The Seven Step Strategy Framework is an approach to strategy formulation that is rooted in the principles of value creation. Strategy is the starting point for the ValueGroove Management Process® (VMP). The fundamental premise of the VMP is that the purpose of an organization is to create value for customers, employees and investors, in ways that integrate the interests of those three groups. In that context, strategy is the process of deciding where an organization or business unit should focus its efforts going forward, in order to Create, Communicate and Capture real, superior value.
The Seven Steps in the model are:
This is a broad, macro view of the environment in which the organization operates, looking especially at recent and imminent changes in the environment that will create new opportunities and threats.
2. Target Customers and their High Priority Needs
With the macro environmental view as context, the model next looks at which customer segments the organization should focus on serving, and at the high-priority needs of those segments. The higher-priority the needs are that you address, the greater the value you create in the eyes of the customer. If your customer is another business, the greater the impact of your offering on the customer’s core business, the greater the value you create.
3. Solutions and Competitive Alternatives
Having identified your target customers and their high-priority needs, what would be the most compelling solutions (again, in the eyes of the customer) that address those needs? What are the current best solutions being offered by others (your likely competitors), and how would the solutions you envision create value that is superior to competitive offerings?
4. High Value Activities
A compelling, complete solution often integrates activities that are performed by many players in an industry value chain: suppliers, partners, complementors, independent distribution channels, outsourced experts (designers, marketing and advertising people, etc.). Each step in a high-value solution is an activity, and the value-creation logic often suggests that each activity should be performed by the player who has the greatest added value in performing that activity. There typically is also a high-value role for an organization to orchestrate the entire solution, coordinating all of the activity providers, and managing the relationship with the ultimate customer. Given the solution identified in step 3, which activities should your organization perform in creating and delivering that solution?
5. Strategic Assets
The degree to which an organization has added value in performing a specific activity is determined by the organization’s strategic assets—its people, capabilities, processes, relationships, proprietary knowledge, etc. What are the strategic assets that your organization has, or that it can develop or acquire, that will allow it to have added value in performing the activities identified in step 4?
6. Alignment of Organizational Infrastructure and Culture
Given the assets you want to maintain or develop, and the activities you want to perform, do you have the right supporting infrastructure (roles & responsibilities, metrics, incentives, IT systems) and culture (values, fundamental assumptions, vision, leadership)?
7. Business and Financial Model
What are the economics of the solution-activities-assets-infrastructure you envision? What are the expected methods and costs for marketing, sales and distribution? What levels of revenue (especially recurring revenue), growth, gross margins, operating profit and return on capital will this strategy deliver? Is this an attractive business relative to alternative opportunities? Will it allow the organization to capture a portion of the value it creates?