified three strategic imperatives to do this:
- Hire more relationship managers who have an established base of customers in each country.
- Increase operational effectiveness through the use of technology
- Improving the customer experience and provide services anytime, anywhere
Each of these imperatives can be analyzed further along the People, Process and Technology dimensions.
For example, if the private bank hires more relationship managers, that would mean we would mean a project in the People dimension would need to be kicked off.
For example, the company would need to review the current organizational hierarchy for relationship managers and determine how many more are to be hired to meet revenue targets. Also, improve the compensation structure or incentives so that top talent would be attracted to the bank.
Let’s take the second strategic imperative as an example. To increase operational effectiveness through the use of technology means that perhaps a new core private banking system or a new portfolio management tool would need to be rolled out to the front, middle and back offices of the bank. These are all projects aligned to the Technology dimension of our framework.
For the third strategic imperative, we would be talking about two dimensions. For example, improving the customer experience may involve streamlining business processes for say, responding customer inquiries (Process dimension) and also implementing a new customer relationship management system (Technology dimension)
As you can see, all strategic imperatives eventually translate into projects along the People, Process and Technology dimensions. Collectively, some consulting firms also call these dimensions the “Operating Model” of a company. If you hear these buzzwords from a consultant in future, you’ll know what they mean.
Wrapping Up …
Whew, that’s a lot of material on business strategy. Of course, many of you will realize that the above is only the very tip of the iceberg when we talk about strategic business analysis.
However, the three business analysis techniques you’ve seen above apply very well in almost any organizational context – whether we’re talking about a bank, a pharmaceutical firm or a university.
By the way, if you want to learn more about strategy, here’s a good introductory book that I strongly recommend.
And that’s all I have for now. Until next time, have fun being a business analyst and formulating strategy!