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4.1 Deriving Strategic Options

Deriving Strategic Options – Horizons

McKinsey’s Strategic Horizons

  • Focuses on growth and innovation
  • Categorizes goals into 3 focus areas:
    • Horizon 1: Maintain and defend core business
    • Horizon 2: Nurture emerging business
    • Horizon 3: Create new business
  • Beneficial for fast-growing entities like startups
  • Great for organizations focused on growth
  • Helps balance short-term profits with long-term risks

How to Use the Right Strategic Framework

Tip #1: Understand the business problem

  • Examine core business metrics and talk with key team members
    • Example: Analyze data for drop in smartphone sales
    • Identify particular models or regions with slow sales
  • Analyze data to identify primary challenges
    • Allows for selection of the best strategy
    • Creates a strategic roadmap to positively impact key business metrics
  • Use clarity to select the best strategy and create a strategic roadmap
  • Define desired future state and align on key metrics

This step is crucial because it will also help you define your desired future state
and align on the key metrics the whole company will need to work on to get there.

Tip #2: Use the right strategic framework to dig deeper

  • Pinpoint the issue (the ‘WHAT’)
    • Example: Analyze data for drop in smartphone sales
    • Identify particular models or regions with slow sales
  • Use strategic frameworks to reveal root causes, associated risks, and viable strategic options
    • Insights and data gathered will inform decision making and strategy development
  • Many organizations use two or more frameworks to better suit their unique strategic needs

Remember, you don’t have to pick just one framework.
Many organizations use two or more frameworks to better suit their unique strategic needs.

Tip #3: Review your plan against your chosen strategic framework

  • Strategic frameworks offer a great starting point for building a business plan
    • Example: Analyze data for drop in smartphone sales
    • Identify particular models or regions with slow sales
  • Systems and tools should be in place to track ground-level operations
    • They contribute to your broader strategic plan
  • Strategy execution tools help analyze alignment

Check the advantages and disadvantages of each framework and choose the most suitable one.