Strategic Direction
Overview
Creating a winning strategy is not easy. It involves considering many different inputs before selecting the ones with the highest impact, the opposite of brainstorming. This work can be time-consuming, but ultimately, the better job you do setting your strategic direction, the less waste you will have.
This framework takes many of the world’s most popular strategy techniques and weaves them into a single process. Having strategy tools on their own is useful, but knowing how to integrate them will give you much better results.
Ultimately, if your competitor is better than you at strategy, they will achieve better results.
For incremental improvements to the product, you will create Strategic Areas. For new products, including paid features, you will use the New Product Generator Canvas.
Delivery and results tracking overview
A Strategic Area consists of several Minimum Valuable Increments (MVI). As each MVI is delivered, you will see results coming back from them. These can give early indicators as to whether the overall strategy is working. For example, you have a strategy to improve low customer satisfaction due to many hard-to-use processes. Each MVI improves a different process. You get results back very quickly that the first improvement is helping. When enough MVIs are delivered, you may see overall customer satisfaction going up. It is very beneficial to set up automated data gathering. If data is hard to get, it can make results tracking difficult and cause people to give up. The picture below represents how MVIs are delivered and results are tracked:
Strategy cadence
Below is a starting point for governance meetings and their cadence. There are two key factors to consider when setting frequency:
How quickly the organisation’s environment is changing.
The time it takes to create value.
These are strategy and outcome-focused meetings. Depending on your organisation’s needs, you may also create delivery progress meetings. Although there is a formal cadence, you do not have to wait for these meetings if results come back that you are not expecting.
| Meeting | Typical Frequency | Purpose |
|---|---|---|
| Product progress | Fortnightly | A lightweight meeting that focuses on Minimum Viable Increment (MVI) results, insights, blockers, risks, and issues. Strategy can be discussed if results are not as expected. |
| Strategy impact review | Quarterly | Objectives and Key Results (OKR) review that includes key learnings and recommendations. Includes a wider group of stakeholders. |
| Strategy meeting | Bi-annual | Full review of strategic direction. |
Strategy at scale
A change to organisational or product portfolio strategies can impact each product’s direction. For example, the product portfolio wishes to move from targeting small businesses to enterprises. Another example would be the organisation seeking to be more cost-efficient across all of its product lines.
The product vision and mission statements, defined in the product positioning stage, anchor your product’s long-term strategy. You may wish to update these if this results in significant changes to your market, customer needs, or technology landscape.
Strategic Items and User Experience Vision
Strategic Items are lightweight inputs into your prioritisation. They help you structure your strategic options. Without these, you may have many unstructured ideas that are hard to evaluate. You will add the ones you have prioritised to the second part of the canvas and assign them to your teams.
The UX vision is designed to bring these to life. This helps you visualise more complex solutions at a high level. It can help with understanding build feasibility, allow for early customer desirability testing and assist with strategic decision-making. Business and technical teams should validate the UX vision to ensure it is fit for purpose. The UX concept output in the Minimum Valuable Increment stage is a more detailed visual output created to guide development. The UX vision can guide the UX concept as a starting point.
Strategic Threats and Opportunities Canvas
The process tab below the canvas contains instructions on how to populate this.
Feel free to recreate the canvas in a tool of your choice. Please attribute the author (Timothy Field), the source of the canvas (this webpage) and add the CreativeCommons BY-SA license
Strategic discovery tools
This section covers a number of artefacts that can act as inputs into your strategy. Each of these has its own page containing detailed instructions to create them and use them within your strategy.
PESTEL Trend Analysis
PESTEL trends can help you identify strategy options. PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal. You may find multiple solution options from each trend. For example, a technology trend that could be used for cost reduction and new features. Trends are important, some can significantly impact or destroy your market position. For example, a new technology that could replace your current solution. These trends can be applied to all the other artefacts. For example, an AI technology trend may improve the Customer Journey Map. To perform PESTEL analysis, see this page.
Customer Journey Map
The Customer Journey Map is a visual artefact that helps you model the experience a customer has with your product. This is designed with a strong focus on empathy, including how a customer thinks and feels. It can help you take a holistic view of their experience, target pain points and drive improvement. This is especially important where you have different teams responsible for different parts of the journey. This can create a disjointed experience. To create a Customer Journey Map, see this page.
Utility, Usability and Accessibility
These aspects can have a significant impact on the customer’s experience:
Utility - This represents the value to the customer, in other words, how well it solves a customer’s problem and meets their needs.
Usability - Is about how easily a user can achieve their goals.
Accessibility - Accessibility is about designing products and services to meet the needs of people with disabilities. The advice provided is lightweight due to its complexity and importance.
A canvas is provided on this page to help you structure this analysis.
Service Blueprint
The Service Blueprint begins with customer actions and proceeds to map the frontstage (what the customer interacts with, such as websites or service staff) and backstage (internal processes and systems hidden from the customer) components necessary to deliver the service effectively. A Service Blueprint is focused on cost reduction and streamlining services, whereas the Customer Journey Map is more focused on empathising with the customer. Processes can be at different levels of granularity, from a high-level overview to multiple more detailed flows. This can translate to customer benefits, too, by reducing delays. For example, automating a manual security process to make it cheaper and faster. To create a Service Blueprint, see this page.
Business Model Canvas
The Business Model Canvas (BMC) was developed by Alexander Osterwalder and Yves Pigneur to give a bird’s-eye view of how an organisation or product operates and creates value. As well as ensuring your business model is well designed, it can also help you identify strategic opportunities. For example, looking at new ways to distribute to customers to increase market share. The BMC can be used with the Resource Based View (RBV) technique. This can be used for identifying competitive advantages that you may already have but are not utilising. To create a BMC and apply the RBV technique, see this page.
Reduce sales loss & churn
When you have high rates of sales loss and churn, it is important to know the split of these so you can prioritise and tackle their root causes. These come from the metrics on the canvas:
Prioritise your factors
You could attempt to tackle all of these, but you may not have the capacity, and some may be of low value. Use the grid below to help you decide what to do. You may need to add weighting to factors. For example, if you have a high customer acquisition cost (CAC), you may need to add weighting to churn. According to this HBR report, the cost of acquiring customers is typically five to twenty-five times higher than retaining an existing one.
Map the following on the grid, adding weighting to factors:
Sales lost did not purchase
Churn to no one
Sales lost to a competitor
Churn to a competitor
Sales lost did not purchase
Only include major reasons in the grid below. With the following information, you are now ready to create Strategic Items to counter these problems.
| Loss Reason | Priority |
|---|---|
Churn to no one
With the following information, you are now ready to create Strategic Items to counter your priorities. You will find a great deal of information on how to improve your value. For example, the trend analysis tab can increase your competitive advantage.
| Churn Reason | Priority |
|---|---|
Sales loss and churn to competitors
This section contains a competitor analysis canvas and instructions on using its findings to your advantage. The Market Positioning Canvas helps you identify your competitors. If you don’t wish to complete the whole canvas, you can use this section to guide you.
The following instructions will help you maximise success.
Summary of competitors
The deals considered in the metrics should only include customers that meet your Ideal Customer Profile definition. If you are attempting to sell to a customer who isn’t and include them in your figures:
Your results will look worse, leading you to react when it is not necessary.
You may change your product and impact the clarity of your value proposition.
The summary grid below is populated from the completed competitor canvases. After this, the section below helps you evaluate each competitor and create a recommended action.
| Competitor Name | % of total sales lost to competitor | % of total churn switching to competitor | Future Threat Level (1 – Low 5 - Very high) |
|---|---|---|---|
Using your metrics
Having gathered metrics, you are now ready to consider your actions:
Reduce sales loss & churn - Prioritise strong competitors to help you combat them. Consider those towards the top right of the grid.
Monitor competitors - You will take no action. You want to monitor what they do for emerging threats.
Increase market share - Prioritise weak competitors to help you attack and defeat them. Consider those towards the bottom left of the grid. Pay particular attention to those you can put out of business and take all their customers, or acquire them cheaply.
Monitoring competitors
You have higher priorities:
You have limited capacity and need to respond to other competitors first.
You have limited capacity and need to focus on cost reduction.
You are acquiring customers at a rate that is limited by your onboarding speed and need to increase it.
The competitor is a low threat:
You are a brand leader, and competitors cannot currently catch you. This can change over time as competitor products grow.
The competitor is losing significant business.
The competitor isn’t well known and is not rapidly growing.
You have a new type of solution that is much superior to the competition. You should take the market from your competitors with sufficient advertising and marketing. For example, moving from physical DVDs to video streaming. You do not need to respond to their product strategies.
Priority and recommended action
Add a recommended action and priority to each competitor:
| Competitor Name | % of total sales lost to competitor | % of total churn switching to competitor | Future Threat Level (1 – Low 5 - Very high) | Recommended action
- Reduce sales loss & churn - Press advantage (increase market share) - Monitor only |
Priority |
|---|---|---|---|---|---|
Create action options
You are now ready to take action against your prioritised competitors. Be careful of your capacity here. For example, if you are creating ten Strategic Items but only have 3 free teams you may be wasting your time.
Competitor weaknesses
List the key weaknesses of your competitors as identified on the canvas. For each one:
Make sure your product does not also contain these. If it does then rectify this to provide a competitive advantage.
Consider targeting marketing and sales information around them.
Competitor strengths
List the key strengths of your competitors as identified on the canvas.
Prioritise these based on how much they impact your sales loss and churn.
Differentiators can be part of multiple competitors’ offerings. In the example below, we have prioritised two competitors with Competitor R being the highest priority. This competitor is winning because of 24/7 support, its reports engine and data cleansing feature. Competitor B is also winning because of 24/7 support. We are now ready to evaluate these differentiators to decide what to do about them.
| Differentiator belongs to (strongest competitor first) | ||||
|---|---|---|---|---|
| Differentiator (strongest first) | Competitor R | Competitor B | ||
| 24/7 support | X | X | ||
| Reports engine | X | |||
| Data cleansing feature | X | |||
| Social media linker | X | |||
The Fields’ Competitive Differentiator Analyser below helps us decide what to do next. Start with your competitor’s strongest differentiators. STOP when you find you have a few more Strategy Items than teams to deliver them. There is no point in creating many options that won’t go forward.
Options
The graph provides these options:
Act now (red section) - When a differentiator is a significant reason for you losing sales.
Consider action (amber section) - When a differentiator contributes to you losing sales.
Ignore (green section) - When a differentiator barely contributes to you losing sales.
How to act
Copy differentiators - Where the cost of replicating is low, look to replicate the differentiator. This is a low-risk strategy, as you know it works for your competitor.
New advantage:
Create a new differentiator:
Create one that is working well for a different competitor. You should go back to your competitor canvases for these. This is a medium-risk strategy, as you know it works for some customers.
Create a new differentiator in the market. This is a high-risk strategy as it is unproven. However, it may impact all your competitors. You can lower the risk if the differentiator is low cost. Be aware that if it is easy to copy, it may not last long. The tabs contain tools with many inputs for this. For example, conducting PESTEL trend analysis can result in many opportunities.
Improve your differentiators - Use the “value proposition” section of the Market Positioning Canvas to identify the main reasons you win and increase the value of this differentiator. This is a medium-risk strategy as the competitor’s differentiator may still override this.
Reduce price - This is a high-risk strategy. It will make you better value, but it will affect your profitability. Competitors may respond, lowering the overall market profitability, and you may lose all benefits.
Improve usage allowance (subscription pricing model) - This is a medium-risk strategy. It will make you better value, but it will affect your profitability. The competitor may respond, lowering the overall market profitability, and you may lose all benefits. This is a good option if your usage allowance is not competitive or so low that the customer is not able to use the product.
Improve marketing and sales messaging - This is a low-risk strategy. If you believe the competitor doesn’t have a big advantage or you aren’t pushing your own hard enough, focus on these.
You are now ready to create Strategy Items for inputting into prioritisation. Below is an example of copying a differentiator:
Increase market share
This is defined as gaining more customers and outperforming competitors. The following can help with this:
Identify unmet needs - Where customers are struggling (pains) or new ideas for creating delight (gains).
Strengthen differentiation - This is particularly important where you have a strategic focus to be differentiated.
Reach new adopters - Win new customers who are new to your type of solution.
Target weak competitors - Attack strengths and highlight weaknesses.
Create barriers to entry - Make it harder for new competition and put your existing competition under pressure.
Improve your business model - For example, using new customer awareness channels.
Remove barriers to expansion - For example, capacity limitations with internal team processes. Assessing this after you have prioritised your strategy is strongly recommended to see if you will have new bottlenecks based on your expected growth.
Identify unmet needs
Where customers are struggling (pains) or would have ideas for improvements (gains).
Pains - The main problems that customers are having. Quantify these to understand the impact.
Gains - Ideas to improve the customer’s experience and create delight. These should still solve a sufficiently large problem. Without this consideration you can end up with customers and stakeholders brainstorming features that are of low value.
The Utility, Usability and Accessibility canvas and Customer Journey Map instructions in the “Strategic discovery tools” tab can help here.
Strengthen differentiation
This is particularly important where you are following a differentiation strategy. With strong differentiation you can win more sales and gain market share.
Increase the value of an existing differentiator:
Use the “value proposition” section of the Market Positioning Canvas to identify the main reasons you win and increase the value of this differentiator.
Create a new differentiator:
Create one that is working well for a different competitor. You can find these by using the competitor threat analysis canvas. This is a medium-risk strategy, as you know it works for some customers.
Create a new differentiator in the market. This is a high-risk strategy as it is unproven. However, it may impact all your competitors. You can lower the risk if the differentiator is low cost. Be aware that if it is easy to copy, it may not last long. The “Strategic direction inputs” tab contains tools with many inputs for this. For example, conducting PESTEL trend analysis can result in many opportunities.
Reach new adopters
Improving your product and brand equity can increase your reach and chance of a sale. The market positioning canvas and brand positioning canvas provide guidance on how to do this.
Target weak competitors
This section uses the competitor threat analysis canvas that you should have created in the “Strategic direction inputs” tab. The Market Positioning Canvas helps you identify relevant competitors.
You may already know which of your competitors is struggling. In this case, skip to the action options section below.
Summary of competitors
The deals considered in the metrics should only include customers that meet your Ideal Customer Profile definition. If you are attempting to sell to a customer who isn’t and include them in your figures:
Your results will look worse, leading you to react when it is not necessary.
You may change your product and impact the clarity of your value proposition.
The summary grid below is populated from the completed competitor canvases. After this, the section below helps you evaluate each competitor and create actions.
| Competitor Name | % of total sales lost to competitor | % of total churn switching to competitor | Future Threat Level (1 – Low 5 - Very high) |
|---|---|---|---|
Using your metrics
Having gathered metrics, you are now ready to prioritise weak competitors to attack. Consider those towards the bottom left of the grid. Pay particular attention to those you can put out of business. You may be able to take many customers or acquire their organisation cheaply.
Create action options
You are now ready to take action against your prioritised competitors. Be careful of your capacity here. For example, if you are creating ten Strategic Items but only have 3 free teams you may be wasting your time.
Competitor weaknesses
List the key weaknesses of your competitors as identified on the canvas. For each one:
Make sure your product does not also contain these. If it does, then rectify this to provide a competitive advantage.
Consider targeting marketing and sales information around them.
Competitor strengths
List the key strengths of your competitors as identified on the canvas.
Prioritise these based on how much they impact your sales loss and churn.
Differentiators can be part of multiple competitors’ offerings. In the example below, we have prioritised two competitors with Competitor R being the highest priority. This competitor is winning because of 24/7 support, its reports engine and data cleansing feature. Competitor B is also winning because of 24/7 support. We are now ready to evaluate these differentiators to decide what to do about them.
| Differentiator belongs to (strongest competitor first) | ||||
|---|---|---|---|---|
| Differentiator (strongest first) | Competitor R | Competitor B | ||
| 24/7 support | X | X | ||
| Reports engine | X | |||
| Data cleansing feature | X | |||
| Social media linker | X | |||
The Fields’ Competitive Differentiator Analyser below helps you decide what to do next. Start with your competitor’s strongest differentiators. STOP when you find you have a few more Strategy Items than teams to deliver them. There is no point in creating many options that won’t go forward.
Options
The graph provides these options:
Act now (red section) - When a differentiator is a significant reason for you losing sales.
Consider action (amber section) - When a differentiator contributes to you losing sales.
Ignore (green section) - When a differentiator barely contributes to you losing sales.
How to act
Copy differentiators - Where the cost of replicating is low, look to replicate the differentiator. This is a low-risk strategy, as you know it works for your competitor.
New advantage:
Create a new differentiator:
Create one that is working well for a different competitor. You should go back to your competitor canvases for these. This is a medium-risk strategy, as you know it works for some customers.
Create a new differentiator in the market. This is a high-risk strategy as it is unproven. However, it may impact all your competitors. You can lower the risk if the differentiator is low cost. Be aware that if it is easy to copy, it may not last long. The tabs contain tools with many inputs for this. For example, conducting PESTEL trend analysis can result in many opportunities.
Improve your differentiators - Use the “value proposition” section of the Market Positioning Canvas to identify the main reasons you win and increase the value of this differentiator. This is a medium-risk strategy as the competitor’s differentiator may still override this.
Reduce price - This is a high-risk strategy. It will make you better value, but it will affect your profitability. Competitors may respond, lowering the overall market profitability, and you may lose all benefits.
Improve usage allowance (subscription pricing model) - This is a medium-risk strategy. It will make you better value, but it will affect your profitability. The competitor may respond, lowering the overall market profitability, and you may lose all benefits. This is a good option if your usage allowance is not competitive or so low that the customer is not able to use the product.
Improve marketing and sales messaging - This is a low-risk strategy. If you believe the competitor doesn’t have a big advantage or you aren’t pushing your own hard enough, focus on these.
You are now ready to create Strategy Items for inputting into prioritisation. Below is an example of copying a differentiator:
Create barriers to entry
Barriers to entry are attributes that make it hard for new competitors to create a profitable product. There are two types of barriers to entry:
Strategic barriers
High switching costs - Increase the cost to switch from your solution so that it puts customers off.
Contracts - Long contracts can make it hard for competitors to gain new customers.
Limit pricing - Deliberately setting a low price so that competitors cannot make a profit. This is combined with your lower costs so that you don’t incur a loss. Exercise caution, you may need to run this for a long time to drive a competitor out of the market.
Predatory pricing - This is similar to limit pricing, but in this case, you lower prices below your own costs and make a loss. This makes it even more difficult for competitors. This is not a strategy you should follow as it violates antitrust laws.
Increase brand strength - Strong brand loyalty can be a significant barrier to entry as customers will even pay more for one they trust. A brand positioning canvas is available to help you with this.
Advertising costs can be much higher to increase brand awareness than for an established competitor.
Loyalty schemes - Offering discounts for staying with a product.
Patents and licenses - If you own these, competitors may not be able to create a product that works or have to sink a lot of investment into new solutions.
Structural barriers
Economies of scale - Where you can leverage significantly lower cost per unit due to a large-scale operation. This can be due to lower operational costs, technology efficiency, and logistics.
Increase network size - You may already have a strong customer network. This will make it difficult to convince them to switch.
High set-up costs - When the initial investment is very high, the new entrant must have enough money to fund this. An example of this would be research and development.
Core product size - Gradually increasing the core product. When all major competitors offer the same set of core features, a new competitor would be strongly advisable to match these. As customers become more familiar with mature solutions, their expectations will grow. Imagine a car without adjustable seats.
Ownership of raw materials - When you have ownership of raw materials, you can either block them from purchasing or raise prices, meaning they cannot compete.
Improve your business model
Use the Business Model Canvas to identify opportunities:
Channels - Optimise and diversify channels to reach more customers.
Customer relationships - Create deeper loyalty and engagement with customers.
Key partnerships - Strategic alliances that can enhance your value proposition.
Revenue streams - Offer new pricing models, subscription services or different ways for customers to pay to expand your reach.
Resource Based View (RBV) - This technique originated from Jay Barney's 1991 article "Firm Resources and Sustained Competitive Advantage". Within your business model, you may have internal aspects that can give you a competitive advantage.
Remove barriers to expansion
You may have specific issues with scaling that are holding you back. For example, a service team that is performing a lot of slow manual tasks. You should identify these capacity constraints and remove the ones that will impact your expected growth. Use previous growth data to determine this. Assessing this after you have prioritised your strategy is strongly recommended to see if you will have new bottlenecks based on your expected growth.
New markets and products
This section covers advice on new markets and products. Both of these strategies can carry significant risk. This section will help you understand and reduce this. You can still create Strategy Items for higher-risk options, but with the advice, you may find better ideas.
New markets
Moving into a new market means targeting a different customer group. The one with the highest revenue potential is called the Ideal Customer Profile (ICP). Below, we see different target customer groups with some overlap between them. For example, we target smaller and medium-sized companies, and the competitor targets medium-sized and larger companies. Those of medium size can fall between both, resulting in a trade-off decision for those customers.
Assessing effort
The amount of work required to compete will differ based on the needs of the new target customer group. This can include product development, new mandatory work (such as regulatory adherence), sales and marketing campaigns. When the difference is large, it is likely that there will be more work. Additionally, you should consider whether the market is large enough versus the effort. A simple visual example of this, with one competitor, is below:
Value proposition clarity
Changing your product to appeal to a very different customer group can confuse your product offering. For example, if you sell to small businesses and then expand to enterprises, you may find a very different set of needs. You now need to support both, resulting in conflicting strategic priorities.
New competitors
Changing your target market can result in new competition. For example, you expand into enterprises and find major competition from large companies. Ensure you have analysed this fully, as you may be unable to compete.
New products
Consider how good your idea is before creating a Strategy Item by considering the following:
Most importantly, does it solve a big enough problem for customers?
Meets basic desirability, feasibility and viability criteria (see this guidance).
Each “Strategic discovery tool” (see the related tab) has advice in it for identifying new product opportunities. The new product generator canvas is provided to help you structure your new product development. This can also be used for new paid features.
Reducing strategic risk
The Ansoff matrix is a useful tool for understanding strategy and how existing organisations can lower their risk of failure. There are four different expansion strategies an organisation can take:
Market development - Reduce risk by finding new customers that are the same or very similar to existing ones. For example, being in a different country. This strategy can be significantly lower risk than new product development, as your product is already proven.
Product development:
Reduce risk by releasing similar products to those you know.
If you are responding to a radically disruptive product, you can utilise your existing customer relationships to gain a competitive advantage.
Diversification - This can be a high-risk strategy. Use the market development and product development risk reduction strategies together.
Risk reduction summary - Use your organisation’s strengths to reduce innovation risk.
Reduce costs
Cost reduction consists of two aspects:
Cost reduction - Reducing current costs.
Cost avoidance - Avoiding costs that are expected or likely in the future. For example, as you get more customers, you may need to create a support team based on current manual processes.
The importance of low costs
High costs can reduce profitability, but also create a serious risk to your future survival:
Strategic focus - You may have a strategic focus to be a low-cost leader. This will provide additional weight to this strategy.
Competitive vulnerability - Consider the current threat level to your profitability from a competitor lowering prices.
Market maturity - The increasing threat to profit from a maturing market.
Competitive vulnerability
Without focusing on low costs, you can be vulnerable to losing profit and even going out of business. In the example below, organisation 3 has deliberately lowered prices to target organisation 2. “Costs competitive in the market” on the canvas reflects this point.
Market maturity
As a market gets more mature, cost efficiency becomes even more important. Prices will be driven down by:
Increased levels of competition.
Competitors with a low-cost strategic focus. Either existing competitors switch to this, or new entrants use this to gain market share.
Products becoming commoditised (more similar to each other).
Larger organisations with lower costs due to economies of scale.
Cost reduction
The following can act as inputs into your Strategy Items.
Areas of high cost and inefficiency
The canvas has sections for capturing these. Start by exploring if you can reduce costs in these areas.
Competitor costs
Research the factors that allow each competitor to deliver at a lower cost. For example, utilising partnerships or economies of scale. Consider copying these. For example, can you utilise the same partnership model? The Business Model Canvas can provide structure to this analysis.
Cost-saving process
Use the graph to prioritise, then create Strategy Items.
Cost avoidance
Cost avoidance deals with expected future costs. For example, you are dealing with a few customers manually, and you know that if you scale, you will need to create a new team. As these often can’t always be accurately predicted, the word “estimated” is used in the calculation:
Types of costs to avoid:
Predictable Costs - These are costs you know will happen in the future.
For example, a software license that is going out of date. If not renewed or replaced on time, it could disrupt operations and require expensive last-minute fixes or workarounds.
Technical debt - Includes areas of high technical debt that have already delayed releases, or impacted support or customers.
Risk-based Costs - These are key strategic risks.
For example, you don’t have very good digital security, and a breach would have a reputational impact, financial loss and regulatory impact.
Includes areas of high technical debt that are likely to cause high support costs or impact the customer when changed. This could be an area of poor code quality that is expected to be frequently updated and will regularly break.
Scaling Costs
For example, increased hosting or support team costs from an increased number of customers. These should be linked to your expected growth.
Technical debt - Includes needing to update areas of high technical debt, where you know rework is needed to scale the platform.
Use the graph to prioritise, then create Strategy Items.
Process
This process will help you prioritise and create your strategy. It consists of the following steps:
STAGE 1 - Direction
In this stage, you will:
Gather strategic direction inputs - This consists of the metrics from the first canvas section and competitor analysis. This information will stop you from guessing your strategic health and setting the wrong direction.
Evaluate strategic direction - This is to help you focus your research. For example, you need to reduce costs.
Gather strategic direction inputs
The strategic direction inputs tab gives you the instructions to these:
Metrics - Helps you prioritise your direction. You may decide to remove or add metrics depending on your organisation’s needs.
Competitor analysis - Provides insight into win/loss and churn, including future threats. You should have created the following grid:
| Competitor Name | Current strength (1 – Low 5 - Very high) | % of total sales lost to competitor | % of total churn switching to competitor | Future Threat Level (1 – Low 5 - Very high) |
|---|---|---|---|---|
Evaluate strategic direction
This is best done as a meeting with senior stakeholders. To determine your strategic direction:
Read the Strategic Direction Overview to help you understand your options.
Use the Field’s Strategic Priority Analyser (Copyright Timothy Field 2024). This maps to four strategy areas on the strategy canvas. It does not include mandatory work, as this work must be done regardless. You only need to prioritise a direction when you have excess capacity after identifying mandatory work. The grid will help you set a high-level direction that can reduce research and focus your solutions. Porter’s Five Forces model is integrated into the analyser to help you consider your competitive environment.
Reduce sales loss & churn
This strategy prioritises reducing customer churn and sales loss, including future risks to these. The following metrics and considerations may lead you to prioritise this defensive strategy:
Metrics:
Sales loss rate - Either to competitors or not purchasing anything.
Customer churn rate - A high overall rate, customers may churn to competitors, back to their old solution or back to needing no solution. Additionally, the impact of churn can be determined by the:
Customer Acquisition Cost (CAC) - The amount spent to acquire a customer that is now a lost investment. According to this HBR report, the cost of acquiring customers is typically five to twenty-five times higher than retaining an existing one.
Customer Lifetime Value (LTV) - The future revenue that is now forfeited.
Indicators of poor satisfaction that may lead to churn:
Net Promoter Score (NPS)
Customer Health Score (CHS)
Strong competitors - High-strength competitors or those with a high future threat level. This information is gathered from competitor analysis.
Porter’s Five Forces to consider:
Competitive rivalry is high - You have an increasing risk of churn that will impact your market share due to:
Many alternative offerings.
Competitors have very similar offerings.
Buyers can easily switch.
Slow or stagnant market growth.
High cost to exit the market (therefore, you should do your best to keep your position healthy).
Threat of new entrants is high - This is a future risk impacted by low barriers to entry, including structural and strategic barriers.
Threat of substitutes is high - Where a different type of product can fulfil the same need. For example, when travelling, trains compete with cars and aeroplanes.
Retire the product
In some scenarios, you may decide to remove the product entirely:
Declining market - No signs of recovery.
Competitive pressure - Continual losses despite changes to strategy.
Alternative strategies - Better growth and ROI elsewhere, or no longer aligns with your strategy.
Reduce costs
The following considerations may lead you to prioritise this strategy:
Your strategic focus is low costs.
Your costs are not competitive in the industry. This can create a major issue if competitors lower their prices, especially if a competitor is using a low-cost strategic focus.
There are many standard products with little differentiation, and brand is of low importance.
Cost avoidance - Areas of high cost that are expected in the future. For example, expansion will lead to large, expensive new teams to support manual processes.
Areas of high cost and inefficiency:
An unhealthy Cost Per Unit (CPU) including:
Fixed costs - These are costs that remain constant regardless of factors like the number of customers or usage. This typically applies in the short term, as large changes could increase or decrease them.
Variable costs - These vary depending on the number of customers or usage.
Porter’s Five Forces to consider:
Competitive rivalry is high - More competition increases the risk of competitors joining with a low-cost strategic focus.
Buyer power is high - Buyers will churn if you set your pricing too high, and can even drive down prices.
Bargaining power of suppliers is high - There are few suppliers or high switching costs, leading to them demanding more money.
Retire the product
In some scenarios, you may decide to remove the product entirely:
Low profitability - High level of investment with a continued likelihood of low profitability. You should consider gross profit and gross profit margin metrics.
Major costs - Major costs that can't be reduced. For example, supply chain, labour and infrastructure. See the costs section of the canvas.
Regulations - New regulations, such as legal and compliance, that stop you from being profitable.
Growth strategy
Even if you have prioritised a different strategy, you still may decide to allocate capacity to growth when you have spare capacity to invest. The following considerations may lead you to prioritise this offensive strategy:
Select Increase market share when:
Your strategic focus is differentiation, and you want to strengthen this further.
You have access to many customers who have not used your type of product before.
You have a weak competitor(s) and can take significant market share from them, possibly removing them from the market.
Select New markets/products when:
You have a new market available with access to many customers who have not used your type of product before.
Your current market is becoming saturated or is in decline.
You have unique capabilities you can use to expand.
An emerging trend will disrupt your current business model, or is one you can take advantage of.
You see a significant opportunity for increased profit.
STAGE 2 - Research
With a priority for your strategy set, you are ready to research and create Strategy Items. These are lightweight artefacts that provide structure to options. You will prioritise these in the next stage. It is important that you read these instructions to understand what they are.
Inputs
The framework provides
Guidance for your prioritised strategic direction - See the relevant page tab.
Strategic Discovery Tools - You can augment these based on your needs or ignore them if they are not relevant.
Managing research
Having management of research is highly recommended. Going into a prioritisation process without suitable preparation will lead to failure. Consider assigning a person to lead this. You should then assign specific people in the organisation to do the different activities. For example, you may have a CTO looking at technology trends. Creating strategic inputs can take some time. This should be an ongoing activity with a regular cadence. For example, you may choose to update your competitor analysis every 3 months.
Mandatory work and capacity
Mandatory work includes anything you must do to keep functioning as a business. It includes aspects like:
Legal and regulatory requirements.
Updating software versions to remain secure or removing old software that is going out of support.
Tackling strategic risks. For example, not having good enough security in your software.
You may have enough mandatory work to fill your team’s capacity immediately. If this is the case, you may be able to assign each team a Strategic Area.
STAGE 3 - Prioritise
When deciding your direction, remember to consider your market positioning and your mission statement. If you are known as having the best service or the lowest price, will your growth still align with this, or are you changing focus?
Prioritisation is the final stage when deciding which Strategy Items or new products to take forward.
Strategic Direction - Returning to the Field’s Strategic Priority Analyser may be helpful as a reminder of your prioritised strategic direction.
Present - Those involved in research should now present their findings and Strategy Items.
Prioritise - Map each Strategy Item onto the grid. It can be helpful to colour-code the strategy each supports. For example, making the “reduce costs“ items green. Guidance for the “Evidence this will work” on the grid is below it. You don’t need to gather all the evidence at this stage. For example, modelling the Return on Investment (ROI) in full. The analyser helps you evaluate the level of risk at this point in time. You can still go ahead with risky items that have a high impact.
Assign - Assign Strategy Items to teams. Full instructions are available below the prioritisation grid.
Use the following guide to evaluate “Evidence this will work” on the grid. If evidence is low in one area, then score the item lower.
Desirability considerations - Evidence that customers want this:
Evidence that it solves a big enough problem for customers.
Newness or level of differentiation of the solution in the market.
Evidence that customers want your solution and will switch from current solutions.
Feasibility considerations - Evidence that we can build and run this:
Understanding of technical design, including the ability to build it and ensure it will scale to customer demand.
Understanding of service design, including the ability to run it and ensure it will scale to customer demand.
Understanding of any major risks that could lead to this failing or greatly increasing in cost.
Viability considerations - Evidence that this will generate a profit:
Understanding of the pricing model and that the target price point is competitive.
Evidence that customers will pay.
Understanding of costs including build, customer acquisition and running the service.
How long it will take to reach the break even point and then achieve a good Return on Investment (ROI).
Assigning strategy to teams
Each team should be linked to a strategy. Avoid linking a team to more than one strategy, especially if it creates resource bottlenecks. You can also have multiple teams linked to a strategy. In this case, it is advisable to be clear about who owns it.
Teams may already be working on a strategy. Therefore, these should be reviewed, as you may not want to interrupt them. Use OKR key results to measure their progress. If they are ready for something new, use the appropriate canvas for the team(s) to build out:
Strategic Area - Where the product is being incrementally improved. For example, improving the visual design of a feature.
New Product Generator Canvas - Provides an in-depth innovation process for new products and high-risk features. For example, adding a reporting engine to a data product.
Optimising delivery team structures
You should consider optimising your delivery team structure where:
You have many interdependencies between teams. This can be particularly bad if you have separate teams based on technologies or capabilities.
You have specific teams or individuals who are involved in multiple strategies.
These dependencies can cause major bottlenecks, high levels of work in progress, and, ultimately, late delivery if not addressed. Keep teams together when they become high-performing. This is much better than resetting all the teams each time you change strategies.
Upskilling versus planning
You should cross-train people to remove delivery bottlenecks when these are likely to happen regularly. For example, a database administrator is used by all the teams and regularly blocks them. Where this is not the case, plan carefully around these. Consider removing specialist component teams where there is enough work, and put these skills into each team. For example, you have a group of user acceptance testers that always cause a bottleneck, and you move one person into each team.
Pricing
If you have made several improvements to your core product, you may wish to review your current price point.
Strategic direction inputs
In this section, you will:
Gather metrics - These should be captured as trends.
Perform competitor analysis - As well as informing the product’s direction, the information can support sales and marketing teams.
The picture below shows an example cadence for this and the overlap with the strategy sessions. Here we have metrics being tracked monthly and competitor analysis updated every two months. The strategy session is biannual. You can adjust these as you see fit.
Metrics
It is strongly advisable to automate the metrics so that it is not a great deal of effort to produce them. Each of the sections provides additional insights into the reasons behind the trends. For example, “loss rate to competitors” can be better understood by following the instructions in the competitors tab.
Leading and lagging indicators
“Leading” metrics indicate that something could happen. “Lagging” indicators tell you something has already happened. The benefit of tracking leading metrics is that we can react early. Consider churn, you don’t want to wait until you’ve lost a lot of customers before you act.
Tracking metrics
You can track these metrics more regularly than the cadence of the strategic direction review. For example, if you see major churn you should not sit back and wait, you may need to react quickly. The metrics should be an average over the timeframe.
Selecting metrics
These metrics are provided as a starting point. You may wish to track additional ones or even ignore some of those provided.
Product profitability
Capturing your overall profitability is essential. It tells you if your product is sustainable and overall will ensure your organisation survives. Gross profit and gross profit margin are metrics that reflect this aspect. You should track trends as well as individual data points. For example, you may have a bad month for sales and could make a poor decision based on a single data point. Break-even point - How many units do you need to sell to break even, and is this level of sales realistic?
Break even point reached
This is the point at which the amount of revenue coming in covers your fixed and variable costs. It is a strong indicator of financial health.
When expected to break even
Ideally, your revenue will be increasing. If it increases enough, you will eventually break even. You may have the following issues and need to take action:
If your revenue is declining.
If your revenue is increasing, but at a rate that will take a very long time to cover costs.
Sales loss & churn
These metrics will give you insight into overall sales loss and churn levels. This includes Net Promoter Score (NPS) and Customer Health Score (CHS), both leading indicators of customer satisfaction. With low satisfaction levels, customers can churn but also spread information about issues with your product that can impact sales. You should only consider customers that match the definition of your Ideal Customer Profile (ICP) in your figures. This page will help you define an ICP. Every metric can be broken down to gather more insights. For example, if you have a poor Net Promoter Score (NPS), is everyone unhappy, or is there a large spread of negative and positive?
Sales loss rate
The sales loss rate represents customers who have selected a competitor and those who haven’t purchased. It is important to consider what “haven’t purchased” means in your scenario:
Sales team calculation
Sales losses can be easier to calculate when working with a sales team that can qualify leads. Leads should be counted at a later stage of the sales funnel. It is unwise to count every single potential company you reach out to. For example, if you are cold-calling, the success rate may be very low. To do this, consider the point where a customer becomes a Sales Qualified Lead (SQL). This is the point where you have assessed them. For example, they have the budget, have shown a willingness to buy and have budget authority.
No sales team calculation
Sales losses can be calculated using the following methods:
Product-Qualified Lead (PQL) - Where a user or account has reached a key activation milestone that correlates with a paid plan. For example, they have spent significant effort moving data into a trial version of your software.
Trial-Qualified Lead (TQL) - Relevant to products with a limited trial period.
Behaviourally Scored Marketing Qualified Lead (MQL) - A user who reaches a set of criteria. For example, a CEO who has attended a workshop.
Account-Based Signals for B2B - Where a number of users reach a key activation milestone within a business. For example, 3 users are working on the product daily.
% sales lost to competitors
This metric is a major indicator of health. This means the customer had a clear need but still did not select you. A high loss rate may indicate you have a weak or non-existent competitive advantage. When products aren’t the same, customers will consider the trade-off of benefits between competitors. For example, you may have better data cleaning, but a competitor has a more advanced reports engine. Additionally, brand strength can impact a customer’s decision, even if the products are the same. Even if the loss rate is low, it is advisable to monitor competitors continually.
Sales team calculation
Sales losses can be easier to capture where opportunities can be clearly differentiated.
No sales team calculation
The following can be considered as a high sales loss %:
Low market share.
Negative customer feedback.
Negative sentiment analysis.
Poorly ranked website.
Post-purchase surveys showing strong positive feedback for competitors.
Customer Churn Rate
This is the percentage of customers that churned over a defined time period:
To no solution - Customers who cancelled or paused. For example, they may have gone out of business or no longer need the service.
When, due to poor market conditions, they may eventually come back to a solution. All competitors can be impacted by this.
When your solution does not solve their problem or provide enough value, this can be far more serious.
To a competitor - Where customers still need a problem to be solved, but select an alternative solution from your competitors.
The churn rate represents the percentage of customers that have left over a time period. This can include:
Subscriptions
Stopping repeat purchases
Contract or policy cancellations or non-renewals
Stopping usage
Mobile app deletion
The churn rate should be captured monthly and tracked as a trend. Churn will naturally fluctuate, and you should avoid being too reactive. Seek to identify the root cause of unusual spikes.
For example:
((20 customers at the start of the time period - 18 customers at the end of the time period) / 20 customers at the start of the time period) * 100 = 10%
Written in long form:
(20 - 18) = 2
2 / 20 = 0.1
0.1 * 100 = 10%
In tiered pricing used in subscriptions, you may also break down the churn rate into each tier. For example, a top tier that is earning you a lot of money has a high churn rate, and you need to respond.
% of churn to competitors
This is the percentage of your customer churn who went to a competitor. This means they still have a need, but you are not fulfilling it. This is a very important metric for gauging your value proposition strength.
Net Promoter Score (NPS)
The likelihood of a customer recommending you on a scale of 1 to 10. A poor NPS score can lead to churn. In addition, you may experience further damage from unhappy customers sharing their negative experiences. Ask the following question to determine your NPS Score:
How likely are you to recommend us to someone?
Scores 0-6 are considered negative and may be at risk of churn.
7-8 are considered neutral.
9-10 are considered positive, with a high likelihood that they will personally recommend you.
The NPS score is derived from the percentage of positive scores, ignoring the neutrals.
NPS represents the percentage of satisfied customers:
Customer Health Score (CHS)
This is an internal indicator of customer health that you can gather yourself. It is a combination of factors that lets you know how well you are doing. You can gather this information without contacting the customer and proactively look for weaknesses in your product and service. This can be gathered more regularly than a Net Promoter Score (NPS). The metric on the canvas is an aggregation of all CHSs.
Example health metrics to consider:
Manual processes - How much time is a customer spending on these?
Support tickets - How many tickets have been raised, and what percentage are serious?
Product usage - How much time is the customer spending on the product?
Customer reviews/feedback - How positive is the customer about your product?
Considerations:
Weighting - You can weight each score to signify importance. For example, you may rate Net Promoter Score (NPS) as a very high indicator of poor health. You should set a frequency for capturing this. For example, every quarter.
Supporting customers - CHS is not just for your product strategy, but also can help business teams focus on high churn risk customers.
An example CHS score. Each metric is translated into a score out of 100. For example, an NPS of 90 may represent a 9 out of 10 on the scale.
| Component | Score (0–100) | Weight | Weighted Score |
|---|---|---|---|
| Product Usage | 80 | 0.4 | 32 |
| Support Satisfaction Score | 60 | 0.2 | 12 |
| NPS | 90 | 0.3 | 27 |
| Frequency of Product Usage Score | 50 | 0.1 | 5 |
| Total Customer Health Score (CHS) | 76% | ||
Cost per unit is important to consider under these conditions:
Available capital (burn rate) - How long can you continue at a loss? If your price is below your cost per unit, you will be losing money now. You need to understand how long this can go on for.
Reduced costs from scale and profitability - Will your cost per unit fall low enough to make a profit at the price you’re charging, even at scale? If not, you will never make a profit.
Are costs competitive in the market?
Benchmark typical competitor costs to ensure you can be competitive and withstand lower prices in a maturing market. In addition, new competitors may join, looking to differentiate with a low-cost (and low-price) strategy. This can disrupt an existing market where competitors incur high costs.
Areas of high cost and inefficiency
See the costs section of the Business Model Canvas to determine key costs.
Competitor analysis
This section contains a competitor analysis canvas. This information will not only support you in understanding win/loss and churn, but also future threats. The Market Positioning Canvas helps you identify your competitors. If you don’t wish to complete the whole canvas, you can use this section to guide you.
Start-ups and emerging solutions
Start-ups in new markets can sometimes ignore competitor analysis. There may be little competition, and they are focusing on establishing their new type of solution. This can be dangerous as the following risks can still impact them:
Current competition levels:
Customers are actively comparing you to another new competitor, and you are losing a lot of business to them.
Your differentiators are becoming much less effective as competitors copy them.
Competitor messaging strengthens as they respond to you, but you ignore them. Your messaging becomes generic and weak.
A competitor optimises their business model and reduces your ability to compete. For example, teaming up with a supplier to lower costs.
Future threat is high:
Your competitors are rapidly releasing new, important differentiators and threatening to take market share.
A competitor is receiving much industry recognition, and their brand strength is growing.
A competitor with a substitute solution is responding to your new solution type to stop you from replacing it. For example, you have a new AI-based accounts product, and they start to integrate AI into their solution.
Your competitor is forming an industry standard that puts you at a competitive disadvantage.
Competitor Analysis canvas
Structured competitor profiling is especially important for gaining a competitive advantage and assessing future threats. The Competitor Threat Analyser Canvas provides structure to this activity:
Summary of competitors
The deals considered in the metrics should only include customers that meet your Ideal Customer Profile definition. If you are attempting to sell to a customer who isn’t and include them in your figures:
Your results will look worse, leading you to react when it is not necessary.
You may change your product and impact the clarity of your value proposition.
The summary grid below is populated from the completed competitor canvases. This information can now be taken into your Strategic Direction prioritisation.
| Competitor Name | Current strength (1 – Low 5 - Very high) | % of total sales lost to competitor | % of total churn switching to competitor | Future Threat Level (1 – Low 5 - Very high) |
|---|---|---|---|---|