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 major innovation, including new products and chargeable 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 focusses 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. |
Overall strategy
The product vision and mission statements, defined in the product positioning stage, anchor your long-term strategy. You may wish to update these if:
There are significant changes to your market, customer needs, or technology landscape.
A change to organisational strategy that impacts your product direction. For example, the organisation wishes to move from targeting small businesses to enterprises.
User Experience vision
The UX vision is designed to bring potential strategic items to life. You should create this for your high-impact options. This helps you visualise complex solutions at a high level. It can help with understanding build feasibility, and assist with a strategy decision. Business and technical teams should validate the UX vision to ensure it is fit for purpose.
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
Canvas inputs and prioritisation
Trend Analysis
This section covers the different types of trends that can you help identify strategy options for all the canvas sections. You may find multiple solution options. For example, a technology trend that could be used for cost reduction and new features. Outside of mandatory work, the trends must result in solutions that:
Solve a big enough problem.
Meet basic desirability, feasibility and viability criteria (see this guidance).
Trend analysis process
The following process is recommended.
Identify trend - Use PESTEL analysis (provided below) to identify trends that are relevant to your organisation.
Identify opportunities / mandatory work - Consider the types of impact you can make with the trend:
Mandatory work - You must take these forward, and they should be automatically prioritised.
Reduce costs.
Protect market position - where losing sales to a competitor or seeing high churn (competitor analysis tab).
Increase market share (gain additional customers).
New markets/products.
Consider prioritised strategic direction - For example, if your priority is to reduce costs, then focus on these items. This does not mean you filter everything else out.
Research and filter
Do some basic research based on the “pre-filtering strategy items” advice in the Strategy Item Guidance tab.
Filter based on this and your prioritised strategic direction (process tab).
Create strategy items ready for prioritisation (example below the grids).
Capture trends and solutions
The grid below can be used to capture trends and associated solutions. An Excel spreadsheet containing the full grid can downloaded here.
| Trend type | Trend details | Solution and expected results |
Impact: - Mandatory work - Reduce costs - Protect market position - Increase market share - New markets/products |
|---|---|---|---|
You may not know the expected results. In this case, doing some basic research to determine them is advisable. For example, if you are implementing the machine learning trend (MLOps) on to your Google cloud, what is the typical cost saving that Google claims?
Examples
Here are some examples that contain the different types of strategy (impact column). A trend may lead to several solutions. This grid is best viewed in a browser.
| Trend type | Trend details | Solution and expected results |
Impact: - Mandatory work - Reduce costs - Protect market position - Increase market share - New markets/products |
|---|---|---|---|
| Legal | New refund regulation must be adhered to | This work must be completed by 2025 | Mandatory work |
| Technological | Machine learning to reduce cloud storage costs | Implement MLOps on our Google Cloud to reduce costs by 20% | Reduce costs |
| Political | Competitors in the USA are about to pay less tax, lowering their costs and increasing their ability to lower prices | Offer a 24/7 service level free for this country to convince customers we are still good value | Protect market position |
| Social | Customers switching to environmentally friendly organisations | Obtain Carbon Neutral Certification and market this to potential customers | Increase market share |
| Technological | AI chatbot that can interrogate data and provide insights | Create a new reporting engine using AI that we can sell | New product |
Strategy Item example
Here, you can see a completed strategy item where a grid row was prioritised.
The risks of ignoring trends
Some trends can significantly impact or destroy your market position. For example, a new technology that could replace your current solution.
PESTEL analysis
PESTEL analysis gives you a starting point for the types of trends to study. This was initially developed in 1967 by Francis Aguilar. Questions have been provided for each trend that will help you maximise its value.
Political
These are changes driven by government, e.g. tax policy, funding and grants, elections, bureaucracy.
What future government policy could impact you?
How could future instability in government impact you?
Economic
For example, interest rates, exchange rates, economic health, availability of finance.
What economic conditions could impact you?
Social
Consider social trends, e.g. a move away from using cash and demographic changes, e.g. an ageing population or more people moving to the countryside.
What changing customer attitudes could impact you?
What demographic changes could impact you?
Technological
Technology innovation can reduce costs, improve customer experience, create new differentiators and be the basis for new products.
Start with benefits
The big anti-pattern for technology trends is jumping onto them regardless of Return on Investment (ROI). To counter this, we start with the benefit the technology is supposed to bring rather than focus on the technology itself. For example, you look at a cloud solution to reduce hosting costs and discover it is not cost-efficient:
What are the expected benefits of a new technology trend that could help you?
Which gives you sufficient benefit versus the cost?
Be careful of drawbacks. Introducing new tools can have additional support requirements, make development more complex and slow down your time to market.
Architectural Innovation
Opportunities to reconfigure technologies to create value. Here are some examples:
Cloud microservices
Improved scaling.
Allows for pay-as-you-go models after the isolation of specific services.
Embedding your tool into other products
Allow other parties to use your back-end processing
Marketplace for third parties - Allow other organisations to build on top of your product (plug-ins, extensions and apps).
Environmental
Aspects like global warming, ethical sourcing, and pollution.
Legal
Aspects like consumer law, international trade legislation, and employment law.
What laws could impact you?
Customer Experience (CX) and Service Design
The picture below shows how a service works from a customer/user and organisational perspective. It is worth noting that there are no industry standard definitions for these terms. What is important is differentiating between the customer’s view and the operational efficiency of a service:
Customer Experience Overview
This is defined as the customer’s view of your organisation. It is about how they interact with and feel about you. They typically go through a Customer Journey steps. For example, consider a university:
The frontstage may include many touchpoints such as marketing, sales and application processing teams. By operating in silos, these teams can present a fragmented experience. For example:
The applications team ask for a passport for identification. The student uploads this digitally.
Later on, in the enrolment process, the student housing team asks for a picture of their passport to be emailed to them.
At its worst, both teams could implement process improvements without considering each other. For example, the applications team move the work to an external organisation, and the student housing team creates new scanning software. With a holistic view of the service, we would be able to see that the information is not required twice. We can now make changes to create a seamless service for the customer.
For detailed instructions on how to create a customer journey map, see this page.
Service Design Overview
This is the operational view of a service:
Frontstage - This is your organisation’s visible touchpoints that the customer interacts with. These may be technology, such as a website or a team of people.
Backstage teams - Actions performed by internal teams to support the service.
Supporting systems - These are IT systems that support the delivery of the service.
User Experience
The Utility, usability and accessibility canvas provides a structured process for identifying issues and opportunities. Customer Journey Mapping is a technique for evaluating a customer’s touchpoints with the software and organisation. Journey Mapping is one of the most effective methods for understanding a customer’s overall experience. The canvas is designed for software-based products and services.
Example Strategy Item
Here is an example of a Strategy Item developed by analysing the customer’s experience:
Service Design
An end-to-end service view considers not only the customer’s touchpoints but behind the scenes processes. The granularity of a process can be from a high-level overview to more detailed flows. Service Design is more focused on operational efficiency than how a customer feels. Focus on this when you want to:
Reduce Operational Costs - Identify and fix high-cost technology or manual processes. Where customer-facing, couple this with improvements to the service.
Increase Market Share - Where customer support or service infrastructure is a limiting factor to market expansion.
High-level Service Blueprint
The high-level view is useful for strategic analysis. It provides a shared view for all stakeholders to align on. This is particularly useful if you have different departments managing each process stage. Major pain points and opportunities can be identified. These should always start with a problem statement. For example, rather than saying, “Use AI for eligibility checks” we consider the size of the problem first. Problems should be quantified to determine to determine this. Without this you end up with a solution orientated blueprint where you prioritise strategy that has little impact.
Low level Service Blueprint
Below is an example of a more detailed flow. This are particularly useful for identifying issues and inefficiencies. Where a process is very poor consider it for complete replacement. In some cases a single individual in an organisation may not know how a process works end-to-end. Focus on processes you don’t understand or where you aren’t clear on its problems. The frontstage the user sees in this example is the OurBank.com website.
Future state Service Blueprints
The same techniques can be used to show future state blueprints. For example, you create a new low-level diagram with the removal of the manual Fraud check and replace it with an automated one.
Example Strategy Item
Below is an example Strategy Item that can be input into prioritisation.
Business Model & Resources
This section helps you identify strategic inputs from:
Your business model - Using the Business Model Canvas (BMC).
Internal resources - Using the Resource Based View (RBV) technique.
Business Model Canvas
The Business Model Canvas 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. Full details on how to create this and identify strategic opportunities are here.
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.
In David Aaker’s brand equity model, these are seen as valuable resources and capabilities that give a brand or product a strong competitive advantage. They can provide credibility and establish trust. For example, owning a patent that provides strong evidence of expertise. They include:
Intellectual Property (IP) - This includes aspects like trademarks, copywritten material and patents.
Digital assets - This includes aspects like unique content, domain names and proprietary software.
Relationships - This includes aspects like supplier and distributor relationships that cannot be copied.
Brand elements - This includes aspects like colour palettes, characters and jingles.
Proprietary processes - For example, you have optimised processes for delivering physical goods or providing personalised customer support.
You should identify these assets and store them centrally. You can then review them to ensure they are properly protected and have no unauthorised usage.
Determining resources
These are determined using the VRIN criteria:
Valuable - Resource that helps efficiency, effectiveness or customer satisfaction.
Rare - The resource must be rare within the industry.
Inimitable - Competitors cannot easily replicate.
Non-substitutable - Cannot be replaced by other solutions that provide similar benefits.
Process
Identify resources that make the organisation unique.
Evaluate these against the VRIN criteria. They must meet all of them.
Develop a strategy to leverage these.
Invest in these aspects to maintain competitive advantage.
Links to the Business Model Canvas
You can use the BMC to look for these advantages. For example:
Key activities - You are a world-renowned expert in creating business strategy.
Key partners - You own a large share of a distribution company, resulting in lower shipping costs.
Monetising assets
Licensing - For example, where you have a patent and can charge another organisation to use it. Ensure this aligns with your brand to protect your integrity.
Merchandising - For example, using logos to create branded t-shirts.
Strategic partnership opportunities. Here are some examples:
Technology
Enhancement - This is where you enhance a partner’s capabilities. For example, you own a security camera patent and work with a car manufacturer to improve their vehicle security.
Joint development - This is where you combine your technology or operating methods to create new capabilities. For example, you own a moisturiser patent and partner with a beauty company to develop a new product.
Process
Efficiency - Where your unique processes can provide an advantage to a partner. For example, you have optimised product ordering and can reduce their costs considerably.
Customer experience - Where your unique processes can provide your partner’s customers with a much better experience. For example, you have created a room booking system that customers can use themselves. Your university partners want to use this for external speakers to plan their own events.
Competitor Analysis
The Market Positioning Canvas helps you identify your competitors. If you don’t wish to complete the whole canvas, you can use this section of it to guide you. It is advisable to continually monitor your competitors even if you don’t immediately plan to react to them.
Market maturity and competition
The diagram below shows how competition changes as the market matures:
In a new market, there will be many potential new customers available. When the market reaches maturity, there can be a lot of similar competition, with solutions growing and converging. Customers will typically switch between these solutions rather than try them for the first time. Eventually, a new type of solution will emerge, replacing the market, and the cycle will start again.
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 Process
Competitor profiling is especially important for gaining competitive advantage and assessing future threats. A common mistake is to take every feature a competitor has, compare them with your own and build out your weak ones. Instead, you should focus on features in a competitor’s product that customers care about.
The Competitor Threat Analyser Canvas provides structure to this activity:
Summary of competitors
The deals considered in the overall win rate should be where the customer meets your Ideal Customer Profile definition. If you are attempting to sell to a customer who has different needs 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.
You may find it helpful to create a summary grid like the one below. This is populated from the completed competitor canvases. After this, the section below helps you evaluate each competitor and create a recommended action.
An Excel spreadsheet containing the full grid can downloaded here.
| Competitor | Our Win Rate % | Key strengths leading to competitor winning | Key weaknesses leading to competitor losing | Future threat level (1 – Low 5- very high) |
Key future threats |
|---|---|---|---|---|---|
Recommended actions
Use the Field’s competitor analyser (copyright Timothy Field 2024) to classify your competitor and decide how to act. If you are using tiered subscription-based pricing, apply this to the competitor overall. You don’t have to respond to every competitor, especially if you have very limited development capacity. Competitor win rate (y-axis) and future threat (x-axis) analysis are provided on the competitor canvas.
Types of action
Protect market position - You are losing too much market share to a competitor and need to respond. Even if you have your own differentiators, these are not as strong as your competitors. According to this HBR report, the cost of acquiring customers is five to twenty times higher. If this is the case for you, prioritise this above pressing advantage against weaker competitors.
Press advantage (increase market share section of the canvas)- Your competitor is losing ground to you, and you want to increase your competitive advantage further and win more market share. You may even be able to take them down.
Monitor competitor - You will take no action. You want to monitor what they do for emerging threats.
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.
Add your recommended actions and priority (order numerically) to your summary table:
| Competitor | Our Win Rate % | Key strengths leading to competitor winning | Key weaknesses leading to competitor losing | Future threat level (1 – Low 5- very high) |
Key future threats | Recommended action:
- Protect market position - Press advantage (growth canvas section) - Monitor only |
Priority |
|---|---|---|---|---|---|---|---|
Creating a strategy
Once you have decided to act, use the Competitor Differentiator Analyser (copyright Timothy Field 2024) to decide what to do. Start with the competitors with the highest priority. Map out each of your competitors’ key differentiators (the reasons they are winning). These don’t have to be features. For example, they may have better customer support. The tool will provide you with recommended actions based on cost/benefit. Where the differentiator is a minor reason for sales loss, and you know it will take effort to create it, don’t map it on the graph. 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.
Action options
The graph provides these options:
Act now (red section) - When a differentiator is a major 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. 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. Consider your trend analysis inputs for this work (trend analysis tab on this page).
Improve your differentiators - Use the customer views canvas section 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 will affect your profitability. The competitor may respond, lowering the overall market profitability, and you may lose all benefits.
Improve usage allowance (subscriptions) - This is a high-risk strategy. It will make you better value but will affect your profitability. The competitor may respond, lowering the overall market profitability, and you may lose all benefits.
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:
UX Vision
Before creating a UX vision, you should have some strategic items generated. The UX vision shows potential high-level system flows. It allows us to provide a good product experience by considering the customer experience as a whole. For example, you may change how customers navigate and interact with your product and would like to visualise this journey. It needs sufficient functional depth for people to understand the strategic options. You are very unlikely to build everything that the vision has within it.
This output is used when prioritising your Strategic Items. It will allow the leadership team to synchronise around what their options really mean, and is a great starting point for discussion.
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.
Process
This process will help you prioritise and create your strategy. It consists of the following steps:
STAGE 1 - Research
In this stage, you will:
Evaluate strategic direction - This is to understand where to focus research.
Conduct research - To create Strategy Items ready for prioritisation.
Evaluate strategic direction
To determine your strategic direction:
Read the Strategic Direction Guidance to help you understand your options.
Gather the metrics on the first canvas section (Strategic direction inputs). Treat these as a starting point, you may decide to remove or add metrics depending on your organisation’s needs.
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.
Protect market position
The following metrics and considerations may lead you to prioritise this defensive strategy:
Metrics:
Customer churn rate - High rate of customers that don’t return.
Loss rate to competitors - The loss rate against a competitor is high.
Indicators of poor satisfaction that may lead to churn:
Net Promoter Score (NPS)
Customer Health Score (CHS)
Porter’s Five Forces to consider:
Competitive rivalry is high - Many alternative offerings exist, you are in a mature market, and buyers can easily switch.
Threat of new entrants is high - 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.
Exit the market
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:
You want to use low prices as your primary differentiator. Select when you have a standard product with little differentiation, and brand is of low importance.
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 - Your competitors are aggressively pricing, and your costs are too high to make a decent profit if you match them.
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.
Exit the market
In some scenarios, you may decide to remove the product entirely:
Low profitability - High level of investment with a continued low 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
The following considerations may lead you to prioritise this offensive strategy:
Overall:
Your competition is a low threat, and your costs are low.
You have spare capacity to invest.
Increase market share when:
You have a weak competitor(s) and can take significantly more market share from them.
Customer acquisition costs are low.
You have a significant cost or differentiator advantage.
Create new markets/products when:
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.
When deciding your direction, 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?
Conduct research
With a priority for your strategy set, you are ready to create Strategy Items. You should read these instructions to understand what they are. The framework provides a number of inputs for your strategy, including diverse aspects like competitor and trend analysis. You can ignore these or augment them based on your needs.
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.
STAGE 2 - Mandatory
Identify any work you need to 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.
At this stage, if free, you may be able to assign teams a Strategy Item to be built immediately into a Strategic Area.
STAGE 3 - Direction
In this stage, you will reconfirm your strategic direction before prioritising individual strategies. You should return to the Field’s Strategic Priority Analyser. You should now have a good grasp of your competitors, customer satisfaction rates and costs. For example, if you are losing a great deal of sales to a competitor, you may not even want to consider cost reduction.
STAGE 4 - Prioritise
Prioritisation is the final stage when deciding which Strategy Items to take forward. Below is a simple prioritisation system you can use. 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.
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 customers want this:
Evidence it solves a big enough problem for customers.
Newness or level of differentiation of the solution in the market.
Evidence customers want your solution and will switch from current solutions.
Feasibility considerations - Evidence 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 this to fail or greatly increase in cost.
Viability considerations - Evidence this will generate a profit:
Understanding of the pricing model and that the target price point is competitive.
Evidence 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).
Linking teams to strategy
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 order to set your strategic direction you should consider some metrics that can you make a better decision. 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.
Protect market position
Customer Churn Rate
This is the overall number of customers that churn:
To no solution.
To a competitor.
Loss rate to competitors
The level of loss to competitors. This is specifically where a customer does not select you. It does not include those customers who didn’t choose anyone.
Net Promoter Score (NPS)
The likelihood of a customer recommending you on a scale of 1 to 10. 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 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:
NPS Score = (Number of satisfied customers with scores 9 and 10 / Number of survey responses) * 100
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. 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 poor customer feedback 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.
Churn rate
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.
Identifying churn reasons
Where you see high levels of churn, it is important to understand where the majority of customers are going:
1. Switching solutions:
To a competitor - The Competitor Threat Analyser Canvas provides the tools for detailed analysis.
Back to an old custom solution.
Created their own new custom solution.
Common root causes:
Your product or its service is poor. For example, a poor user interface. The canvas is designed to pick up these types of issues.
Poor adoption or implementation experience. The customer journey map will pick up these types of issues.
Your product does not represent value for money.
The loss of a key champion, leading to your product being dropped.
Negative industry view of your product.
Lack of user community.
Budget cuts.
2. Stopped using any solution for the problem your product solves.
Common root causes:
The problem you are solving may not be big enough.
Customer needs have changed.
Revenue loss and churn
Pay particular attention to individual high-value customers leaving and where groups of lower-value customers are going. Individually, lower-value customers can feel less important, but with enough of them churning, this can result in a large revenue loss. You should use the canvas to identify areas of high churn risk and react quickly.
Costs
See the costs section of the Business Model Canvas to determine key costs.
Cost per unit
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 run high costs.
Areas of high cost and inefficiency
See the costs section of the Business Model Canvas to determine key costs.