The strategy process in five steps: from strategic question to chosen course
Five steps in a fixed order, each with a result the next step builds on.
In this topic: Strategy 7
From strategic question to chosen course, one step at a time
The strategy process in five steps, with what each step has to deliver before the next one can start.
Many strategy sessions start with a whiteboard and a SWOT. Two afternoons later there are sixty sticky notes and no decision. The problem is rarely a lack of ideas but the order: without a sharp question, clear roles and an agreed way of deciding, the analysis has no direction and the choice gets postponed. A strategy process that works fixes the order first.
The five steps below take you from a strategic question to a chosen course, in an owner-managed firm as well as in a division of a large group; only the weight of each step differs. Each step has its own article, and all of them follow one fictitious company, Norvane Building Services, so you can see how one result feeds the next.
A good process beats a clever analysis
Dan Lovallo and Olivier Sibony studied 1,048 major business decisions and found that process mattered more than analysis by a factor of six (source: McKinsey, March 2010). Process here means open debate, room for dissent and criteria agreed before the options are on the table. That needs no large team or costly data, only discipline about how you decide.
The strategy process in five steps
- 01
Approach and framework
Write the strategic question, set the scope and horizon, decide who takes part and who decides, and agree the rules of play. Result: a process plan on one page.
- 02
External analysis
Work from the macro environment through your industry and customers to your competitors. Result: opportunities and threats ranked by impact and likelihood.
- 03
Internal analysis
Look at results, activities, capabilities and people, and compare them with your industry. Result: strengths and weaknesses backed by figures, plus the capabilities that give you an edge.
- 04
SWOT analysis and TOWS matrix
Bring the outside and the inside together in a SWOT with a confrontation matrix, then turn the hot spots into strategic options with the TOWS matrix. Result: a short list of options that really differ.
- 05
Evaluate, choose and implement
Score the options on criteria agreed in advance, make the choice, and translate it into goals, owners and a meeting rhythm. Result: a chosen course and an execution agenda.
Here is what each step produced for Norvane, a building services firm with 35 staff that had seen its margin fall for three years.
| Step | What Norvane had at the end of the step |
|---|---|
| Approach and framework | One question: keep bidding for new-build work, or put scarce technicians on maintenance and retrofit? Five half-day sessions; the managing director decides. |
| External analysis | Four factors above the cut-off, led by the technician shortage and the retrofit programmes of large landlords. |
| Internal analysis | Long client relationships and certified heat-pump technicians as strengths; too few technicians and low-margin new-build work as weaknesses. |
| SWOT and TOWS | A matrix pointing to retrofit, and four options, including carrying on as now and selling. |
| Evaluate and choose | The retrofit and maintenance route, a decision note and four goals for year four. |
Fictitious Firmfocus example. The full figures are in the step articles.
Linear on paper, iterative in practice
Henry Mintzberg and James Waters described real strategies as a mix of the deliberate (what you planned) and the emergent (patterns that formed without a plan). In practice you will loop back: the internal analysis may show that your question was too narrow, or an option may need another look at a competitor. That is not a failure of the process. Two habits help: write down the assumption behind every choice so you can test it later, and once a year look at what emerged without a plan, because some of your best moves may have started there.
How long does a strategy process take, and who takes part?
| Small business | Mid-sized company | Larger organisation | |
|---|---|---|---|
| Participants | Owner, a partner or key employee, the accountant as critic | Management team, a few specialists, an outside critic | Board, strategy team, business unit leaders, supervisory or non-executive directors |
| Duration | Two to four half-days over a few weeks | Six to ten weeks | Three to six months for a first full round |
| Written result | A one-page strategic plan | A plan with goals and initiatives per team | A group plan and a plan per unit |
| Review | Once a year, or when something big changes | Quarterly check, annual reset | Annual cycle linked to the budget |
More detail on each format is in strategy for small businesses and strategic planning in large organisations.
Five pitfalls in the strategy process
- Starting with the answer: if the favourite is fixed first, the analysis becomes a justification after the fact.
- The budget as starting point: budgets anchor on last year's figures. Keep strategy and budget apart until the choice is made.
- Long lists without ranking: in a review of SWOTs made for UK companies, Hill and Westbrook found lists of over 40 factors on average, with no attempt to verify them (source: Long Range Planning, February 1997).
- The boss speaks first: once the decision-maker has given a view, others fall in line. Collect views in writing first and let the decision-maker speak last.
- The hockey stick: plans that forecast a sharp rise after flat years are common, yet the odds of a mid-table company reaching the top fifth of performers within ten years were 8 percent (source: McKinsey, February 2018).
Write your strategic question in one sentence before you plan anything else. Norvane's version: "Should we keep bidding for new-build projects, or concentrate our scarce technicians on maintenance and retrofit of existing buildings, and what would that shift take?" If you cannot write the sentence, start there.
After the process: write it down and use it
A choice only works when people can act on it. The one-page strategic plan captures the course, the goals and the initiatives, and put it in writing and apply covers mission, vision and how to keep the plan alive. Every other strategy topic, from analysis models to execution, is in the Strategy overview.
How long does a strategy process take?
Who should take part in developing a strategy?
Can I skip steps in the strategy process?
Do I need an outside consultant?
Sources
- McKinsey Quarterly, Lovallo and Sibony: The case for behavioral strategy (March 2010)
- Mintzberg and Waters, Strategic Management Journal: Of strategies, deliberate and emergent (July 1985)
- Hill and Westbrook, Long Range Planning: SWOT analysis, it's time for a product recall (February 1997)
- McKinsey Quarterly, Bradley, Hirt and Smit: Strategy to beat the odds (February 2018)
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