If you’ve ever gone through a strategic planning session, it’s highly likely you’ve built in a SWOT analysis as part of your process.
Many businesses rely on a basic SWOT analysis to plan their future, but this can often be too simple. A SWOT (Strengths, Weaknesses, Opportunities, and Threats) is a great starting point, but it’s like using a map for a whole country without looking at the local area.
To build a robust and adaptable strategy, you need to go deeper. Here are three powerful tools that can help you do just that.
1. Ansoff matrix: choosing your growth pathway
Most businesses need to continuously improve to survive, but to succeed, they often need to innovate in a more agile way. That often requires growth and change at speed, and you must be strategic or you’ll waste a lot of time and money throwing ideas at the wall and hoping one sticks. This is where the Ansoff Matrix comes in. It helps you quickly visualise and choose a potential growth strategy, providing a clear structure for your thinking so you can grow more effectively.
This powerful tool uses a 2×2 grid to look at your options based on new versus existing products and new versus existing markets.
The Ansoff matrix enables us to focus on growth strategies by examining opportunities in new and existing markets with new and existing products. It outlines four key strategies:
- Market Penetration: This is about selling more of your existing products to your existing customers. It’s generally the lowest-risk option. For example, a coffee shop might offer a loyalty card to get customers to visit more often.
- Market Development: This involves selling your existing products in new markets. This could mean selling to a new geographic area or a new customer segment. For instance, a clothing brand that’s only sold online might open a physical shop.
- Product Development: This is when you sell new products to your existing customers. It’s about building on the relationships you already have. A restaurant, for example, might introduce a new tasting menu to attract its regular customers.
- Diversification: This is the highest-risk strategy. It involves selling new products in new markets. This is often used when a business wants to move away from a declining market or leverage an entirely new opportunity. For example, a coaching service provider might choose to start building custom AI solutions.
The matrix helps you see the different paths you could take and the inherent risks associated with each. You would use this tool to decide on one or more potential growth paths to investigate further. Each of these four options is not mutually exclusive. Your growth strategy can have elements of all four approaches.
Ansoff is great for identifying what you want to do, but it shouldn’t be relied on as the sole method of deciding your strategy.
2. PESTEL Analysis: assessing your chosen path
Once you have one or two growth strategies in mind from your Ansoff Matrix, the PESTEL analysis becomes an essential tool to see if they’re viable options. Instead of a general scan of the world, you now use PESTEL to specifically analyse the external forces that could affect your chosen strategy.
This framework breaks down the macro-environment into six key areas to help you assess your chosen path:
- Political: Are there any government policies, trade regulations, or political instability in the new market you’re considering?
- Economic: What are the inflation rates, interest rates, and economic growth forecasts for your new product’s target market?
- Social: What are the cultural trends, demographics, and consumer attitudes you’ll need to consider when launching your new offering?
- Technological: Is there a risk that new technologies could make your product obsolete? What technological infrastructure is available in the new market?
- Environmental: Are there any ecological or environmental regulations you must comply with in your chosen new market or for your new product?
- Law: Are there any specific (existing or pending) laws around employment, consumer protection, or data protection that will impact your strategy?
By methodically looking at each of these areas, you can identify potential ‘tailwinds’ (things that will help your business grow) and ‘headwinds’ (things that might slow you down) that are specific to your chosen strategy. This gives you a comprehensive picture of the viability of your plan, so you can decide if it’s a good idea to proceed.
3. Cynefin framework: planning your actions
The final piece of the puzzle is to figure out how to actually do things. The Cynefin framework (pronounced Kuh-NEV-in) helps you do this by making sense of the challenges you’re facing. It helps you tailor your approach to the specific type of problem you’re trying to solve.
The framework identifies five domains.Four of these require diagnosis of the situation followed by actions that are contextually appropriate. The fifth context is for situations which cannot be readily diagnosed:
- Clear (or Simple): These are problems with an obvious cause and effect. They have established solutions and best practices. Your approach here is to “Sense, Categorise, Respond.” An example is a business putting a simple new process in place, like a new customer sign-up form.
- Complicated: These problems have a clear cause and effect, but you need expert knowledge to figure it out. The approach is to “Sense, Analyse, Respond.” This is where you might bring in a consultant or a specialist to fix a complex technical issue.
- Complex: Here, the cause and effect are only visible after the fact. You can’t predict what will happen. The best approach is to “Probe, Sense, Respond.” This means experimenting and learning as you go. For example, launching a new product into a market with a lot of unknowns.
- Chaotic: In this domain, there is no clear cause and effect, and the situation is unstable. The priority is to act immediately to stabilise things. The approach is to “Act, Sense, Respond.” A sudden market disruption might require immediate and decisive action to stabilise the business before any further strategic planning can occur. We’ve seen this play out in situations such as health pandemics where there is no analysis available and we just need to act on the information available now, then figure out our next steps as soon as possible after.
- Disorder: This is the domain of complete uncertainty, where you don’t even know which of the other four domains you’re in. The first thing you need to do is try and categorise it into one (or more) of the other domains as simply as possible. This is a tricky situation to be in for more than one reason. It’s sometimes a result of complacency in the Clear domain, where shortcuts have been made for so long that a build-up of entrenched errors makes it difficult to find a clear solution, resulting in a multitude of knock-on effects.
By using this framework, you can avoid trying to solve every potential situation with the same approach. It helps you decide whether you need to follow a rulebook, call in an expert, run an experiment, or simply act to restore order.
The Cynefin section is essential because it shows that not all strategic challenges are the same. It provides a way to move from the abstract “what” of a strategy to the practical “how” of execution, ensuring you use the right approach for each unique situation you face.
Putting It All Together
Using these three frameworks in this sequence allows you to move beyond a simplistic approach to strategy. First, the Ansoff Matrix helps you select the most appropriate growth options for your risk appetite. Then, the PESTEL analysis helps you dive deeper on the risks and opportunities of those specific options. Finally, the Cynefin framework ensures you have the right decision making in place to tackle the challenges you may face.
By doing this, you’re not just making a single strategic decision; you’re building an informed, adaptable, and ultimately more successful way of running your business.