`Strategy is the direction and scope of an organisation over long term, which achieves advantage in a changing environment through its configuration resources competencies with aim fulfilling stakeholder expectations`(Johnson, Scholes & Whittington 2008, cited in Paul, Cadle & Yeates 2014). Other ways to define strategy is to `paint a picture`:
• what top management does
• about the organisational direction
• the process that sets in motion the important actions necessary to achieve these directions
• what the organisation should be doing.
Strategy can be developed due to a variety of drivers, including:
• strategy associated with an individual (e.g., CEO)
• from the experiences and views of Internal Managers
• strategy emerges from the people who do the work
• formulate strategy by adopting a formal, carefully planned, design process,
Once a strategy is developed a written statement is needed for many reasons. One of the most important reasons to for a strategy to be written down, is so that it can provide the organisation with a focus and employees can identify how they can contribute to the strategy.
External Environment Analysis
Prior to the development of a strategy an external environmental analysis needs to be undertaken. There are a variety of tools that a business analyst can use to conduct an external environmental analysis:
Tools to assist with External Environment Analysis
PESTEL (or PESTLE)
All organisations operate within the constraints imposed by their environment
Five Forces Model
A framework to analyze level of competition within an industry
Consider the internal (strengths and weaknesses) and external environment (opportunities and threats)
Five Forces Model
PESTEL: This model is a macro view of the external environment, a bird`s eye view, providing different angles to consider when considering the current or a possible future direction.
Five Forces Model: This model is concerned with those forces that affect a company`s ability to serve its customers and make a profit.
SWOT: This model is useful in identifying the strategic fit between the internal environment and resources with the external opportunities. So SWOT can be considered as looking at both the internal environment and the external environment. The SWOT analysis should be undertaken after the preliminary analysis has considered the external and internal environments. The SWOT analysis is particularly useful for summarising "the key strengths, weaknesses, opportunities and threats" (Paul, Cadle & Yeates 2014, p. 49).
Internal Environmental Analysis
Although the analysis undertaken of the external environment can tell managers a lot, a successful strategy must also consider the internal environment as well. An internal environmental analysis looks at how and how well an organisation performs. Mintzberg (1991) devised a major strategic framework that considers competitive forces within an organisation. These forces should not be thought of as static, rather they should be seen as varying continuously over time. The importance of considering forces for the business analyst relate to the current situation as well as the change involved in considering a different direction in the future. Jashapara (2011, p.98) describes the forces within Mintzberg`s model:
• Direction: concerned with strategic vision and may relate to organisations in startup or turnaround situations;
• Efficiency: concerned with standardisation and formalisation of processes and may relate to bureaucratic organisations where rationalisation and restructuring are a major focus
• Proficiency: concerned with tasks requiring high levels of knowledge and skills and may relate to professional organisations
• Concentration: concerned with concentrating efforts on serving certain markets, particularly in large diverse firms
• Innovation: concerned with discovering new things for the customer and may relate to adhocracies comprising skilled experts or multidisciplinary projects.
• Cooperation: concerned with the pulling together of ideology such as norms, beliefs and values
• Competition: concerned with pulling apart of politics and may relate to political organisations where infighting is rife.
Another response to the idea that knowledge management is a fad comes from Lambe (2011) who addressed this by looking at the unacknowledge parentage of knowledge management. Knowledge management is a strategic activity. When undertaking an Internal Environmental Analysis a close consideration of the knowledge activities undertaken within the organisation will help to avoid duplicating effort and encourage innovation and creativity (Debowski, 2006)
Putting a new strategy into place involves a level of risk as it involves change. Depending on how different a new strategy is will have an impact on the nature of the change (incremental change, `bumpy` incremental change, or discontinuous change.
• Incremental change is slow and steady with predictable organisational challenges.
• `Bumpy` incremental change involves moving towards doing things better.
• Discontinuous change involves having to adopt different ways of doing things (Jashapara 2011).
The Balanced Scorecard and the McKinsey 7-S model are useful in implementing strategy.
Knowledge Management Standard
Ferguson (2006) gives an interesting summary of the key points of the Australian Standard.
The Australian Knowledge Management Standard is the first nationally accredited KM standard in the world. Unlike other standards the KM Standard is purely normative and not prescriptive as all other preceding standards have been. The aim is to enhance organisational performance rather than focusing on organisations conforming to prescriptive actions and behaviours. The Knowledge Management Standard (AS5037-2005) is introduced here as Chapter 3: Mapping context and culture, of the Standard relates to strategy. The KM Standard (Standards Australia 2005) states that "knowledge management has the ability to drive strategic intent and alter the organisational context" (p.8)."The strategic intent of the organisation helps to answer the question of `where are we and where do we want to be`. By analysing the strategic context, you can begin to identify the relevant drivers for your knowledge efforts. Drivers act as pointers or indicators towards what knowledge should be developed or leveraged and will help guide and focus knowledge interventions" (Standards Australia 2005, p.14).
1. If you have not already done so, follow ALL the links on this page and make yourself familiar with the concepts and assumptions.
2. Write a 200 word (maximum) yourself by answering the following question:
· Discuss the similarities and differences between how your textbook (Paul, Cadle & Yeates) discuss strategy and how Chapter 3 of the Knowledge Management Standard(Standards Australia 2005) discusses `where are we and where do we want to be`?