This is intended to be the first in a series of posts over the coming weeks discussing different aspects of business strategy and some tools for developing it.

Information and intelligence are vital to the effective development and execution of any strategy.  Just as a general would never take the field without first surveying the terrain and attempting to locate the enemy, no manager should ever commit to any strategy without first collecting as much relevant intelligence as is available.  What is the difference between information and intelligence?  Think of information as being raw data; tables full of numbers and the like.  Once you process that information into decision worthy content you have intelligence.  You may keep track of information on your sales over the years, but with a little analysis that information might yield which types of customer made the biggest purchases.  That information can help you develop a strategy.

What kind of information and intelligence should you look for?  There are a few different common approaches, but we’ll start by dividing it by internal and external.  Internal clearly being features and traits of your own organization.  External has to do with the industry and markets you live within.

Internal Analysis

A SWOT analysis is one of the simplest, yet effective, methods for developing strategy.  SWOT stands for strengths, weaknesses, opportunities, and threats.  Strengths and weaknesses are both internal factors and are precisely what they say (I told you this one was simple).  What does your organization do well, what does it do poorly?  What are your core competencies?  Next we get into competitive advantage; look for things that you do so well that they can provide a reason for customers to choose you over the competition (yes this begins to cross into external analysis, bear with me). 

External Analysis

The second half of SWOT, opportunities and threats, prompts you to examine the playing field and see what other organizations are doing and what consumers desire.  Ideally you position yourself to match strengths with opportunities and mismatch weaknesses and threats.  Another, slightly more complicated framework to use is the Porter’s 5 Forces Model*.  The first force is the threat of new competition; how easy and likely is it that a new firm will enter the market and squeeze your market.  The second force is the threat of substitute products/services; how many other products exist that are similar to yours?  The third force is the bargaining power of consumers; largely stemming from threat of substitutes this has a lot to do with the competitiveness of the market.  If consumers have other options they force your prices down.  The fourth force is the bargaining power of suppliers; who has more leverage in dictating terms of sale for your resources?  The fifth force is intensity of competitive rivalry; how desperately are you fighting for market share with your competitors?

These pieces of information are a great place to start when developing organizational strategy.  They provide a very good view of where your organization sits within the bigger picture and where it can go.  This is; however, far from the be all, end all of business strategy.  There are many more factors to be considered and over the next few weeks I will be touching on many of them.

* Harrison, Jeffrey S., and John Caron H. St. Foundations in Strategic Management. Mason, OH: Thomson/South-Western, 2008. Print.

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