There are a number of business frameworks that can be applied during the strategic planning process. Let’s analyse the differences between them, their advantages and application areas.
Comparative Table of Strategic Planning Frameworks
The table below shows where each framework contributes most to the strategic planning process.
|Strategic Planning Tool||Step 1. Mission, Vision, Values||Step 2. Strategy Formulation||Step 3. Strategy Description||Step 4. Strategy Cascading||Step 5. Strategy Execution|
While the contribution score is quite subjective, we can see that conceptually, there are two types of frameworks:
- Strategy execution frameworks. Such as the Balanced Scorecard for the overall strategy and the more lightweight OKR framework for specific challenges.
- Strategy formulation frameworks. SWOT, Three Horizons, Constraints Analysis, PESTEL, etc. that help organizations to generate new ideas (step 2 of the strategic planning process). Most of such frameworks also help to describe those ideas on certain diagrams (step 3 of strategic planning) but provide no guidance for strategy cascading.
Below, we discuss these two types of frameworks. We will also talk about the role of software in the automation of strategy planning and execution.
The lesson 3 of the free strategic planning course is focused on using different business frameworks for strategy definition. Here is a full video of the lesson:
Understanding Strategic Planning
Each business framework has its own application area. In the previous article we discussed the typical steps of strategic planning, we are going to get back to these steps often, so let’s list them once again:
- Step 1. Define top-level goals. In this step, an organization defines its mission, vision, core values, strategic priorities.
- Step 2. Formulating business hypothesis. Following the ideas formulated in step 1, we can now focus on more specific goals that would help us to achieve the vision.
- Step 3. Strategy description. Any strategy is better when it is written down in some form. In this step, we use strategy maps and similar techniques to articulate strategy.
- Step 4. Strategy cascading. Having a single top-level strategy is not enough. We need to find ways to explain it to all business units, teams, and individuals.
- Step 5. Strategy execution. In this step, our focus is on action plans and performance indicators. We also learn during execution and will use those insights in step 2.
Strategy Execution Frameworks
Strategy execution frameworks address a wide range of strategy-related challenges, from strategy formulation and description to strategy cascading and execution.
Balanced Scorecard Framework
This is one of the most used business tools in general, specifically for strategic planning. The concept evolved from a measurement system (“balancing” indicators across the perspectives) to the recognized strategy execution framework.
- The main part of a properly designed Balanced Scorecard is a strategy map
- A strategy map includes strategic themes and four categories (perspectives)
- Goals on the strategy map are connected by cause and effect logic
- Leading and lagging performance indicators are aligned with the goals
- Action plans or initiatives explain how exactly the goal will be executed
- The strategy is cascaded (aligned) across the organization
Like any business tool, in the wrong hands, it might not work as expected. Before starting the Balanced Scorecard project, it makes sense to understand its advantages and possible drawbacks.
Starting as a lightweight goal setting framework, it was adopted by many tech companies. OKR is now getting the fame of agile strategy execution tool.
- OKR framework suggests focusing on a few important goals (“Objectives”) and tracking their execution with several lagging indicators (“Key Results”)
- The OKR process consists of four steps that end with a results review
- The recommended process cycle time is one quarter
The comparison of BSC and OKR frameworks indicates that the frameworks solve similar business challenges on different levels. BSC is more suitable for overall strategic planning, while OKR works better on the lower levels and during the execution stage.
Hoshin Kanri framework is similar to OKR and BSC:
- The framework focuses on continuous improvement (Plan-Do-Check-Act cycle)
- Underlines the importance of strategy alignment and discussion (Catchball)
- Suggests tracking an individual’s performance
The Hoshin Kanri Matrix provides an alternative tool for strategy description by giving a one-page overview of the top-level strategic priorities and their connection to the specific improvement goals and targets.
OGSM Model – Objectives, Goals, Strategies, Measures
The OGSM model looks very similar to the Hoshin Kanri framework. Both models appeared in Japan in the 1950s; both models suggest looking at strategy from the four different levels of abstraction. Similar to Hoshin Kanri, OGSM is a one-page document, but there is no X-matrix.
Here is a comparison table of the models’ vocabulary:
|Strategies||Priorities and activities|
While the OGSM model is simple, there are certain problems that each organization solves in its own way:
- Goals vs. Objectives. Even in the same organization, there is no clear agreement about the difference between goals and objectives. Time horizon is no longer a reliable differentiator. Are the objectives strategic in their nature and goals operational?
- Strategies. The term might be confusing. As we discussed before, there are at least 10 different schools of strategy. Most agree that strategy is a hypothesis, and it should give a clear context for future actions. In the paradigm of OGSM, the strategies look more like simple action plans.
- Measures. There is no agreement about what should be quantified by the measures – the strategies, the goals, or the objectives. Or should we have the measures on all these levels?
- Leading vs. Lagging Measures. Similar to Hoshin Kanri, OGSM doesn’t make any specific difference between leading measures and lagging measures. We can only imagine that most of the strategies will be quantified by the leading measures, while goals and objectives will be validated by the lagging metrics.
The MBO framework was one of the first strategy execution frameworks that suggested an effective way to cascade objectives from the top level to the level of individuals.It shares a lot of ideas with BSC and OKR frameworks. MBO established certain requirements for the objectives:
- They should be ordered according to their importance
- They have to be quantitative
- They have to be realistic
- They have to be in line with organizational policies
- They have to be compatible with each other
The framework is not as sophisticated on the strategy description step as BSC or Hoshin Kanri, but on the level of strategy execution, its simple approach adds value.
Strategy Formulation Frameworks
As the comparative table shows, many popular business frameworks are excellent tools for formulating business strategy. Those frameworks help to have a different perspective when looking at the challenges of the organization.
McKinsey’s Three Horizons
McKinsey’s Three Horizons framework addresses innovation planning challenge. It suggests to prioritize innovation efforts according to three time-frames (horizons):
- Now. Something that an organization needs to do today, e.g. innovating its core business
- Near-term future. Innovations that address the challenges in the comfort zone.
- Future. Focusing on trends that might soon become disruptive.
The framework is strong in the context of strategy formulation, especially when we are talking about innovation strategy.
A classical SWOT framework helps to analyze the company’s position from the four perspectives – Strengths, Weaknesses, Opportunities, and Threats.The action plan for SWOT analysis is:
- Match strength and opportunities, or
- Convert weaknesses and threats into strengths or opportunities
With the SWOT+S framework, we make SWOT analysis more specific by focusing on different projections of its components. For example, instead of simply talking about strengths, we are looking at the strength from a customer, internal, innovation, and financial perspective.
Such an approach also makes it easier to use the results of SWOT analysis for further strategy description on a K&N strategy map.
The goal of VRIO analysis is to find a sustainable competitive advantage and the resources that are needed to achieve it. VRIO is often used to explain why certain companies are successful. In practice, VRIO analysis helps to look at the potential of certain “resources” to help achieve sustainable competitive advantage.
Formal VRIO analysis is thought-provoking on the stage of strategy formulation. Its potential to describe strategy is limited by a simple table diagram that could point to improvement directions but won’t provide a space for specific action plans or performance indicators.
The 7-S framework is another strategy formulation framework. In this case, a business challenge is analyzed from the perspective of 7 factors (the Ss). These 7 factors are divided into:
- Hard Ss – Strategy, Structure, System, and
- Soft Ss – Shared Values, Skills, Style, Staff
Can a 7-S framework be used together with BSC? The findings of 7-S can organically form the business goals that are mapped on the strategy map. Here is what Robert Kaplan, one of the authors of the BSC framework, said on the topic:
I believe that the BSC is not only fully consistent with the 7-S framework, but that it can also enhance it in use.
Robert Kaplan in “How the Balanced Scorecard complements the McKinsey 7-S model” 
PEST or PESTEL analysis refers to the analysis of the external factors. What are those factors?
The findings of PESTEL analysis can be used on the strategy formulation step of strategic planning process either as an input to other business tools, like, for example, SWOT or directly, as strategy map goals that address specific challenges.
Different business frameworks could generate a lot of competing strategic hypotheses. Pareto analysis helps to pick the few to focus on right now.
The key idea of Pareto analysis in the context of strategic planning is to compare:
- Resources needed to try certain hypotheses versus
- Expected benefits from successful validation of the hypothesis (achieving business goals)
By focusing on the most promising hypothesis, an organization could achieve expected results with fewer resources.
Constraints Analysis or TOC theory was formally introduced in “The Goal” book by Dr. Goldratt with some good examples from manufacturing.
This analysis helps to determine the constraints (bottlenecks) of the system and optimize performance following these five steps:
- Analysing constraints
- Response plan in the context of constraint
- System update to fulfil response plan
- Updating constraints
- Getting back to step 1
Shifting from manufacturing to a technological economy, we are still facing constraints, but their number increases and their impact is often not clear. Similar to Pareto Analysis, the main focus area of constraints analysis in the context of strategic planning is step 2 – strategy formulation.
The gap analysis is another business tool that helps in finding improvement points by comparing expected performance with actual results. The steps of gap analysis are the following:
- Gap Identification. Understanding where the organization is now and how its actual performance is compared to the expected performance.
- Root-cause Analysis. Understanding the reasons of gap.
- Improvement Plan. Developing the improvement plan.
Here is how Gap analysis helps in the different steps of the strategic planning process:
- On the strategy formulation step, gap analysis will help to come up with improvement direction based on historical results
- During strategy description, the results of gap analysis are presented in the form of indicators and the gap (the difference between the indicator’s current value and target value)
- On the strategy execution step, understanding where the gap is (based on indicators’ data) helps to introduce corrective actions quickly
Strategy is about making choices, and choices are about analyzing alternatives and defining their priorities.
- How are these priorities calculated?
In strategic planning, basic prioritization is done by such tools as:
- SWOT Analysis – the priority goals are the result of matching strength and opportunities or converting weaknesses and threats into strengths or opportunities
- Gap Analysis – the priority is on the goals with higher absolute weight and biggest performance gaps
- Pareto Analysis – suggests to focus the efforts on 20% of the most promising goals; however, not giving a specific way to spot those goals
- Strategic Themes of the Balanced Scorecard – that work as high-level priorities for the rest of the strategic goals
Mentioned frameworks are a starting point for prioritization on a strategic level. When we move to operational level (think about product development, for example), we need different tools that could calculate a specific priority score.
We have discussed some popular prioritization frameworks in a separate article with some specific examples for the users of BSC Designer.
In the context of strategic planning, those frameworks might be considered as part of a strategy formulation toolkit, respectively. In the comparison table, we can put them into the Step 2 column.
Strategy Planning Software
Depending on the strategic planning model, the need for automation software change. Here are some thoughts about the effective use of automation tools.
- Understand the concept first. Automating wrong things will do more harm than good. Give a new framework a try on paper before moving to automation software.
- Write down rationale. In many cases, we get the results from the strategy formulation framework (for example SWOT or Three Horizons) and add it as a goal to the strategic plan. What is important is to write down the reasoning behind those findings. It will be helpful in the review stage.
- Focus on one tool. If we look at strategic planning tools from an abstract perspective, then everything rotates about three artefacts – goals, indicators, and supporting documentation. Your organization will benefit if it uses one tool to manage all the artefacts related to strategic planning instead of supporting various software that approach the same problem from different sides.
Where Strategy Planning Software Can Help
|Step of Strategic Planning||Software Solution Helps To…|
|Step 1. Mission, Vision, Values||
|Step 2. Strategy Formulation||
|Step 3. Strategy Description||
|Step 4. Strategy Cascading||
|Step 5. Strategy Execution||
BSC Designer Software
Where BSC Designer can help in the context of automation:
- Our main focus is Balanced Scorecard framework and its strategy map
- We do excellent support for Key Performance Indicators
- In the templates section, you will also find some examples that will help you to get started with other business frameworks easier.
Most business frameworks could provide additional value to the organization. The question is, how to pick the right one and use it for the correct challenge.
In this article, we analyzed the most popular frameworks for strategic planning and discussed their best application areas.