5 Steps to Stress-Test Your Business Strategy

A business strategy maps out where your business is heading and what its priorities should be. However, what if your assumptions about the future of your industry are wrong or your ability to execute in that industry are no longer valid? Strategy expert Charlotte Brown offers these steps for small businesses to stress-test their strategies.

1. Identify Assumptions: Recognize that your existing strategy was developed using assumptions of your industry’s future economic, demographic, social-political, technological and legal/regulatory environment. Lay out these assumptions loud and clear.

2. Imagine Game-Changers: Use data, insight and imagination to develop scenarios where each of the assumptions about your industry’s external environment are challenged. Access up-to-date research, understand the competitive evolution of adjacent industries and brainstorm the extreme but possible scenarios that could play out over the next three to 10 years.

3. Impact Versus Probability: Name or number all scenarios and analyze each from two dimensions: (A) The probability it happens; (B) The size of the impact on your company and existing strategy. I recommend plotting (A) versus (B) on a graph so you can visualize each scenario relative to others.

4. Identify Potential Gaps: Look at the scenarios that scored highly for both impact and probability. Then identify the capability gaps in these scenarios versus your existing business plan. Pay close attention to areas of your business that struggle in multiple scenarios – these may require strategic investment in the future.

5. Potential Opportunities: Stress-testing your business strategy is not just about assessing risk. These scenarios could unlock new growth opportunities or ways to enhance your competitive advantage. Identify if there are any new investments or growth opportunities worth incorporating into your existing strategy to create a better-case scenario for your business.

Once you stress-test your business strategy, do it again, at least annually, as part of your business planning process. Communicate the scenarios across your organization and closely monitor the industry trends and capability gaps you identify so your business can respond quickly to change.

Categories: Biz Expert Advice, Business & Industry