Internal Assessment for Strategic Planning

Key Insight

A robust internal assessment is crucial for effective strategy formulation, comprising three core components: evaluating strengths and weaknesses, inventorying resources, and identifying innovations and new ideas. To gain an objective view of strengths and weaknesses, companies should solicit input from employees, managers (anonymously if needed), trusted advisors, investors, board members, and key customers, which also strengthens customer relationships.

A particularly useful inquiry is to determine 'what the company does better than anyone else' and its unique competitive capabilities, often termed 'Distinctive Competence.' This principle suggests that smart firms focus on activities where they possess a superior advantage, avoiding competition in areas where they are not uniquely strong; for instance, an engineering-driven firm should not compete primarily on marketing skills. While playing to strengths, companies must also continuously work on eradicating crippling weaknesses.

The second component involves a clear picture of available resources, including cash flow, access to outside capital, scarce materials, production capacity, and personnel. Lastly, innovation and new ideas are often overlooked aspects of strategic planning. Companies must be responsive to their internal creative output, examining potential innovations from product development, research, design, and marketing. It is vital not to suppress unplanned ideas, as most breakthrough products arise from emergent innovations rather than pre-determined plans, profoundly influencing strategic options, such as the invention of the tank altering World War I allied strategy.