In this blog, we'll explore the strategic risks, opportunities, threats, and assumptions you can centrally manage as part of a continuous approach to strategy
When it comes to our strategic and operational plans, there are inherent risks that will exist. However, how we identify, act, and learn from these issues is crucial to creating a culture of achievement in your organization.
Risk logs are nothing new. They’ve always formed a recognized role in all portfolio, program, and project management methodologies.
The same is true for opportunities and threats. Practically every strategy includes SWOT analysis in one form or another.
And defining strategic or planning assumptions has been considered best-practice management theory.
So why is it that, as strategic and operational leaders, we can’t readily point to this information, let alone leverage it?
What if we could centrally manage this information and build it into our strategic process?
This blog answers the second question and shows how strategic issues are essential in a continuous approach to strategy.
What are the different types of strategic issues?
You can use any label you see fit. We call them “strategic issues.”
These represent items that can significantly influence a positive or negative outcome for your strategy and strategic plan.
These come in the shape of the ROTA framework.
ROTA – strategic issue framework
Let’s look in more detail at each of these types of strategic issues:
Strategic risks might impact strategic outcomes or, conversely, might be created by an organization’s strategy and strategic plan.
Sometimes, businesses can try to avoid these risks, but other times they have to take the chance.
There are different types of risks to consider:
1. Poor planning
One of the most common strategic risks is poor planning. Without a clear plan, businesses can quickly become bogged down in day-to-day operations and lose sight of their long-term goals. Additionally, without a plan, businesses may find it challenging to allocate resources effectively and make decisions promptly.
2. Lack of market research
Another common strategic risk is a lack of market research. Businesses that do not take the time to understand their target market are more likely to make decisions that are not in line with customer needs and preferences. This can lead to lost sales and decreased profitability.
3. Overreliance on one customer or supplier
Another strategic risk is an overreliance on one customer or supplier. If a business relies too heavily on one customer or supplier, it may be at risk if that customer or supplier decides to take their business elsewhere. This can lead to lost revenue and decreased profitability.
4. Entering into new markets without adequate research
Another strategic risk is entering into new markets without adequate research. Businesses that do not take the time to understand a new market may find themselves at a disadvantage and may struggle to compete against more established businesses. This can lead to lost sales and decreased market share.
5. Making decisions without considering all options
Another common strategic risk is making decisions without considering all options. When businesses make decisions without considering all of the potential options, they may make choices that are not in the company's best interests. This can lead to missed opportunities and wasted resources
Strategic opportunities represent future opportunities for exploitation, maximize leverage of strengths, and minimize risks associated with weaknesses.
Some examples of strategic opportunities include:
One strategic opportunity that businesses often pursue is diversification. This involves expanding into new markets or product categories to reduce the risk of reliance on a single market or product. Diversification can effectively boost growth and profitability, but it can also be risky if not done correctly.
Another strategic opportunity that businesses may pursue is acquisition. This involves purchasing another company to quickly expand into new markets or gain access to new technology or talent. Acquisitions can effectively grow a business, but they can also be risky and expensive.
3. Joint Ventures
A joint venture is another type of strategic opportunity that businesses may pursue. This involves partnering with another company to share the risks and rewards of pursuing a new opportunity. Joint ventures can effectively access new markets or technology, but they can also be risky if the partnership does not work out as planned.
Licensing is another type of strategic opportunity that businesses may pursue. This involves agreeing with another company to use their technology, brand, or other intellectual property. Licensing can effectively access new markets or products, but it can also be risky if the agreement is not carefully negotiated.
Franchising is another type of strategic opportunity that businesses may pursue. This involves agreeing with another company to use its brand, business model, and other intellectual property. Franchising can effectively expand into new markets, but it can also be risky if the franchise agreement is not carefully negotiated.
6. Increasing demand for products and services
One of the most significant strategic opportunities is the increasing demand for their products and services. With the world population projected to reach 9.7 billion by 2050, the demand for goods and services will only increase. Businesses anticipating and meeting this demand will be in a solid position to succeed.
7. Emerging markets
Another strategic opportunity for businesses is the growth of emerging markets. Countries such as China, India, and Brazil are experiencing rapid economic growth and becoming increasingly essential business markets worldwide. Companies that can tap into these markets will be well-positioned for future growth.
8. Technology advancements
Another opportunity for businesses is the continual advancement of technology. New technologies can give businesses a competitive advantage and help them improve their operations. For example, using artificial intelligence can help businesses automate tasks, saving time and money.
9. Changes in consumer behavior
A final strategic opportunity that businesses should be aware of changes in consumer behavior. As consumers’ tastes and preferences change, businesses need to adapt their offerings to stay relevant. Additionally, as consumers become more health-conscious, environmentally conscious, and socially conscious, businesses must consider these trends when developing new products and services.
Often arising from the change, external threats are any aspect of the external environment (or “market universe”) that might negatively impact strategic outcomes.
Examples of strategic threats include:
1. Economic threats
Economic threats can come from a recession or depression, leading to decreased demand for a company's products or services. Additionally, economic threats can come from competitor companies that may be able to offer lower prices for their products or services.
2. Social threats
Social threats can come from various sources, such as demographic changes, consumer tastes, or social trends. For example, a decrease in the number of people interested in your product or service could pose a social threat to your business.
3. Technological threats
Technological threats can come from various sources, such as new technologies that make your products or services obsolete or new competitors who are using better technology than you. For example, if a new technology makes your product or service obsolete, that could pose a technological threat to your business.
4. Political threats
Political threats can come from various sources, such as changes in government regulations or policies, new taxes or tariffs, or international events that could impact your business. For example, if the government were to enact a new regulation that made it more difficult for you to do business, that could pose a political threat to your business.
5. Environmental threats
Environmental threats can come from various sources, such as natural disasters, climate change, or pollution. For example, an earthquake that destroyed one of your factories would be an environmental threat to your business.
6. Legal threats are a company in danger of being sued or fined by the government or citizens. This can happen if the company violates environmental regulations, produces unsafe products, or engages in illegal activities.
When formulating a strategy or constructing a strategic plan, assumptions were made (hopefully assumptions that were fact-based and validated wherever possible).
These assumptions are not just financial and can be far wider regarding expected industry or market trends.
Examples of strategic assumptions include a company understanding:
1. Customers and their needs.
2. Competitors and their offerings.
3. Its strengths and weaknesses.
4. The market trends.
5. Its financial situation.
The guiding principles of strategic issues
Managing strategic issues is a snap, provided you follow these basic principles.
1. Central management
Centralize your strategic issues so everyone can access up-to-date information, provide updates, collaborate, and report.
All strategic issues have context. Show traceability between issues and the different elements of your strategy and strategic plan.
It almost goes without saying.
Assign a clear owner for each strategic issue and make this individual or team both responsible and accountable for managing it and reporting on it in review meetings.
4. Simple lifecycle
Very simply, strategic issues can be ‘open’ and ‘closed.’
As a software company and without really breaking a sweat, we could come up with cases where you might want to suspend a strategic issue but keep it simple to start with.
Which issues are we aware of (open), and have we dealt with them, or can we otherwise remove them from our radar (closed)?
It is worth considering attaching start and end dates to strategic issues. Start dates can be as simple as when the strategic issue was raised.
How to review strategic issues
How often should you track your environment?
Here are three next steps to consider when building a radar to track your environment: How often you meet as a team to discuss strategic issues will vary from organization to organization.
Should you have a dedicated strategic issue review session?
Similarly, whether you have a dedicated meeting to sharpen focus or ‘piggyback’ an existing meeting (such as a strategy review) will depend on your situation.
Should all strategic issues be monitored?
It’s worth noting that not all open strategic issues need to be reviewed in each strategy review. Any factors might dictate when or how often individual strategic issues are discussed as a team.
The challenges of managing strategic issues
It is not the management of strategic issues or their review that tends to be challenging.
Instead, the challenges often lie in monitoring for changes in these strategic issues and, subsequently, how to adapt the strategy or your plans to course correct or pivot.
Adapting strategic direction in this way is an essential capability of organizations aspiring to be more continuous with their strategy management, being better at responding to changing market conditions.
We tackle this topic in a separate blog, so for now, we’ll focus on how best to monitor these strategic issues.
How to monitor strategic issues
All strategic issues can be manually monitored or tracked if enough time can be made available and suitable sources can be identified.
In both cases, the software can help.
Market and competitive intelligence software can automatically search hundreds of thousands of sources and report any intelligence from its research.
Automation is the key to enabling thorough research.
But this software is not an alternative to human research and analysis.
Think of it more as augmentation helping to overcome the fact that, as humans, “we don’t know what we don’t know.”
Taking the next step
Start by building a consolidated list of strategic issues categorized by type for your current organization's strategy and plan.
You can then get a holistic sense of priorities based on impact and begin to arrive at a review frequency for each strategic issue.
Learn more about continuous strategy and strategy execution
Take the next steps in your journey to embracing continuous strategy by exploring our strategy execution resource hub or any of the below:
- Key to strategy execution eBook: Read how companies like Danaher and HP have mastered strategy execution and what you can learn from them.
- What does it mean to be Business Agile?: Leap into the future of strategic planning and execution with this fascinating insight.
- How AI and Machine-Assisted Learning will help strategy execution: As Artificial Intelligence becomes a mainstay in our lives, read how AI and machine-assisted learning will evolve to support your strategy execution.
About the author
James Davies is i-nexus’ Chief Product Officer. As an experienced software executive with 20 years of experience working in Silicon Valley, USA, James has held senior leadership roles in three venture capital-backed software start-ups (including CEO, CPO, and Chairman). He has delivered management consulting services to some of the world’s largest technology companies.
If you’d like to talk more about the future of strategy execution, reach out to him on email@example.com or connect with James on LinkedIn for the latest insights