The Management Frameworks You Should Be Using Every Year
A Simple Breakdown Of Three Management Frameworks And How To Apply Them
Management frameworks aren’t just an MBA school exercise: they’re vital methods of uncovering the problems that are preventing your business from growing. If you’re truly unafraid of addressing root problems, then you should strive to discover and solve them through methodical and regular analysis.
Hello there, management frameworks.
As part of the free Offsite-In-A-Box eBook, we packaged up three management frameworks that should be part of any executive team’s regular rotation. These models hit on three factors that need to be regularly reviewed by executive teams: competitiveness, growth, and internal priorities.
Even if you’ve never taken a business school course on management frameworks, critical thinking requires no degree (or business school loans!). The magic of a good model is that applying them is intuitive and the results are often surprisingly simple. To help you match the right tool to the right problem, we’ve called out some likely signals that indicate that you might want to use a particular model.
Porter’s Five Forces
When To Use Porter’s Five Forces:
“What makes us unique compared to other similar organizations?”
“Where should we spend our marketing dollars?”
“Why are we spending so much on supplies?”
“Why are our rivals doing better than us?”
Created by Michael Porter, this framework has been a go-to method of analyzing competition since 1979. By neatly bucketing some of the biggest competitive influences, this model helps disentangle long-term business realities to help an organization find their place in the market.
According to Porter, there are five forces that represent the key sources of competitive pressure within an industry:
Supplier Power
Supplier Power focuses on your business inputs. Suppliers have more power if they can increase their prices easily or reduce the quality of their product, especially if there are only a few suppliers for your unique product/service. This also includes the switching costs from one supplier to another: if it’s complicated to switch suppliers, that’s more power to them.
Buyer Power
How many potential buyers are there for your product or service? If there are very few buyers, then your rivals are looking at and marketing to the same pool of customers. Buyers (i.e. your potential and current customers) have power: they may find it easy to switch to a rival if their experience or price with you is beat by another supplier who is eager to snap up the few potential buyers in the market.
Threat of Substitution
Every day your customers may find a better solution to their problem than whatever you sell. This may transcend what your competitors are offering, too: a cheap 3D printer may be a better substitute than buying widgets from widget businesses like yours and your competitors. If the problem that your product or service addresses can be solved in lots of ways, you have a high threat of substitution.
Threat of New Entry
If any high schooler with spare time and an internet connection can open up a copycat business, then your business faces a high threat of new entry. If your product or service has high start-up costs, requires complex partnerships, must navigate legal hoops for compliance, and is powered by hard-to-find suppliers, then there is a lower threat that a new rival may show up to eat your market share.
Competitive Rivalry
This influence looks at the number and strength of the above competitive influences. In an industry where rivalry is intense, companies tend to compete on price and marketing spend. This can make it easy for suppliers and buyers to go elsewhere if they feel that they're not getting a good deal from you. On the other hand, where competitive rivalry is minimal and no one else is doing what you do, then you'll likely have tremendous competitor power as well as healthy profits.
Protip: Porter’s Five Forces should focus on your niche and competition, not what you’ll change about your product/service to compete. Product development should use something like the Ansoff Matrix, below.
How to Use Porter’s Five Forces
It’s a good idea to whip out this management framework at least annually. The idea is that with this framework, you can identify what kinds of competitive threats are brewing and you can get ahead of them. You might discover that all your suppliers are being consolidated into a single supplier- Supplier Power has increased! Perhaps it’s time to investigate alternative suppliers. Or maybe a new technology is developed that increases the Threat of Substitution: your miracle product may no longer be nearly as competitive.
Ansoff Matrix
When To Use the Ansoff Matrix:
“Should we build this exciting new product or stay focused on what’s working now?”
“Our market is drying up: what should we do?”
“How do we protect our organization against an economic downturn?”
“We’re losing more and more deals: where should we invest to start winning them?”
Created by H. Igor Ansoff and first published in the Harvard Business Review in 1957, this model maps out the pros and cons for different choices around business growth. It quickly makes risk easy to identify and where your business can capitalize on the best opportunities.
There are two spectrums - New vs. Existing Markets against New vs. Existing Products - that create a four box grid. Each box has a clear strategy that can help you focus on what initiatives to choose to implement.
Existing Product in Existing Market: Market Penetration
Here, you focus on expanding sales of your existing product/service in your existing market: you know the product works and the market holds few surprises for you. Strategies to increase market penetration will lean on Marketing: increasing ad spend, running new campaigns, and better aligning product/service benefits with customer needs. You might even consider buying a competitor!
New Product in Existing Market: Product Development
In this quadrant, you focus on enhancing how you solve customer problems, either by adding new features or developing a new offering for your existing market. Since you have some insight already on your market, you could invest in being a better solution, rather than reaching more people. Strategies around product development find the greatest success when current or potential customers are included in the process, either through user interviews or product testing. Enhancing customer service, introducing upsell and cross-sell offers, and improving service delivery efficiency are other avenues for product development.
Existing Product in New Market: Market Development
Market Development is focused on finding new customers for your existing product. Moving to a new market is risky, but potentially lucrative. If there is an untapped market that could use your product/service as is, then market development may be the strategy for you! Strategies around market development may be Sales-oriented (changing from direct sales to indirect sales through a distributor, for example) or Marketing-oriented (such as running a campaign to a different demographic profile).
New Product in New Market: Diversification
This is the riskiest growth strategy because you are selling a new product (that may not work) to a new market (that you don’t know as well). However, tweaking your existing offering for an up-and-coming market may be the right play to diversify your revenue stream and set up your business to innovate for the future. Strategies for diversification may include developing complementary products (clothing brand introducing footwear products), adding features to capture a complementary market (automobile brand introducing electric vehicle products), or chasing a moonshot (essentially everything Amazon [product]: Amazon Fresh, Amazon Web Services, Amazon Prime Video, etc.).
How To Use The Ansoff Matrix
If your organization is undergoing a lot of change, growth, or expansion, the Ansoff Matrix is a great quarterly exercise. All too often does an organization invest in new features, products, and markets without doing the strategic pro/con analysis that the Ansoff Matrix makes easy. Organizations simply don’t have infinite resources and investing in Market Penetration doesn’t always seem sexy, but sometimes the best answer is to stay the course. The Ansoff Matrix makes these investment decisions easier to navigate.
VMSV Pyramid
When To Use the VMSV Pyramid:
“Why are all our teams doing different things and how do they relate?”
“How does my work contribute to the bigger picture?”
“What should my team/department be focusing on?”
“Everything we’re doing feels chaotic.”
Finally, the third management framework to regularly review is the Vision-Mission-Strategy-Value Pyramid, or VMSV for short. Articulating a vision and mission reaches as far back as Jesuit monks in the 16th century, but expanded into a tiered model and was most popularized by Peter Drucker. The VMSV model is perfect for leaders looking to make internal priorities crisp and aligned.
The model is simple to understand but the magic happens in the discussion when filling out each category.
Vision
This is the "why" behind your organization's existence. It is aspirational and extremely intentional, answering the questions, "What do you do? Why do you do it? How do you do it?" This North Star statement should remain true year after year, but may change if your organization is going through a transformation.
Mission
This is the more specific roadmap and major focus for your organization/team. A Mission will be more concrete than a Vision because it is more prescriptive as to the How. A great Mission should have a clear metric of success, even if multiple teams will be involved in reaching that metric.
Strategy
While there should only be a single Vision and a single Mission, there can be multiple Strategies to get there. A Strategy outlines the high level steps that will directly contribute to achieving the Mission. If a Mission is to “Get to the Moon,” then a Strategy would be “Develop rocket boosters capable of sending a payload to the moon.”
Values (or Goals)
The bottom of the pyramid are the values, sometimes referred to as Goals. These are the most concrete and time-bound elements of the pyramid, providing a clear set of milestones that will lead your organization through a Strategy. If you’re familiar with SMART goals, that’s a great technique to use to build this bottom layer of the pyramid.
How To Use The VMSV Pyramid
A full review of your organization’s Vision through Values should happen annually to ensure that internal priorities are still accurately aligned. Organizations that fail to regularly reflect are the ones that lose their way, degrading the culture, resulting in employee turnover: a very expensive cost! However, the Strategy and Values tiers of the pyramid can also benefit from quarterly review, especially with larger organizations (where there are many moving parts) and fast-changing organizations (to adapt strategies to fit new circumstances).
Before and After Using A Framework
A management framework like these three are great, but the setup and the action steps afterwards are what will truly make-or-break your brilliant strategy planning. Download our free Offsite-In-A-Box eBook and organize a killer offsite that sets your strategic priorities on the path to success.
