6 Strategic Thinking Tools for a Technology Leader.

We touch upon tools for assessing — Internal Strengths and Weaknesses, Portfolio Distribution, Growth Strategies, Competitive Environment & Environment Macro-Factors.

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CodeX

8 min readApr 1, 2024

Why is Strategic thinking important for Technology Leaders?

Technology leaders often work with businesses and organization leaders to support the larger vision of a company by aligning technology strategies and initiatives with the overall business objectives.

This aspect of technical leadership goes beyond short-term problem-solving, it involves a holistic approach to decision-making considering the broader context, future implications, and the organization’s overall strategy.

This aspect is strategic thinking. Strategic thinking is important because it helps analyse various factors and potential outcomes to develop clarity & thus conviction to prepare a long-term plan of action to achieve specific goals.

Now let's look at some techniques to help with strategic thinking.

Tools to help with strategic thinking

1. SWOT Analysis

It is an analysis of internal Strengths & weaknesses, & how they can either help in external opportunities or get exploited by external threats.

Image Credit — https://en.wikipedia.org/wiki/SWOT_analysis

Strengths & weaknesses come from within, what is already available & where it lacks. Be it product or processes or team composition.

For example, a product could have excellent multi-lingual & internationalization support allowing a much deeper & wider user base. But, it may fall apart if more than 10 million users are onboarded.

This kind of analysis helps determine where time & resources need to be invested.

2. BCG Matrix 2.0

Original Boston Consulting Group’s growth-share matrix is a portfolio management framework that has helped companies since the 1970s to decide how to prioritize their different businesses based on profitability.

It’s a 2x2, four quadrants matrix which helps decide where to invest or disinvest based on — company competitiveness and market attractiveness.

BGC matrix for Google products. Image Credit — https://www.superheuristics.com/bcg-matrix-of-google/

Each of the four quadrants represents a specific combination of relative market share and growth:

Low Growth, High Share. Companies should milk these “cash cows” for cash to reinvest. Example Google Search and advertising.
High Growth, High Share. Companies should significantly invest in these “stars” as they have high future potential. Example Google Maps
High Growth, Low Share. Companies should invest in or discard these “question marks” depending on their chances of becoming stars. Example: Google Docs which faces stiff competition from Microsoft Office.
Low Share, Low Growth. These are cash traps. Companies should liquidate, divest, or reposition these “pets.” Example: Google Player, Orkut.

In the current world of faster innovations, disruption of mature businesses & unpredictability increases. Therefore the matrix needs to be applied with greater speed & focus on strategic experimentation. Because a) Businesses move around the matrix quadrants more quickly & b) the longevity of cash cows is likely to be curtailed.

This brings us to BCG Matrix 2.0 in practice with four practical imperative

Accelerated Pace of Application — Shorter planning cycles, feedback loops & approval processes for investment and divestment decisions.
Balance exploration and exploitation — Increase the number of question marks, Test question marks quickly and economically, Milk cows efficiently with constant innovations, and Keep pets on a short leash by lowering exit barriers.
Measure and manage portfolio economics of experimentation — measure the number & costs of the question marks, the rate of question marks becoming stars, cost of failure for question marks, and the long-term view to replace ageing cash cows with current stars & question marks.
Data-driven rigorous selection — Predictive analysis to determine question marks which should be scaled up through increased investment and which pets and cows to divest proactively.

3. Ansoff Matrix

Ansoff Matrix is also referred to as the Product/Expansion Grid. Businesses use it for analyzing and planning their growth strategies.

It describes 4 growth alternatives for growing an organization in existing or new markets, with existing or new products. Each alternative poses differing levels of risk for an organization.

Businesses are responsible for creating expansion plans but the technology leaders need to be ready with the product to support the business expansion goals.

Image credit — https://corporatefinanceinstitute.com/resources/management/ansoff-matrix/

The concept of markets within the Ansoff framework can mean different things for example — a geography or customer segment. And products could be products or services.

Market Penetration — If the business/organization tries to increase its market share in a current market with existing products/services, then as a technology leader, one has to consider how the product will handle the increased volume from the respective market. In case new companies are onboarded, multi-tenancy compliance and monetization are important considerations.
Market Development — The business plans to launch its products in new markets. Let's say launching the product in a new country, then from a technical point of view, the product needs to be flexible enough to incorporate new regulations, language & performance needs.
Product Development — The business strategy is to expanding within the existing market by launching new products. This can be done by developing new products or acquiring products or using COTS products with customizations. This is the classic cost, skill & time to market analysis one needs to do from a technical point of view.
Diversification — Diversification strategies are used to extend the company’s product lines and operate in several different markets. It can be similar products or completely different products in different industries.

Here is a link for Samsung’s diversification journey https://www.superheuristics.com/ansoff-matrix-samsung/

4. Porter’s Five Forces

Organizations use it to assess their competitive environment. It provides a structured framework for understanding the external forces that impact a company’s profitability and long-term sustainability so businesses can make strategic decisions.

Porters Five Forces Image credit: https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysis

Industry/Competitive Rivalry — It measures how many competitors are their? And is their product/services better than your own?

As a technology leader in a cutthroat competitive industry, on one hand, its helpful to look for ways to reduce costs & on the other hand to keep an eye out for innovations which can help the organization develop an edge over its competitors.

2. Bargaining Power of Suppliers — The influence of a supplier over the profits of a company or its dependency decides how much the supplier can dictate its terms & prices.

As a technology leader, it is wise to have a long-term strategy to avoid vendor lock-in. One of the ways could be to have a diverse supplier base and ideally have a fallback supplier even for niche technologies.

3. Bargaining Power of Buyers — Just like supplier monopoly can pressurise a business to agree to unfavourable terms, Buyer monopoly can do the same. It can be a situation when there are several sellers and few buyers.

A premium product/service can command a higher price than competition and a well-connected ecosystem makes it harder for the buyer to switch. Apple is a good example.

4. Threat of Substitute — The Threat of Substitution refers to the likelihood that customers no longer want to use your product. Ratings, loyalty programs, global presence, and niche markets are some techniques to stand out.

But at times technology changes can completely replace the way business is done. For example, WhatsApp calls replace phone calls. Or Netflix replacing DVD rental.

5. Threat of New Entrants — This involves evaluating the barriers to entry in an industry. And answer how easy is it for new competitors to enter the market and threaten existing players.

For example, how easy would it be for Amazon or Walmart to enter a new market & threaten existing players? Or how easy it could be for a local.

5. PESTEL (or PEST) Analysis

It is a tool for identifying the external factors that influence the macro-environment of firms.

Image credit : https://blog.oxfordcollegeofmarketing.com/2016/06/30/pestel-analysis/

It looks at 6 environmental factors —

Political — Political factors include how local, national, and foreign governments can affect the economy within a specific industry. If there are ex-pats or outsourced partners, can a policy change impact it?

2. Economical — Economic stability of the country/region. Is there a disposable income where a premium price may be demanded? For example, music apps may have different payment plans depending on the country.

3. Social — Assessment of product alignment with customers’ behaviour, expectations & sentiments. For example, a company can invest in video game products if there is a leisure preference. Are the people easygoing when it comes to quality or can a glitch make the news?

4. Technological — How is the technology adoption trend in the market? Are there already technical enablers? for example, Cheap mobile networks enable streaming music apps & online games.

5. Environment — Increasing awareness & preference for carbon neutrality & in general more efficient software designs.

6. Legal — There are several legal regulations for software depending upon the industry and region for example Data Protection and Privacy Compliance, Security Compliance,Accessibility Compliance,Regulatory Compliance, etc.

6. Road Map

A road map is a time & goal-based high-level strategy to meet business objectives. Let’s say an online retail company wants to increase its profit by 30% in the next 2 years by entering the Indian market.

For this business objective, there may be architectural changes needed, like scaling to a new load, integrating with new payment options, local language support, legal compliance, etc.

This identification of bigger items can be laid out in a broad timeframe for example quarterly or half-yearly milestones forming a road map.

A road map is different from a plan. A plan is a detailed proposal for doing or achieving the goal within the timeframe. A plan in a project looks like a Gantt chart, it has clear work items, who is supposed to do what, and a clear execution & finish date.

Summary

SWOT Analysis — Analyse Internal Strengths and Weaknesses. And its relation to external opportunities & threats.
BCG Matrix 2.0 — Portfolio distribution based on profitability
Ansoff Matrix — Planning growth strategies.
Porter’s Five Forces — Used to assess the competitive environment.
PESTEL Analysis — Access environment macro-factors
Road Map — Time & goal-based high-level strategy.

The tools mentioned are used in conjunction and the idea of this article is to give a quick run-through of some of them. There are other popular ones like Value Chain Analysis, VRIO Framework, and McKinsey 7s Model.