Overall Process

STAGE 1 - Inputs

In this stage, you will gather strategic direction inputs. This consists of the metrics and information in the first canvas section 1. Product health. This information will help you make better strategic decisions based on data. You may be capturing additional metrics for your organisation that feed into this decision. Each tab provides full details on how to capture this information. You may assign a lead to each.

Important note: You only need to prioritise a direction and create new strategies when you have excess capacity after identifying mandatory work. For example, you only have one team, and they are tied up with months of mandatory legal work.

STAGE 2 - Direction

You are now ready to evaluate and select your overall strategic direction. This helps you focus on the most important strategic choices for your organisation and narrow your research. For example, if you have significant cost inefficiencies, it may not make sense to expend effort on researching how to enter new markets at this stage.

The goal of setting a strategic direction is not to stop you from innovating, but to recognise that you may face major threats to your product and need to respond to them.

Evaluate strategic direction process

This is best done as a discussion with senior stakeholders who have a broad view of the product. This would include people responsible for the product and its service. It can also include marketing, who will understand how customers are responding to your current offering.

A single-page guide is available in PDF. This contains the direction analyser grid below and a slightly summarised version of each strategy:

Strategic direction meeting

• Review the data in 1. Product health - This is the first section in the Strategic Threats and Opportunities canvas. You may present additional information. For example, when discussing major service quality issues, a service manager may bring additional customer feedback.

• Agree on your current situation using the Field’s Strategic Direction Analyser (Copyright Timothy Field 2024) - This maps to four strategy areas on the strategy canvas. It does not include mandatory work, as this work must be done regardless. The grid will help you set a high-level direction that can reduce research and focus your solutions. Porter’s Five Forces model is integrated into the analyser to help you consider your competitive environment. As a team, discuss where you map to on the quadrant. For example, you may have a few highly unoptimised costs that are causing you very low profitability. In another case, you may have major churn. The sales loss/churn and reduce costs/cost avoidance strategies also include guidance on when to retire a product. This may be a difficult decision, but it reflects that not all products succeed, and this is an important consideration.

• Prioritise your strategic direction(s) - There are checkboxes on the main canvas that allow you to select more than one. With a large development team, it may be possible to run multiple strategies. This does not stop you from researching other strategies, but if you are capacity-constrained, it may be wise.

When to select “Reduce sales loss/churn”

This strategy prioritises reducing customer churn and sales loss, including future risks to these. Sales loss and churn can be down to the same factors. For example, a poor quality service or a competitor’s strong differentiation. The following metrics and considerations may lead you to prioritise this defensive strategy:

• Metrics:

  • Sales loss rate (qualified leads) - You may be losing to competitors, or they are not purchasing anything. Qualified can be defined as:

    • They meet your Ideal Customer Profile (ICP) definition. These customers will have a need that matches your offering. Customers who don’t meet the ICP definition will be less likely to buy and can skew your figures. To define an ICP, see:

      • Selling to businesses - B2B Customer profile canvas

      • Selling directly to customers - B2C Customer persona canvas‍ ‍

    • Have gone far enough in the sales journey to demonstrate a clear intent to buy. For example, a product trial or a training course. This is not the initial 1-hour sales pitch, as that is low effort/commitment. They may have reached out themselves following their own research.

    • The BANT framework can be useful here. A qualified prospect will have Budget, Authority, Need and Timeline (will they buy any time soon?).

  • Customer churn rate - A high overall rate, customers may churn to competitors, back to their old solution or back to needing no solution. Additionally, the impact of churn can be determined by the:

    • Customer Acquisition Cost (CAC) - The amount spent to acquire a customer that is now a lost investment. According to this HBR report, the cost of acquiring customers is typically five to twenty-five times higher than retaining an existing one.

    • Customer Lifetime Value (LTV) - The future revenue that is now forfeited.

• Net Promoter Score (NPS) - A low overall NPS score is a leading indicator of potential churn.

• Strong competitors - High-strength competitors or those with a high future threat level. This information is gathered from competitor analysis.

• Porter’s Five Forces to consider:

  • Competitive rivalry is high - You have an increasing risk of churn that will impact your market share due to:

    • Many alternative offerings.

    • Competitors have very similar offerings.

    • Buyers can easily switch.

    • Slow or stagnant market growth.

    • High cost to exit the market (therefore, you should do your best to keep your position healthy).

  • Threat of new entrants is high - This is a future risk impacted by low barriers to entry, including structural and strategic barriers.

  • Threat of substitutes is high - Where a different type of product can fulfil the same need. For example, when travelling, trains compete with cars and aeroplanes.

• Retire the product

  In some scenarios, you may decide to remove the product entirely:

  • Declining market - No signs of recovery.

  • Competitive pressure - Continual losses despite changes to strategy.

  • Alternative strategies - Better growth and ROI elsewhere, or no longer aligns with your strategy.

When to select “Reduce costs/cost avoidance”

The following considerations may lead you to prioritise this strategy:

• You are struggling with lower-priced competitors, or you are very vulnerable to competitors lowering prices. The picture below demonstrates this. Organisation 3 has deliberately lowered prices, seriously impacting Organisation 2. A simple way to evaluate this is to assess at what price profitability would become an issue. These are scenarios where competitor pricing may impact you:

  • Existing competitors may drop their overall price.

  • Existing competitors are typically offering discounts. The price shown is not the usual amount they charge.

  • New competitors may enter, seeking to differentiate with a low-cost (and low-price) strategy. This can disrupt an existing market where competitors incur high costs.

  • A new competitor loss-leads to take a section of the market but may not be able to afford this in the long term.

• Your product’s overall strategic focus is low costs. This means you are using low costs as a primary differentiator.

• There are many standard products with little differentiation, and brand is of low importance.

• Cost avoidance - Areas of high cost that are expected in the future. For example, expansion will lead to large, expensive new teams to support manual processes.

• Areas of high cost and inefficiency:

  • An unhealthy Cost Per Unit (CPU) including:

    • Fixed costs - These are costs that remain constant regardless of factors like the number of customers or usage. This typically applies in the short term, as large changes could increase or decrease them.

    • Variable costs - These vary depending on the number of customers or usage.

• Porter’s Five Forces to consider:

  • Competitive rivalry is high - More competition increases the risk of competitors joining with a low-cost strategic focus.

  • Buyer power is high - Buyers will churn if you set your pricing too high, and can even drive down prices.

  • Bargaining power of suppliers is high - There are few suppliers or high switching costs, leading to them demanding more money.

• Retire the product

  In some scenarios, you may decide to remove the product entirely:

  • Low profitability - High level of investment with a continued likelihood of low profitability. You should consider gross profit and gross profit margin metrics.

  • Major costs - Major costs that can't be reduced. For example, supply chain, labour and infrastructure. See the costs section of the canvas.

  • Regulations - New regulations, such as legal and compliance, that stop you from being profitable.

When to select a “Growth strategy”

Even if you have prioritised a different strategy, you still may decide to allocate capacity to growth when you have spare capacity to invest. The following considerations may lead you to prioritise this offensive strategy:

• Select Increase market share when:

  • Your strategic focus is differentiation, and you want to strengthen this further.

  • You have access to many customers who have not used your type of product before.

  • You have a weak competitor(s) and can take significant market share from them, possibly removing them from the market.

• Select New markets/products when:

  • You have a new market available with access to many customers who have not used your type of product before.

  • Your current market is becoming saturated or is in decline.

  • You have unique capabilities you can use to expand.

  • An emerging trend will disrupt your current business model, or is one you can take advantage of.

  • You see a significant opportunity for increased profit.

STAGE 3 - Research

With a priority for your strategy set, you are ready to research and create Strategy Items. These are lightweight artefacts that provide structure to options. You will prioritise these in the next stage. It is important that you read these instructions to understand what they are.

Inputs

The framework provides:

• Guidance for your prioritised strategic direction - See the relevant page tab.

• Strategic Discovery Tools - You can augment these based on your needs or ignore them if they are not relevant.

Managing research

Having management of research is highly recommended. Going into a prioritisation process without suitable preparation will lead to failure. Consider assigning a person to lead this. You should then assign specific people in the organisation to do the different activities. For example, you may have a CTO looking at technology trends. Creating strategic inputs can take some time. This should be an ongoing activity with a regular cadence. For example, you may choose to update your competitor analysis every 3 months.

Mandatory work and capacity

Mandatory work includes anything you must do to keep functioning as a business. It includes aspects like:

• Legal and regulatory requirements.

• Updating software versions to remain secure or removing old software that is going out of support.

• Tackling strategic risks. For example, not having good enough security in your software.

You may have enough mandatory work to fill your team’s capacity immediately. If this is the case, you may be able to assign each team a Strategic Area.

STAGE 4 - Prioritise

When deciding your direction, remember to consider your market positioning and your mission statement. If you are known as having the best service or the lowest price, will your growth still align with this, or are you changing focus?

Prioritisation is the final stage when deciding which Strategy Items‍ or new products to take forward.

1. Strategic Direction - Returning to the Field’s Strategic Priority Analyser may be helpful as a reminder of your prioritised strategic direction.

2. Present - Those involved in research should now present their findings and Strategy Items.

3. Prioritise - Map each Strategy Item onto the grid. It can be helpful to colour-code the strategy each supports. For example, making the “reduce costs“ items green. Guidance for the “Evidence this will work” on the grid is below it. You don’t need to gather all the evidence at this stage. For example, modelling the Return on Investment (ROI) in full. The analyser helps you evaluate the level of risk at this point in time. You can still go ahead with high-impact, risky items.

4. Assign - Assign Strategy Items to teams. Full instructions are available below the prioritisation grid.

Use the following guide to evaluate “Evidence this will work” on the grid. If evidence is low in one area, then score the item lower.

• Desirability considerations - Evidence that customers want this:

  • Evidence that it solves a big enough problem for customers.

  • Newness or level of differentiation of the solution in the market.

  • Evidence that customers want your solution andwill switch from current solutions.

• Feasibility considerations - Evidence that we can build and run this:

  • Understanding of technical design, including the ability to build it and ensure it will scale to customer demand.

  • Understanding of service design, including the ability to run it and ensure it will scale to customer demand.

  • Understanding of any major risks that could lead to this failing or greatly increasing in cost.

• Viability considerations - Evidence that this will generate a profit:

  • Understanding of the pricing model and that the target price point is competitive.

  • Evidence that customers will pay.

  • Understanding of costs including build, customer acquisition and running the service.

  • How long it will take to reach the break-even point and then achieve a good Return on Investment (ROI).

Assigning strategy to teams

Each team should be linked to a strategy. Avoid linking a team to more than one strategy, especially if it creates resource bottlenecks. You can also have multiple teams linked to a strategy. In this case, it is advisable to be clear about who has overall ownership.