How to diagnose strategic deficit

When a company asks me to help it understand its strategic position, the first task is almost always to resist the urge to go to strategy formulation before enough analysis has happened. The companies that most need strategy work are often the ones most eager to skip straight to decisions.

In connected-product businesses that impatience is especially expensive. A direction chosen without enough analysis can become tooling, certification work, supplier commitments, field-service infrastructure and deployed hardware before the weakness in the thinking has had time to declare itself. In a software company, a wrong strategic direction can be corrected by rewriting the roadmap. In a connected-product company, the direction may already be embodied in physical assets with their own lead times, costs and contractual commitments. The tools exist to slow that down, and used well, they are worth slowing down for.

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Reading the external environment

The approach I use consistently combines external analysis, internal analysis and then synthesis before any decision is made about direction. The standard frameworks are well known. What matters here is where they catch things that connected-product companies specifically miss.

PESTEL. Scanning the macro-environment across political, economic, social, technological, environmental and legal dimensions tends to surface the constraints that are invisible from inside the product organisation: regulatory changes across jurisdictions, certification burdens that affect launch timelines, and the local operating conditions that determine whether a physical product can actually be supported once it arrives.

Porter's Five Forces. At industry level, it forces a different question: which structural shifts in the market are changing the economics without anyone explicitly announcing that the rules have changed? For connected-product businesses, the forces that matter most are often the ones that look least threatening at first, such as a shift in buyer bargaining power as distribution consolidates, or a substitute product in an adjacent category that reframes what the customer considers good enough.

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Understanding the internal position

SWOT provides the point where internal and external analysis meet. The version I find more useful is TOWS, which takes the SWOT outputs and generates strategic options from the combinations: how to use strengths to exploit opportunities, how to overcome weaknesses before threats arrive, and the variants in between. The output is not a strategy, but it maps the viable options so that the choice is deliberate rather than habitual.

VRIO sits underneath and asks a more targeted question: which of the company's resources and capabilities are genuinely difficult for competitors to replicate? In a connected-product business the answer often surprises people. The sustainable advantage is rarely the hardware itself. More often it is the firmware expertise, the field-service knowledge, the regulatory approvals already won, or the diagnostic capability that took years to build and cannot be bought off the shelf. Most high-tech companies have more resources than they recognise, and fewer sustainable advantages than they think. VRIO forces that distinction.

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Formulating options

Ansoff's matrix makes explicit what kind of bet is being made: market penetration, market development, product development or diversification. For a company in strategic deficit, that explicitness is the value. Moving into a new market with an existing product is a different risk profile from developing a new product for an existing market. Treating them as interchangeable is one of the more common ways strategic planning produces plans that nobody actually believes.

Blue Ocean thinking is useful when the analysis shows that competing harder in the current market space is not a viable answer. The question it asks (where is there uncontested demand the company could serve?) is genuinely generative when used with real market data rather than as an abstract exercise. The risk, and it is a specific risk in connected-product businesses, is that it gets used to produce compelling narratives for markets the company has not actually assessed. Entering a new market that needs local certification, new support capability, different spare-parts assumptions or a product variant that will be expensive to reverse once built is a materially different proposition from entering one that needs a new landing page and a revised pricing model. The framework does not make that distinction. The CTO should.

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Implementation and the measurement gap

Most strategic analysis falls down at the transition from formulated strategy to implemented strategy. Setting objectives is straightforward. Defining the KPIs that would reveal whether the strategy is working, before success or failure becomes obvious in the results, is harder and more important. The key questions are these. What would we see, and when would we see it, if this direction is right? And what would we see if it is wrong?

Without those questions answered in advance, the progress review becomes a search for evidence that the decision was correct. That is a different exercise from actually evaluating it.

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How a new-market entry drifts

The pattern I have seen most often, and most expensively, involves new-market entries. A company with a working connected product decides to expand into a new geography. The strategic analysis runs through cleanly: Porter's Five Forces shows limited direct competition, the TOWS output supports market development with an existing product, and the Ansoff risk profile is manageable. A direction is set. Execution begins.

Six months in, the review covers distributor conversations initiated, trade-show attendance and a handful of customer meetings. The slides are positive. What nobody defined at the outset was what a credible six-month mark actually looked like: how many pilots signed versus conversations had, how much revenue pipeline was qualified versus merely expressed, whether the failure rate in the new environment matched the home market, and whether the service infrastructure was in place to support growth at all.

The review is warm because ambiguous inputs can be read optimistically, and there is no agreed baseline to read them against. The strategy continues not because it is working but because there is no prior definition of what not working would look like. By the time the signals are unambiguous, a year has passed and the costs of the entry have been committed.

The measurement work itself is not complicated. It needs two questions answered before execution starts. What specifically would we expect to see, and when, if this direction is right? And what specifically would we expect to see if it is not? Those answers become the agenda for every progress review. Without them, the frameworks produce strategy and the reviews produce narrative.

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Four things worth taking seriously

For boards: before approving a strategic direction, ask what evidence would show it is working, by when, and what would show it is not. Then make those answers the agenda for every review.

For CTOs: make the physical cost of a strategic option explicit. Certification, support capability, spare parts and product variants turn a market entry into a commitment that is expensive to reverse.

For founders: resist the urge to skip straight to decisions. In a connected-product business the direction soon becomes tooling, hardware and contracts, so the analysis has to come first.

For anyone assessing competitive advantage: look past the hardware. The advantage is more often in firmware expertise, field-service knowledge, approvals already won and diagnostic capability.

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I would be interested to hear how your organisation defines, before execution starts, what a strategy that is not working would look like.