The five steps of strategy development:

LederInsigt has been inspired by Lars Bo Hansen's clear approach in the book "Strategy that works" (2013) for the preparation of this tool. The procedure can be well combined with other methods and tools – and narrowed down or expanded as needed. Only deal with the parts that make sense for your business.

Lars Bo Hansen divides the strategy work into five phases, under which there are lots of different considerations. In the following, you will find a brief description of the five phases as well as references to where you can find resources, here at LederInsigt, that will help you further.

The five phases are:

1. Get started
2. Agreement on starting point
3. Choice of strategy
4. Commissioning
5. Correction and learning

First phase: Getting started

In this first part of the strategy process, it is not about thinking strategy at all. It's about doing an initial analysis and research that enables you to think strategically.

Specifically, you must:

• Determine your strategic competencies. Consider where things tend to go well and poorly when you have previously laid out and implemented a strategy.
• Organizing the strategy process: Include a project plan: how long will you spend developing the strategy, who will be involved and what roles will they have?
• Decide the critical questions: Consider which main topics the strategy must address and why you need a new strategy. Use e.g. the priority scheme to select the most important ones. (Replace urgent/not urgent and important/not important with high/low probability of it happening and high/low importance to the company if it happens.)
• Plan the data collection: Find out which data you need before you begin the actual analysis and prioritization work. Eg. stakeholder-, customer-, product-, competitor- and market analyses. Start the analysis work early in the strategy process, so you don't have to wait for the results later.
• Start determining the level of ambition. Where should the company move to? Agree on what the bar for the new strategy is. Read here how to set SMART goals.

Second phase: Agreement on starting point

In order to be able to lay out a realistic strategy, it is important that you know the company's resources, situation and competition and that a common picture is created of your weaknesses, strengths, opportunities and threats. Both externally and internally.

To examine your external starting point, you can:

• Make a political and socio-economic analysis. Use e.g. The PEST(EL) model. Strongly prioritize the results and consider the significance of political, economic, societal, technological, environmental and legal changes for the company.
• Analyze market structure and dynamics. read more here
• Carry out a customer segmentation. See how here
• Prepare a competitor analysis by using e.g. Porter Five Forces model.
• Assess your sales channels. Where does your revenue come from? Through which channels do you sell your products? And which channels generate the most and least revenue?

To examine your internal starting point, look at your:

• Customers and products. Look at your products in relation to the segments you have previously identified. Where do you see the greatest revenue or earnings? Prioritize the customer groups and products with the greatest earnings/revenue. Where is the potential for additional earnings?
• Supplier. Analyze your suppliers and select the suppliers who are most attractive and perform best. Supplier analysis
• Skills. Assess current competencies within e.g. management, strategy, planning, motivation, communication etc. on a scale from 1-5. How does it look now and what will the requirements be in the future? Insert any the results in a radar map
• Financial starting point. To get an overview of your financial situation, you can e.g. look at yours key figures. Calculate e.g. your revenue growth, profit margin, rate of return, return on equity (ROE), inventory days and Return On Investment (ROI) and other key figures that are important for your specific industry.
• Culture and structure. Is your current organizational structure useful in relation to the task it must solve in the future? What traits do you have? organizational culture slows down and accelerates changes in the company?

Create an overview
You have now compiled a long list of strengths, weaknesses, opportunities and threats, and must now gather the threads to create an overview of the company's starting point. Enter the identified strengths, weaknesses, opportunities and threats in the following table, which gives you a good overview of your overall starting point.

In order to maintain an overview, you must try to limit yourself to 20-25 points as a summary of the many analyses.

Third Phase: Choice of strategy

With an overall overview of your company's strengths, weaknesses, opportunities and challenges, you are equipped to consider which strategy makes sense for your company.

You can find the strategy itself by answering these five questions:

• What is your level of ambition?
• What is your business model to fulfill these ambitions?
• What makes your strategy special?
• How will you implement the strategy?
• Why is this a good strategy?

Read more: Choose strategy: The five most important questions a strategist must ask himself

Fourth phase: Initiation

It is absolutely central to the initiation of the strategy that you get it communicated correctly. You have hopefully already involved and communicated with the organization during the development process. Now it's about briefly and precisely sharing the chosen strategy with the organisation. For that, you can e.g. use a model based on this formula:

We will …

[insert ambition]

through …

[insert the chosen business model and differentiation on customers, market, products and internal conditions]

because…

[insert explanation of why the strategy makes sense]

Read more: 12 tips for internal communication

Fifth phase: Correction and learning

Strategy is not a finished process because it is very rare that it ends up the way you think. Here it is about setting up a contingency plan that ensures that the strategy continues to be relevant, and finding out how to keep the strategy work going in practice.

Specifically, it is about establishing a strategic preparedness, which, among other things, involves setting up listening posts, as Lars Bo Hansen calls it. In other words, appoint responsible employees who keep an eye on whether specific parts of the strategy work as they should - also over time.

Read more: Strategy Execution: Action, trade and attitude.

Source: Lars Bo Hansen: Strategy development (2005) and Strategy that works (2013)