Strategic Analysis: What It Is & How To Do It Effectively

Unlike strategic planning and strategy execution, strategic analysis can be a fuzzy term. People sometimes confuse it with tracking and analyzing operational data points. That is an important business activity, but not one usually tied to strategy. Strategic analysis is a key part of long-term business planning and the first step in the planning process.

At ClearPoint Strategy, we give organizations tools to conduct thorough strategic analyses. Leaders use them to gather the data they need, identify trends, and form strategies they can act on. The platform simplifies the process and feeds strategic planning and execution.

This article defines strategic analysis, describes the methods used to conduct it, and lists its key components so you can carry it out.

What Is Strategic Analysis?

Strategic analysis (sometimes referred to as a strategic market analysis) is the process of gathering data that helps a company’s leaders decide on priorities and goals, shaping (or shifting) a long-term strategy for the business. It helps a company understand its environment and build a strategic plan to match. Every organization needs it, because it provides the context and backbone for the strategy and overall position of the business.

Quantitative data and charts alone are not enough to plan for the future. An organization cannot understand how it will succeed without context about its internal resources and external environment, in the form of both qualitative and quantitative data. Strategic analysis adds that context to quantitative data. The trends and patterns you spot and evaluate will inform your organization’s long-term plan.

You’ll know you’re performing a strategic analysis if you are:

• Focusing on high-level strategy. If you’re prioritizing operations, sales, marketing, or any other function, organization-wide strategic analysis won’t happen. The focus should be on information that directly impacts your long-term strategies and goals.
• Looking both backward and forward. Strategic analysis means assessing data about the past, so you can judge what that performance implies and predict what is likely to happen next. The better your reports are at looking backward, the better your organization will be at moving forward.
• Involving company leaders in the process. Junior analysts may assemble the information, but the leadership team needs to make decisions and act on it.

A strategic analysis is not a one-time exercise you drop once your strategy is in place. The business environment changes, whether from a growing number of employees, new government regulations, or anything else. To stay adaptable, repeat the analysis periodically.

Organizations that are part of fast-changing industries should conduct this exercise (in abbreviated form if need be) more frequently than those that are not. An annual refresh of your strategic market analysis keeps your organization on track over a few years and helps inform your annual slate of initiatives.

Types Of Strategic Analysis

There is no standard strategic analysis “format.” Several methodologies can guide you through collecting and analyzing data for strategy planning. Two of the most commonly used methods are SWOT and PESTLE.

• A SWOT analysis (which stands for strengths, weaknesses, opportunities, and threats) helps organizations identify where they’re doing well and where they can improve, both from an internal and external perspective. Strengths and weaknesses are considered internal factors, and opportunities and threats are considered external factors.
• A PESTLE analysis focuses entirely on external factors in the political, economic, social, technological, environmental, and legal areas that your organization can’t control but should prepare for. It might flag changing tax legislation, new laws or legal procedures, fluctuating interest rates, and similar shifts. Your strategy planning should consider any possible change that would have a material impact on your business.

Many organizations do both a SWOT and PESTLE analysis to get a complete picture of the business environment. Your entire leadership team should take an active part in these sessions, along with anyone else who can bring relevant data points or perspectives.

Some team members may be able to speak to strengths and weaknesses through experience; others may have access to data that supports (and provides context around) those viewpoints. A team that is knowledgeable about both the company and industry will produce the most effective strategic analysis.

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Key Components In Strategic Analysis: 5 Steps

Below are the five steps to a strategic market analysis. First, one distinction: strategic analysis is only part of strategic decision making. It’s a necessary step, and it helps you make informed, thoughtful decisions. Once you finish the analysis, treat it as a tool in your decision-making kit and refer to it often.

The five steps of a strategic market analysis are:

1. Determine the level of strategic analysis you’re performing. Decide whether the analysis is for the corporate, divisional, or functional area (such as marketing or sales) level. It helps to understand your company’s strengths, weaknesses, opportunities, and threats at all levels of the business, so you can devise the best strategy for future progress.
2. Gather a team to help. Participants should include members of the board or leadership, along with representatives from finance, human resources, operations, sales, and any other critical functions. You need people with different perspectives on the business, and some of them should be able to identify and evaluate internal and external data.
3. Use one or more analytic methods such as SWOT or PESTLE to conduct your analysis. Direct team members to bring relevant quantitative and qualitative information, which may include feedback from outside groups such as customers or industry experts. Whether or not your organization uses the Balanced Scorecard (a strategy management framework), its four perspectives can help guide the discussion once everyone is assembled. (You can see what we mean in this SWOT analysis example.)
4. Summarize your findings and present them to the team. The analysis is the foundation of your strategy, so prepare a report that summarizes your findings. Give some context around the analysis and highlight the conclusions, ideally in a visually pleasing way. Presentation might not seem like a big deal, but it is. Your audience will read and absorb the information more easily if it looks good. You’re also more likely to get buy-in for whatever strategy you devise when you show that it originated from a thoughtful, detailed analysis.
5. Devise a formal strategy based on the analysis. Use your strategic analysis to organize your priorities and create goals, as well as measures and projects that will help you achieve them. Work out how to use your strengths to take advantage of opportunities, how to minimize threats and weaknesses going forward, and whether any new priorities have emerged. Create a strategy map that visually shows your organization’s overall objectives and how they relate to one another.

Done well, this analysis helps improve business performance. It can also push organizations to be more innovative with their strategy.

Strategic Analysis Examples

Some organizations struggle to tell strategic analysis from other types of analysis, so they are usually unsure which software tools to use for the job. As co-founder of the strategy software company ClearPoint, I often find myself having conversations with prospective customers to clarify their activities (whether they are doing strategic planning or not) and discuss whether ClearPoint can help. Below are summaries of three such conversations. One of them may reflect what you’re doing now.

Story #1: Strategic Analysis Vs. Operational Data

A local government prospect asked me if ClearPoint’s software could track individual court cases and budget line items.

I explained that ClearPoint is designed to track information that enables organizations to do strategic analysis. We can track summary information, such as the total number of cases each month or budget status for projects, but not individual court cases or department expenses. Here’s why:

• Analyzing summary information is strategically useful because it provides direction for an organization’s long-term strategy. For example, if one type of court case is appearing frequently, the local government may want to change its five-year plan to increase court staffing levels or reorganize the layout of a court building. The strategic analysis might also be something the municipality communicates to lawmakers in an effort to change the way current laws are executed through the court system.

• Tracking individual court cases or standalone budget items is operational data and not as helpful for strategic analysis. It matters, but operational data as individual items is too detailed to extrapolate into trends or summaries that might shift an organization’s strategy. For example, ClearPoint doesn’t track the outcome of Case #1234 and how long it took to process.

The ideal way to use our system would be to analyze the average length of time to close a specific type of case, but not to track cases one by one. Another example: You can’t make strategic decisions to fund (or defund) certain projects based on a team’s expenses for new computers or division’s investment in technology upgrades.

The goal of strategic analysis is to chart performance in order to see patterns and trends, which can help predict future outcomes. Tracking one-off items won’t accomplish that goal. (Don’t get me wrong; you need to track all of the transactions, but just not in ClearPoint.)

ClearPoint can link strategic data from an operations system. That gives you the complete data story, high-level and detailed, in one platform.

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Story #2: Strategic Analysis Vs. Data Analytics

I met with a manager at a large media corporation who inquired if ClearPoint could provide insights on its media campaigns, similar to what data visualization software like Tableau offers.

ClearPoint can report on the status, progress, and results of campaigns or initiatives, but it is not designed to provide individual data points. For example, our platform cannot provide impressions from thousands of individuals or tweak information by demographic groups. That is data analytics, and very different from strategic market analysis.

As in the first story, you should look at media impression results to learn how the market reacts to your products. But those impressions and analytics will not drive your strategy. You should have strategic goals and measure progress in achieving those goals. Changes over time to the average reaction of those media impressions will help you make strategic decisions. ClearPoint’s strength is in summarizing and interpreting data analytics to simplify and improve management reporting, so organizations can focus on making better strategic decisions.

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Story #3: Strategic Analysis Vs. Customer Relationship Management

A nonprofit organization asked me if ClearPoint could replace its customer relationship management (CRM) software.

CRM software cannot do strategy management. Managing customers and managing strategy require very different functions and capabilities in a software platform. It won’t surprise anyone if the strategy planning office and sales team have different opinions on which software has the biggest benefit for an organization.

Tracking all of your customer interactions and the results of those interactions isn’t a job for ClearPoint or any other strategic analysis program. To focus on strategy from a customer standpoint, you need the ability to summarize all prospect and customer information to discern trends. Then your sales leadership team can decide which audiences to target and which products or services to push. This is managing high-level information, not one-off data points. Both types of software are important, and they solve different problems.

My Thoughts on Strategic Analysis

Given the pace of change in the business world, I strongly believe you need strategy at the center of your management process to ensure you're achieving your goals. You should not ignore operational or customer data. Data that aids internal analysis in strategic management meetings is critical to your success, but it won’t determine how your business should be run.

Strategy management and analysis should be the big gear that drives all the smaller gears doing operations, data analytics, and more. You likely need different tools to manage all your data. Platforms like ClearPoint can connect the pieces to tell the whole story, so you can drive your organization with strategy, not data points.

If you’d like a tour of our software, let us know. We’re happy to show you around.

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