So let's return to our consideration of doing Strategic Analysis and let's highlight now the fourth step and important step which is to Analyze and Recommend Strategic Actions moving forward. If we think back to the set of questions we can ask, we want to add a few more. First, how can we improve our current competitive position? How can we in essence, create more value in our competitive environment? I list here a few things you might think about. Scaling your business, entering new markets, innovating in some way, maybe acquiring a competitor or another player within our market segment. We have a whole host of tools that can help us understand what opportunities and what options might be most viable for us. Ultimately, we want to get to the recommendation phase. Any good strategic analysis will have a set of recommendations to tell us, what do we recommend doing going forward? This is in essence, the point of a strategic analysis, and it's the way we pull together all the tools that we have in our tool kit. So again, we need to move from analysis to action. Then the actions come from asking you these series of questions about what opportunities, what actions can we take moving forward. Another way to frame this same set of questions is to start with our recommendations. Which strategic actions do we recommend going forward? Well the first thing we might want to ask are what are the underlying assumptions of these recommendations? Do they meet our tests that we might have for providing value? This is the essence of a tool called hypothesis testing, which is part of our strategist toolkit. How competitors are likely to react to these actions. Pay off matrices in game theory cam be very useful in understanding that give and play as actions are taken by various competitors within an industry. Does it make sense in the future worlds we envision? We talked before about scenario planning as a tool that helps us envision future scenarios and then work back to understand what are actions we might need to take in those various scenarios if they play out. Does it provide strategic flexibility? Real options analysis again highlighting the desire to have strategic flexibility or at least the value of strategic flexibility provides. So for example, do I have to be all in in a strategic action or do I have a way of staging it, so if things don't turn out the way I'd hoped, I can actually cut investments in those areas. Last, does it create value by actions that exceed the the opportunity cost, in particular as it relates to things like acquisitions. So we have our acquisition analysis tool as another tool in our tool kit to help us understand the value of certain action versus others. And while the acquisition analysis tool by it's very name, is focussed on mergers and acquisitions, it can actually be useful as an understanding of opportunity costs for other strategic investments one might make. So maybe it's a capacity expansion or an R and D investment. A counter opportunity might be, let's just go out and buy that capability ourselves, maybe we go out and buy an existing plan. So when we think of acquisition analysis, I challenge you to think of it more broadly than just the question of a narrow merger in acquisition. Now, all together, these tools help us do decision making under uncertainty. These are various ways to work through the various uncertainties we might face when thinking about a strategic action, and then hopefully get to better decisions moving forward. So when we think about a robust strategic analysis, a number of observations. First, it's fundamentally integrative. The various tools in the tool kit are very helpful in providing various pieces of the puzzle, various pieces of the picture. The goal at the end is to bring all of those tools, all those insights together to create an integrative narrative about what the company or organization should do, moving forward. I always tell students that the tools themselves are what we often refer to as back office and by this I mean, they don't necessarily have to be front and centre in your analysis at the end of the day. What clients, or maybe your boss, would care about is the insights they provide. They're there to help you walk through what are the various possibilities, and what are the various concerns and issues, we need to think through as we're moving forward, doing the strategic analysis. One of the ways I think about strategic analysis is to think it on three different levels. At it's most basic level, a strategic analysis could be a consulting project or a strategic planning exercise where you may have weeks or even months to complete your analysis. A second way to think about strategic analysis is what I would call the overnight request. The boss calls up and says we need to understand X by tomorrow, some issue or maybe some change in the global economy. How do you quickly run through the strategic implications of that Issue in a reasonable but short period of time? Last but not the least, and really the highest order of strategic thinking in my mind is what I've call the elevator pitch. You're on the elevator with the boss or a client and they ask you a question that has strategic implications and you need to very quickly think strategically and come up with a reason and reasonable response. In all three of these examples, it's really the same process of thinking that you go through. It's the same set of tools, thinking about the environment and trends, thinking about competitors, the underlying business structure, what are the capabilities the firm has and the like? But you need to do it quickly and you need to do it comprehensively. Ultimately, Strategic Analysis needs to embrace the uncertainty and complexity of the world. It needs to be fact-based and informed by research and analytics, but it also understands that ultimately you're advancing and testing hypotheses, and you might not have all the answers, but you hopefully have better answers than others.
