Strategic Analysis Tools Book

Tools Book
Key Question

Table of Contents

1. Strategy Concepts
What are the key market drivers ? What are the top-line factors affecting the issue at hand ? What industries or sectors should we be in ? What stage of the product cycle are we at ? Does size matter ? What are the benefits of scale or experience ? How well are we using our assets ? What type of possible strategies are there in this market ? Where are we over-satisfying our customers ? Where do we lose potential customers ? What are the top-line factors affecting the issue at hand ?

Porters 5 Forces SWOT Growth Share (BCG) Matrix Product Life Cycle EOS : ROS RMS EOS : Learning Curve Typical Output Format ROS / RONA Value Disciplines Happy Line Conversion Waterfall SWOT
Tool Description

2. Key Visual Tools

Typical Process Pareto Curve (80:20) Value Map (Mekko) Value Chain Weighted Column Maker Share Gain Line KPC Combs Harvey Balls Quotes Lollipops Channel Maps Conceptual Maps Forces at Work Crocodile Chart Parfait What matters ? What are the various segments and sub-segments ?. Where do our core competencies reside ? Which are the most profitable competitors in absolute terms ? Who has been gaining market share ? What are the main purchasing criteria, and how do we fare ? What is the best way to display soft quantitative data ? What is the best way to display qualitative data ? Tricks creative Can I come up with& Tips data displays of my own ? What is the relative importance of various routes to market ? How can I simply structure a set of data before analysing it ? What are the forces at work ? Can I come up with creative data displays of my own too ? What is the easiest way to display market growth ?

3. Analysis Techniques
Logic Tree Process Maps Sanity Checks Top-down Estimation One-Off Interviews Interview Programmes Focus Groups Clustering Factorial Analysis How does one organise the research ? What are the key steps ? Does this number make sense ? How can I estimate a sub-set ? What are the main issues with one-off interviews ? What are the main issues with interview programmes ? What are the main issues with organising focus groups ? How can I group people by preferences ? How can I group peoples preferences in broader sets ?

4. Sources
Desk Sources Usual AABC Sources Where can I find secondary data ? What are the usual AABC sources ?

Tools Book
Key Question

Table of Contents

Tool Description

Typical Output Format

1. Strategy Concepts

Typical Process

Tricks & Tips

Tools Book
Key Question

Porters 5 Forces

What are the key market drivers ?

Tool Description

Porters model is a great check list when starting to describe an industry. It helps you organise your research and, more importantly, provides a good framework in which to present your findings.
Typical Output Format Porters 5 forces map Threat of New Entrants

Bargaining power of Suppliers

Rivalry among Competitors

Bargaining power of Customers

Threat of Substitution

Typical Process

Tricks & Tips

Start with top-line list of the main players in each of the 5 boxes - key competitors - key suppliers - key customers - most likely entrants - most likely substitution Carry out lit. search on the names compiled above Gather all relevant articles in one binder lift most common comments into a word document Organize results into 5 boxes Summarize

Keep a good balance between words and data Force quantification of words. For example if you read customer power is likely to continue growing at broadly the same rate try and find relevant data and write customer power is likely to continue growing, keeping price hikes on historical level of 2%p.a. Think about Newton and Archimedes (every proactive force creates its own reactive force) and try capturing both the net effect and the 2 opposing forces Ground model in the analytical process: what further research would be required to conclude on a given trend?

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Tools Book
Key Question

SWOT

What are the top-line factors affecting the issue at hand ?

Tool Description

The SWOT box is a less formal , more intuitive version of Porters model . It provides a good framework in which to lay out initial findings - and can be used to start a Logic Tree (see below)

Typical Output Format SWOT analysis of Chelsea FC Experienced players Key real estate location Cultured football methods shared across the squad Midfield play Little development opportunities for the youth teams Old players more accident prone Low scoring Inexperienced manager Still backed by private investors MUFC and Arsenal keep getting bigger Leeds, Liverpool, etc back in contention for N 3 spot

Strengths

Weaknesses

Opportunities

Attract further key international names Umbrella branding (internationally recognised name)

Threats

Typical Process

Tricks & Tips

Self-explanatory

Many issues are both an opportunity and a threat, or a strength and a weakness ! Do not sit on the fence; you will revisit this analysis in due course but start by choosing a box for every phenomenon observed / anticipated

Competitor-I

Tools Book
Key Question

Growth Share (BCG) Matrix

Which industries or sectors should we be in?

Tool Description

The Share-Growth matrix is a simple matrix devised to visualise multiple investment alternatives. It helps you compares relative attractiveness of different shares vs. growth situations. It requires an Excel sheet and the Bubble function in the Chart Menu.
Typical Output Format Fish food service segments, Share & growth, 1998
Segment FORECAST growth (%)

Low
12,0% 10,0% 8,0% 6,0% 4,0% 2,0% 0,0% -2,0% 0 Clubs 10 Education 20 30 40 Restaurants Health Catering Services Hotels

High

High
Pubs Fish & Chips

Low

50

60%

Segment share (% of market)

Typical Process

Tricks & Tips

Compile competitor or division market shares in their relevant market Gather market growth rates for each industry or segment Plot Split chart in 4 quadrants : Dog; Question Mark; Star; and Milk Do not worry exceedingly about accuracy of positioning of a given data point in the matrix but focus rather on relative positioning

Each quadrant of the matrix corresponds to a generic term, describing the strategic opportunities available to a company or division present there: - bottom-left quadrant, dog, small market share of a below par growth industry, little opportunity - top-left , question mark, small market share of an above par growth industry, good opportunity - top-right, star, big market share of above par growth industry, great opportunity - bottom-right, cow, big market share at below par growth, superb position but little opportunity , time to milk ! Original BCG had the x-axis with RMS (relative market share) and was plotted with leaders on the left rather than the right

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Key Question

Product Life Cycle

What stage of the cycle are we at ?

Tool Description

The Product Life Cycle is a concept devised to keep in mind that relative competitive advantages can ebb and flow. It helps you position competitors or industries against one another and against a time line. Works better on a theoretical level rather than with lots of data
Typical Output Format Product life cycle curve

Measure or phenomenon (ie sales in , penetration in %, etc)

Time line of phenomenon (in years, or months, or days, etc)

Typical Process

Tricks & Tips

Find start date of timeline (i.e. first recorded mention of the technology, the product, the industry, etc) Define a vertical axis (i.e. sales, penetration levels, etc) Create Excel table with measurement records over time Plot

Tip : it is usually quicker - and as illustrative to plot 3 or 4 milestones than it is plotting the whole line

Market-II

Tools Book
Key Question

EOS : ROS - RMS

Does size matter ?

Tool Description

The ROS-RMS is a simple chart displaying together relative size of competitors and profitability levels. It requires an Excel table and the Bubble function in the Chart Menu. The parallel band lines need be added afterwards
Typical Output Format ROS - RMS Industry A 25% ROS 20 (last 3 years, 15 %) 10 5 0 -5 0,01 0,10 1,00 10,00 ROS (last 3 years, %) 25% 20 15 10 5 0 -5 0,01 0,10 1,00 10,00 ROS - RMS Industry B

-10 -15 -20 -25 RMS (log)

-10 -15 -20 -25 RMS (log)

Typical Process

Tricks & Tips

Define list of competitors to be included, and order annual reports Create Excel table with last years sales + last 3 years profits Plot Annotate competitors with incomplete and / or misguiding data, such as less than 3 years of profits; latest year of sales is not last year; finer data available includes other divisions, not just sales and profits of relevant segments, etc Strip down competitor sales to relevant segments Estimate comparative profitability of remaining segments

Order annual reports in advance : 2 weeks lead-time for foreign companies Dont forget 3 years average for ROS Start plotting data you have : partial is better than nothing Do not hesitate to call competitor directly - after clearance from case team manager - to gain idea of segment profitability (ie higher than average of company, etc)

Competitor-I & II

Tools Book
Key Question

EOS : Learning Curve

What are the benefits of scale or experience ?

Tool Description

The Learning Curve is a very simple concept: it is the trend line of a set of data where the Y axis represents the cost/unit of the X axis. It requires an Excel table and the Scatter function in Chart Menu
Typical Output Format Manufacturing scale curve, Biscuits industry, 1997 Cost per Tonne (excl. materials, 1,0 1993, k/Tonne)
0,8 0,6 0,4 0,2 0,0 1 000 1,2 Broxburn Linkoping Hatton Durango Lauragais X1 Ashby Maastricht Jyvas Hyva A 10 times increase in scale represents a theoretical cost improvement of 275p.T. Some of this, however, would be offset by increased distribution and other costs

Gyor Carlisle X2 Dortmund R2 = 65% Genoa Tyneside

10 000

100 000

Manufacturing Capacity (kTonnes, 1996, Log scale) Typical Process Tricks & Tips

Define the exact value chain dimension whose learning curve you want to display (manufacturing, purchasing, etc) Choose the number of data points you need (5 will result in rather illustrative outcome, 10 - 12 will give more confidence)

Careful! There are 2 versions of the learning curve. One is really about learning, the other really about scale In the first case, the X axis represents the cumulative N of units produced to date and the Y axis the cost/unit over time (A typical example is plane production. Few units produced per year, and the cost of each unit keeps coming down as assemblers get better at it with experience) In the second case, the X axis represents the size of a given process (eg. plant capacity) and the Y axis the cost/unit for this process in various plants. Tip: manufacturing directors are not often approached for market research and thus tend to talk a lot

Gather data on cost/unit from client for relevant objects (eg: get exact capacity and cost/tonne for client in 4 plants) Interview competitors relevant director for missing data using smart approach (eg: by how much would your cost/unit drop if you doubled size

Competitor-II

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Key Question

ROS / RONA

How well are we using our assets ?

Tool Description

The ROS-RONA is a simple chart displaying together asset turn and profitability of a set of competitors. It requires an Excel table and the Bubble function in the Chart Menu. The RONA iso-curves need be added afterwards
Typical Output Format Major retailers ROS-RONA, UK, 1993-95 20% ROS (last 3 years, %) 1,8% 16% 14% 12% 10% 8% 6% 4% 2% 0% 0 1 House of Fraser 2 3 4 5 6 Asset Turn WH Smith Kingfisher John Menzies Body Shop M&S Boots RONA (%) 70% 50% 30% 10% 9 10

Typical Process

Tricks & Tips

Check with manager the definition of net assets that will be used Define list of competitors to be included, and order annual reports Create Excel table with last years sales + last 3 years profits + last 3 years net assets Plot, and create RONA iso-curves Annotate competitors with incomplete and / or misguiding data, such as different definition of net assets, less than 3 years of profits; finer data available includes other divisions, not just sales and profits of relevant segments, etc Strip down competitor sales to relevant segments Estimate comparative profitability of remaining segments

Order annual reports in advance : 2 weeks lead-time for foreign companies Dont forget 3 years average for ROS Start plotting data you have : partial is better than nothing Let manager know early if agreed definition of net assets creates data problem - there are many possible definitions and another one might make things easier for you without affecting usefulness of information Do not hesitate to call competitor directly - after clearance from case team manager - to gain idea of segment profitability (ie higher than average of company, etc)

Competitor-I & II

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Key Question

Value Disciplines

What types of possible strategies are there in this market ?

Tool Description

The Value Discipline model helps you position competitors or industries against one another according to 3 possible main generic strategies. Works better on a theoretical level rather than with lots of data
Typical Output Format Value disciplines, Car industry, UK, 1999

Product Leadership BMW Rolls Vauxhall Operational Excellence

Typical Process

Lada Daewoo Customer Intimacy

Tricks & Tips

If without data : Define list of competitors to be included Position each competitor on map based on available evidence (lit.search, annual reports, brokers reports, gutfeel, etc)

If using data : Create Excel table with score of each competitor against each of the 3 dimensions Plot data using the Radar function in the Chart Menu

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Tools Book
Key Question

Customer Happy Line

Where are we over-satisfying our customers ?

Tool Description

The Customer Happy Line is a complex, but powerful concept that helps illustrate the areas where we under-deliver on customers expectations and those where we over-deliver. It requires an Excel table and the Scatter function in the Chart Menu. The Line needs be added afterwards
Typical Output Format 10 Good Our score against each KPC (1 to 10) Average 9 8 7 6 Bad 5 4 9 8,5 Critical 8 7,5 7 6,5 6 5,5 5 4,5 Happy Line , Company X, Industy Y, 1999

Important

Secondary

KPC Score (i.e. relative importance of criteria to Customers) Typical Process Tricks & Tips

Create Excel table with outcome of customer interview programme : average score given to each criteria and score of each competitor against the criteria Plot client score, with X axis as criteria score Set X axis so that Min and Max equal the scores of respectively the lowest and highest ranking customer purchasing criteria Reverse X axis so that Max is to the left Set Y axis so that Min and Max equal respectively the lowest and highest scores obtained by one of the relevant competitors against any criteria Add Happy line

Tip : set Y axis by choosing a relevant set of competitors for which to obtain lowest and highest scores (you do not want to benchmark the client against nohopers in the industry) Happy Line goes from Top left of chart to the middle, and then horizontally to the right

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Tools Book
Key Question

Conversion Waterfall

Where do we lose potential customers ?

Tool Description

The Conversion Waterfall is a concept that helps you summarise the findings of a customer interview programme along 6 major measures. It requires an Excel table and the Bar function in the Chart Menu. Can work as well on a preliminary, data-less level
Typical Output Format Conversion waterfall, Retailer X, France & Germany, 1997 % of population 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Awareness Knowledge Liking Preference Visit Purchase France Germany

Typical Process

Tricks & Tips

Create Excel table with outcome of customer interview programme : share of the sample population that meets the successive measures Plot

Self-explanatory

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Tools Book
Key Question

Table of Contents

Tool Description

Typical Output Format

2. Key Visual Tools

Typical Process

Tricks & Tips

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Tools Book
Key Question

Pareto Curve (80:20)

What matters ?
Tool Description

The Pareto Curve is a simple and powerful concept : it posits that quite regularly 20% of a given population will account for 80% of this populations actions with a third party (ie sales, purchases, etc). It requires an Excel table and the Scatter function in the Chart Menu*
Typical Output Format Company X, Customer Pareto, 1998 100% Cumulative % of Sales 80% 60% 40% 20% 0% Pareto Rule 20% of a given population accounts for 80% of this populations actions (eg. 20% of a customer base account for 80% of sales)

10

20

30 40 50 60 70 Customers (Ranked by decreasing Sales) Tricks & Tips

80

90

100

Typical Process

Lets assume we are drawing a Pareto of a clients customers Gather client total sales, and sales by customer Rank customers in column by decreasing sales Calculate weight of each customer as a % of total clients sales Set-up column with cumulative share of customer sales Plot scatter of cumulative sales column

* : instead of using the scatter function you can use the Bar function, Select Data series, and set Options / Gap to 0 Tip : do not despair if you only have sales of the Top 50 customers (or of the Top 50 suppliers) . Find out how many customers (or suppliers) make up the total list and posit that each of the smaller ones has the same - tiny - weight. You can now draw a pseudo-Pareto where the top right hand part of the curve will effectively be a nearflat straight line

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Tools Book
Key Question

Value Maps (Mekko)

What are the various segments and sub-segments ?

Tool Description

A Mekko is a visually simple but analytically complex tool that helps you display in one sole slide 2 successive cuts at a data set (eg market size by product category and by product, industry sales by sector and by competitor, etc). It requires a special input tool; the Mekko Maker
Typical Output Format General insurance market, UK, 1998
Property 8.2bn Motor 6.8bn
Accident Pecuniary & Health Loss 2.7bn 2.3bn Other
Domestic Mortgage Extended Warranty

100%
Personal vs commercial split for sector

Liability 1.9bn

Total Market = 21.9bn

Private Non-Comprehensive

80 60 40 20 0
Corp orate

Personal Property

Private Comprehensive

Public/ General Liability

= PI

Personal
Payment Protection

Other

Commercial Property

Commercial Vehicles Fleet

Employers Liability

Consequential Loss

0 Typical Process

20

Sector as per cent of UK market

40

60

80

100%

Tricks & Tips

Create Excel table formatted as follows : - one segment by column - rank segments by decreasing size - each sub-segment of a given segment in the successive rows of the relevant column - rank sub-segments by decreasing size Open Mekko Maker Copy Excel table into Mekko Maker

Tip : use only absolute measure of size (ie ), not market shares or other relative measures / ratios For clarity of reading segments of size inferior to 5% of total market size should be grouped into an other segment Likewise, all sub-segments of size inferior to 3% of total size of a given segment should be grouped into an other sub-segment Use shading & patterns

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Key Question

Value Chain

Where do our core competencies reside ?

Tool Description

The Value Chain model helps you highlight for different competitors within a given industries the competencies each one has developed to succeed. Works better on a theoretical level rather than with lots of data
Typical Output Format Value chain

Finance HR Technology Logistics

Purchasing

Manufing

Marketing

Sales

Typical Process

Tricks & Tips

Identify the main competencies in the industry Create generic industry arrow with support functions and operating functions Gather from desk research (annual reports, articles, etc) and one-off interviews the area of the value chain where each competitor chooses to focus (core competencies)

Do not hesitate to alter the arrow above Only principle to follow for visual : - horizontal division separate support functions from operating ones - key operating processes are split vertically This principle will justify treating different functions differently by industry (e.g. technology is a support competency in most industries, but a key operating one for a software company) Tip : an organisation chart is often a good starting point to understand emphasis attached to the competency

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Tools Book
Key Question

Weighted Column Maker

Which are the most profitable competitors in absolute terms ?

Tool Description

A Weighted Column chart is a simple tool that helps you display at once both competitor profitability level and overall industry profits. It requires a special input tool; the Weighted Column Maker
Typical Output Format Industry profitability, Industry X, 1995-98

20% ROS (last 3 15 years,%) 10 5 0 0 -5 -10%

Weighted Average = 10.0%

Comp 1 20

Comp 2 40 60

Etc 80 100%

Share of Market, by Competitor

Typical Process

Tricks & Tips

Define list of competitors to be included, and order annual reports Create Excel table with last years sales + last 3 years profits Plot Annotate competitors with incomplete and / or misguiding data, such as less than 3 years of profits; latest year of sales is not last year; finer data available includes other divisions, not just sales and profits of relevant segments, etc Strip down competitor sales to relevant segments Estimate comparative profitability of remaining segments

Order annual reports in advance : 2 weeks lead-time for foreign companies Dont forget 3 years average for ROS Start plotting data you have : partial is better than nothing Do not hesitate to call competitor directly - after clearance from case team manager - to gain idea of segment profitability (ie higher than average of company, etc) Plot Weighted Average industry profitability line based on information you have, but indicate what total % of industry sales you have profitability data for

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Tools Book
Key Question

Share Gain Line

Who has been gaining market share ?

Tool Description

The Share Gain Line is a visually simple tool - if a bit difficult to grasp at first - that helps you display relative share performance of competitors in the market context. It requires an Excel table and the Bubble function in the Chart Menu. The Zero-gain line needs be added afterwards
Typical Output Format Share movements by competitor, Music, Cards & Video retail, UK, 1995-1999 Competitors Growth (% over 4 years)
60% 50% 40% 30% 20% 10% 0% -10% -10% 0% 10% WH Smith 20% 30% 40% 50% 60% Our Price Disney Store Boots WH Smith Woolworths J. Menzies

Competitors gaining share

Paperchase

Blockbuster

WH Smith Disney Store Woolworths J. Menzies

Competitors losing share

Music

Cards Total Market Growth

Video

Typical Process

Tricks & Tips

Gather historical market data and compile market growth for each market Define list of competitors to be included by market Gather historical competitors sales data and compile competitors sales growth Create excel table with market size Year Zero (Yo), market size now (Yn), competitors sales Yo and competitor sales Yn Plot Draw line bisecting the two axes

Always write meaning of bisecting line on the chart: above line = gaining share below line = losing share Tip : for multi-segments on one graph all the bubbles in a given market should be on the same vertical line

Competitor-I & II

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Key Question

KPC Combs

What are the main purchasing criteria, and how do we fare ?

Tool Description

The KPC Combs is a visually simple tool - if a bit difficult to grasp at first - that helps you display jointly both the importance of customer purchasing criteria and the ranking of competitors against those criteria. It requires an Excel table and the Bar + Line function in the Chart Menu
Typical Output Format Key purchase criteria (KPC) comb, Industry X, Germany, 1999

10 Score (1 to 10) 9 8 7 6 5 4 3 2 1 Criteria 1 Criteria 2 Criteria 3 Criteria 4 Criteria 5 Criteria 6

Criteria Comp 1 Comp 2 Comp 3 Client

Key Purchasing Criteria Typical Process Tricks & Tips

Create Excel table with outcome of customer interview programme : average score given to each criteria and score of each competitor against the criteria Plot

You can plot both the Criteria and competitors score using the same scale : draw chart as a Line chart, select the Criteria line; go into Chart Options and select a Bar Do not forget to set minimum and maximum of Y axis to values of the range offered (eg from 1 to 10, not 0 to 10) Tip : for a large interview programme, the dispersion of the average scores will be minimal. You can increase visibility of differences by setting Y values more finely on either side of the average (eg display from 3 to 8, or 4 to 7, instead of from 1 to 10)

Customer-I & II

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Key Question

Harvey Balls

What is the best way to display soft quantitative data ?

Tool Description

Harvey Balls are a technique that helps you summarise the results of a benchmarking exercise where the item benchmarked obey different metrics. It needs to be hand drawn. Can work as well on a preliminary, data-less level
Typical Output Format Competitor benchmark summary table, Mixed retailers, UK, 1999 Competitors KPI Supply chain efficiency Customer retention level Staff utilisation level Etc ...

WH Smith

John Menzies

Boots

Woolworths

etc

Typical Process

Tricks & Tips

Select dimensions to be included in table Write down a code for each dimension (ie what score justifies a full ball, what deserve half, what is a quarter, what is zero) If wanting a Total row, give a weighting to each dimension and calculate total for each column Hand-draw

Tip : Write code before filling the table, as filling a Harvey Ball table usually throws open at least one implication that wasnt foreseen with just the base data

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Key Question

Quotes

What is the best way to display qualitative data ?

Tool Description

Quotes are a systematically under-used technique for displaying qualitative data in a powerful way.

Typical Output Format

There has bee a trend away from sport shoes and towards work boots worn as streetwear. This has been going on at the rate of 2-3% p.a. over the last 3 years, is getting stronger now, and is no longer just a teenage fashion - J. Swartz, CEO, Timberland Consumer shift towards good value and cheaper shoes, together with the availability of imports from the Far East and economically weaker countries have intensified price pressure and competition in the market - Euromonitor Camel is the best selling boot in Germany, with in excess of 5% market share - Marketing Director, Camel UK

Typical Process

Tricks & Tips

Create on an on-going basis a database / binder of comments with good quote value Write comprehensive notes during oneoff interviews Manage a good filing system when carrying outlit. search Quote value rests in the nature of comment heard or read and / or in the authority of the source

Format all quotes in a consistent manner, preferably as above Try and get a number in every other quote, ie : select the quotes on the basis of their number content (ex-post) force interviewee to quantify qualitative statements (ex-ante)

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Key Question

Lollipops

Can I come up with creative data displays of my own ?

Tool Description

Lollipops are a technique that helps you display in one sole slide a large number of detailed information across a large selection of objects (competitors, products, etc). It requires an Excel table and the Bubble function in the Chart Menu
Typical Output Format Plant sizes & total capacity by competitor, Storage products industry, Europe, 1998
70k Plant size (k tonnes), 60 50 40 30 20 10 0 Total Capacity (k tonnes)
yp al str uc t S c or ha efe r De x io n M ec alu x N ed co n M eta Fe ra lco Ti x it Ga ll e r Es m en a St ow Po l Ap e
UK B E NL D UK D D N SF UK NL D S E

60k tonnes

UK

B D

Competitor

Typical Process

Co n

Tricks & Tips

Create Excel table with all the data required : one object / criteria per row (eg competitor) and one measure per box vertically (eg plant capacity of competitors plant) Plot A Lollipop chart is simply a creative answer to a regular problem : how to display a large number of data points, the detail of which is necessary but less important that the overall picture it paints A Mekko is another creative way to solve the problem described above Any solution you may come up with that solves your display issue has got to be a good one !

Tip1 : always try creative solution on paper before launching into big Excel manipulation Tip2 : remember that a nicely laid out Excel table is always a more powerful visual than a cumbersome graph ...

N/A

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x ag ist a Tr av hy d Ar ro em sa M au se r Ar bi tec M

Tools Book
Key Question

Channel Maps

What is the relative importance of various routes to market ?

Tool Description

Channel Maps are a technique that helps you display the complexity of various routes to market whilst quantifying their relative importance. There isnt a software available to generate them : they need to be hand drawn
Typical Output Format Channel map, Construction materials, UK, 1999 Products 22.3bn
Construction Materials Manufacturers/Importers
Additional Products*

15.3bn Channels
Direct 7.0bn
Specialist Merchants/ Factors Wholesalers

Distributors/Stockists

3.2bn 4.4bn

Builders Merchants

DIY Stores, Superstores and Hardware shops, Garden Centres etc

4.6bn

6.3bn 0.8bn 0.5bn

7.6bn

EndCustomers

Builders/Contractors

Home Customers

18.2bn

7.3bn

Typical Process

Tricks & Tips

Gather on one page all the data you have about the industry sales (manufacturer sales, retail sales, wholesale sales), and organise data into 3 tiers : products (or manufacturers), channels, and endcustomers (or retailers) Firstly, draw the product and endcustomer horizontal bars Secondly, draw the direct flow between these 2 bars (on the left of the above map), and infer from this a MSP to RSP ratio Thirdly, split this ratio in two to body double the MSP to WSP and WSP to RSP ratios, and convert your whole data set in the relevant unit you are using Finally, draw a first map, and iterate...

Be sure to use the same units throughout, 100 of manufacturer sales can be exactly the same as 200 of retailer sales if RSP (retail selling price) = 2xMSP (manufacturer selling price) in thi industry .. Tip : when possible volumes are a better measure than values (as stay the same throughout the flow normally)

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Key Question

Conceptual Maps

How can I simply structure a set of data before analysing it ?

Tool Description

Conceptual Maps are basic techniques that help you breakdown complex issues into sub-sets so as to better either lay out the thinking, plan the research or map the results. They do not require intricate softwares; just a ruler, a pencil, and an eraser ...
Typical Output Format Key conceptual maps 2x2 Matrix Conceptual Cross

Dimension 1

Dimension 3

High

Low

Dimension 4

Low

High

Dimension 2
Typical Process Tricks & Tips

Conceptual Maps come in various shapes. The mother of all conceptual is the 2 x 2 Matrix, where various objects are plotted in 4 boxes : dimensions 1 & 2 with sub-sets low and high A Conceptual Cross provides another way to think about how objects can be classified against 2 other dimensions

The 2x2 Matrix is the most useful consulting tool ever The Conceptual Cross is marginally less helpful. It can come handy when you find that the objects you have plotted in a matrix all fall on the diagonal line : a 45 rotation of Matrix dimensions gives you a Cross map

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Key Question

Forces at Work

What are the forces at work ?

Tool Description

The Forces at Work visual is simple version of Porters model . It highlights complexity rather than simplify / organise it in the way Porter and the SWOT box do.

Typical Output Format

Clothing manufacturing Clothing manufacturing shifting production shifting production overseas overseas

Convergence in Convergence in national tastes national tastes across Europe across Europe Customers demanding Customers demanding shorter lead times shorter lead times Threat of Threat of cheap imports cheap imports from Asia from Asia Growth of Growth of international international customers, e.g. customers, e.g. Nike & Benetton Nike & Benetton

Clothing manufacturers Clothing manufacturers shifting production from shifting production from West to East and South West to East and South Europe Europe

Improvements in the Improvements in the speed and cost of speed and cost of logistics across Europe logistics across Europe Shortening product life Shortening product life cycles in fashion cycles in fashion

Price convergence Price convergence between markets between markets driven by the Euro driven by the Euro

Typical Process

Tricks & Tips

Self-explanatory

Do it either at the beginning of a case - or at the end to illustrate complexity of forces at work During case work, try and organise these forces either in Porters 5 Forces model, or in SWOT box

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Key Question

Crocodile Chart

Can I come up with creative data displays of my own too ?

Tool Description

Crocodile Charts are a technique that helps you display in one sole slide how the issue you are studying narrows down to your specific area of focus. It requires an Excel table and the Bubble function in the Chart Menu
Typical Output Format Crocodile chart, Oil reserves, 1995
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Global Continental National Regional

Sea North

Land

UK South Europe

Typical Process

Tricks & Tips

Create Excel table with all the data required Plot 4 bars Add connecting lines

Tip : it is easier to add lines across all bars and delete unnecessary one upon finalising the chart than the other way round

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Key Question

Parfait

What is the easiest way to display market growth ?

Tool Description

A Parfait is a visually simple tool that helps you display jointly both the relative size of market segments and their relative growth. It requires an Excel table and the Area function in the Chart Menu
Typical Output Format UK Clothing Market 1994-98
3 000 Annual Growth 2 500 Childrenswear 2 000 1 500 Menswear 1 000 500 Womenswear 2% 2% Sportswear

Market size (1998, m)

3% 10%

1994

1995

1996

1997

1998

Typical Process

Tricks & Tips

Create Excel table with all the data required Plot

Do not forget to add growth data to the right of the chart

N/A

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Key Question

Table of Contents

Tool Description

Typical Output Format

3. Analysis Techniques

Typical Process

Tricks & Tips

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Key Question

Logic Tree

How does one organise the research ?

Tool Description

One half of Structured Thinking, the Logic Tree turns the initial client brief into a set of discrete questions. Each Logic Tree has a twin in the shape of the Research Tree. Once the key questions have been established it is usually clear which research method is the most appropriate
Typical Output Format Logic Tree
I can find a solution to my sockless state

Research Tree
I gather data to inform the applicability of each option

I can find another sock in the flat

I can get an entirely new pair

I can compensate for what I dont have

Research inside the flat

Research outside the flat

Inquire about socklessness

I can trace the other sock

I can trace another pair

I can buy a new pair in time

I can have one sent

I can alter clothing to hide sockless ness

I can justify sockless ness

Check my room (under the bed, other drawers)

Check Check Ask flatmates there are who is coming sock Check Call to laundry shops on the get them room to bring way one

Check with partner that socks are needed

Ask for a good joke Think of how to turn it into a statement

Typical Process

Tricks & Tips

Write top of tree as a positive statement answering the client question Create sub-branches by splitting the top of the tree into its natural components (writing a good Logic Tree is an art and a technique that one acquires with experience) The sub-branches should obey the MECE method (Mutually Exclusive Completely Exhaustive), i.e.all the sub-branches taken together must exhaustively support the branch above, and each subbranch must deal with something different from the other sub-branches The MECE methods implies that - if one of the sub-branches is false then the top of the tree must be false - if all the sub-branches are true then the top of the tree must be true

A positive statement is more difficult than a negative statement, and thus gives client more confidence on strength of our answer Tip : some first level split of the logic tree occur rather regularly. Typical first level branches are : - Sales, Margins and Costs - Customers, Competitors and Cost Tip : do the research tree only once finished with logic tree (on 80:20 basis). Indeed some research branches can address several branch of the logic tree at once

N/A

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Key Question

Process Maps

What are the key steps ?

Tool Description

Process Maps are a technique that helps you group a set of research and/or action points into broad sequential steps

Typical Output Format

Deal Origination

Bidding, Negotiation & Closing

Owning

Exit (Trade Sale or Flotation)

Target identification Assessment of potential postdeal synergies

Market Study / strategic due diligence External validation Ammunition for negotiations Black holes check Resolve competition and regulatory issues Valuation analysis

Strategy development Post-acquisition disputes

Business plan preparation Market study for potential prospectus Outside in view for potential buyers Synergy valuation for negotiations

Typical Process

Tricks & Tips

Self-explanatory

Try to aim for 4 to 7 steps to keep the process map useful

N/A

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Key Question

Sanity Checks

Does this number make sense ?

Tool Description

Sanity Checks are basic techniques that help you assess the viability of a data point obtained through desk research or one-off interviews. This do not require anything else than careful consideration ...

Typical Output Format

Main data sanity checks

Confidence Ranging Narrowing a variety of N from different sources down to a range within which you are fairly confident the true answer is to be found (confidence interval) Feel Right Test Connecting data obtained on esoteric issues to more easily understandable dimensions and assessing credibility of implication Materiality Test Putting in perspective the differences between the various estimates obtained typically by expressing biggest delta as % of average value Impact Criticality Test Establish whether the different estimates obtained lead to the same outcome with regard to the question you are really addressing Body Doubling Choosing one unique data point as the estimate you will go with pending further information

Typical Process

Tricks & Tips

See above & Generic Research

Most important test is materiality test, i.e. how different are the various estimates obtained ? Tip : choose a different color - red for examples - for the body doubles in an Excel worksheet

Generic Research

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Tools Book
Key Question

Top - Down Estimation

How can I estimate a sub-set ?

Tool Description

The Top-Down estimation is a method that consists in shaving off parts of something you know (eg. market size) until you are left with the rump (eg. a segment size) that you were trying to estimate in the first place
Typical Output Format

Own-label, non-ready meals, frozen fish market top down estimate,1998

Market value (m, RSP, 1998)

2 000 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 Total Fish Market Share of Retail Share of Frozen Retail Frozen
Coated Natural Own Label

Food service

Canned

Fresh Chilled
Ready Meals Branded

Share of nonReady Meals

Share of Own Label

Our Market

Typical Process

Tricks & Tips

Gather all the available data on the market you try to estimate as well as data on broader market sets Make a list of the cuts for which you have data (eg. you have data by channel and by products but not by channel & product) Split the starting object into sub-set by applying the cut for which you have least data (eg. you know market share of products in retail but not in wholesale, thus share by channel before you share by product)

The outcome of a top-down estimation is visually complex to illustrate The best method is to create a set of 100% vertical bars and one by one turn to no border & no area the boxes that you dont want to see appearing Think Rubiks cube: you will probably have to try 2 or 3 different sequencing of the cuts before you arrive at a satisfactory outcome

Generic Research

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Tools Book
Key Question

One-Off Interviews

What are the main issues with one-off interviews ?

Tool Description

Check-list for One-Off Interviews. Use framework below before proceeding with interviews

Typical Output Format One-off Interviews Check-list

Preparation

Anticipation of Answers

Contact & Persuasion

Execution

Interpretation of Results Be flexible but focused on the answer

Wrapping Up

Be polite, Be clear exactly Define your especially to which questions objectives for secretaries the meeting up need to be front answered Be rigorous in using secretaries Ensure you Choose the where possible come out with appropriate the specific method Write a answers you professional but require Contact the deferential fax correct people Do not lie !!

Prioritise questions Be prepared for obstructive remarks from interviewees Write clear and comprehensive meeting notes

Be prompt in delivering high quality feedback Remember who has paid the bill!

Typical Process

Tricks & Tips

See above & Generic Research module

Go through the check-list again & again ! Tip : always keep in mind the ANSWERS you are expecting and particularly the different SO WHAT that different answers will point to

Generic Research

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Key Question

Interview Programmes

What are the main issues with interview programmes ?

Tool Description

Check-list for Interview Programmes. Use framework below before proceeding with interviews

Typical Output Format

Interview Programme Check-List

Preparation Anticipation of Answers Contact & Persuasion Execution Interpretation of Results Wrapping Up

Choose the appropriate method - on the phone - in the street - mix Select the best sample - suitable proportion of market - hit rate

Create a questionnaire which is focused on testing the hypothesis - correct questions - questions asked in the correct way

Ensure interviewers are fully briefed

Ensure process is managed effectively

Set-up database Pilot and maintain it questionnaire throughout and re-draft ineffective Temp performance questions monitored and data inputed as rapidly as possible

Only appropriate analysis is carried out (80 : 20)

Keep paper copies of questionnaires at hand !

Typical Process

Tricks & Tips

See above & Customer-I module

Go through the check-list again & again ! Tip : always keep in mind the ANSWERS you are expecting and particularly the different SO WHAT that different answers will point to

Customer-I

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Key Question

Focus Groups

What are the main issues with organising focus groups ?

Tool Description

Check-list for Focus Group. Use framework below before proceeding with organising groups

Typical Output Format

Organising the day Managing the debate

Focussing debate

Logistics

Getting the right people

Venue and travel arrangements Agreeing the plan with the client Maintaining records What to take (equipment, props, etc...)

Selecting candidates Invitations Hit rate Incentives

Typical Process Tricks & Tips

See Tricks & Tips

If possible, pre-select to ensure representative cross section by asking key questions on the phone Confirm details in writing (by fax for speed) Invite up to double the candidates you want unless they are motivated to come - offer cash/other incentive as appropriate as sanctioned by the project manager Think through the timing Draft issues for debate of key questions beforehand Stick to the agenda Use flip charts to document contributions Keep travel to a minimum Ensure venue is appropriately comfortable Keep database as for interview programmes Be prepared!

Customer-I

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Key Question

Clustering

How can I group people by preferences ?

Tool Description

Clusturing is a complex technique that helps you group object (eg customers) according to their similarity of preference between a set of dimensions (eg customer purchasing criteria). It requires an Excel spreadsheet and a conjoint analysis software, such as SPSS
Typical Output Format

Cluster analysis, Storage product industry, 1998 Speed of service A lot Y Cluster

Average Cluster X Average A lot Exclusivity of operations

Typical Process Tricks & Tips

Little

Average Z

A lot Cluster

All-round support

Create Excel table with detail of customer interview programme : score given to each criteria by each customer (one customer per row, one criteria per column) Import dataset into conjoint analysis software (SPSS or other) Run Classify \ Cluster function in Statistics menu of conjoint analysis software Write down N of rows that fall in each cluster Go back to Excel spreadsheet, create Cluster N column to tag each row according to relevant cluster Calculate average criteria score by cluster

Spend 3 or 4 hours reading the conjoint analysis software manual, and practicing on fictitious dataset ! A Cluster analysis will start by giving you X clusters for your X customers (fair enough each one is different ). It will then start grouping the two customers with the most similar preferences into a single cluster, leaving you with X-1 clusters, etc, until all is one big cluster. The real N of clusters in the population is usually obtained by trial and error, thus Tip : Never erase the content of a given Cluster N column when tagging rows in Excel a discarded solution usually turns out to be the correct one in the end !

Customer-I & II

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Key Question

Factorial Analysis

How can I group peoples preferences in broader sets ?

Tool Description

Factorial Analysis is a complex technique that helps you group a large number of dimensions of choice (eg 14 customer purchasing criteria) into the relevant, fewer factors that underpin clusters preferences. It requires an Excel spreadsheet and a conjoint analysis software, such as SPSS
Typical Output Format Key Purchasing Criteria 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

Factorial analysis, Storage product industry, 1998

Factor 1 Speed of service

Factors

Speedy quotations turnaround time Distributor brand Choice of payment terms Technical support & design assistance Speedy & reliable delivery Literature with distributor brand/name No competing direct sales force Complete territorial exclusivity Choice of pricing structures Full technical & design digest Free contract management facility Choice of stock holding policy Free & regular training programmes Dedicated account manager

Factor 3 All-round support Factor 2 Exclusivity of operations Factor 1 = KPC 1 & 5 Factor 2 = KPC 2, 7 & 8 Factor 3 = KPC 3, 4, 6, 9, 10, 11, 12, 13 & 14

Typical Process

Tricks & Tips

Create Excel table with detail of customer interview programme : score given to each criteria by each customer (one customer per row, one criteria per column) Import dataset into conjoint analysis software (SPSS or other) Run Data Reduction \Factor function in Statistics menu of conjoint analysis software Check resulting plot, and iterate if need be

Spend 3 or 4 hours reading the conjoint analysis software manual, and practicing on fictitious dataset ! A good dataset will always give you a reduction of your X criteria into X/3 or X/4 factors. Trying to fathom what these factors represent can be a notoriously difficult exercise. Ask for help Tip : it is usually easier to understand a factor after having carried out a Cluster analysis (see previous page)

Training Modules

Customer-I

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Key Question

Table of Contents

Tool Description

Typical Output Format

4. Sources

Typical Process

Tricks & Tips

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Key Question

Desk Sources

Where can I find secondary data ?

Tool Description

Check-list for Desk Sources. Use framework below and create your own portfolio of regular & favourite sources

Typical Output Format

Desk research avenues of enquiry

Search CD-ROM or on-line databases Eg. - Profound - Datastar - Reuters - Worldscope - etc

Search the Net - FT.com - search engines - etc

Search AABC knowledge base - Global Best Practices database - etc

Search business sources - trade publications - government statistics - etc

Procure documents

Go to various libraries - City business library - MBS library - etc

- annual reports - brokers reports - market reports - etc

Pure electronic Typical Process

Mix Tricks & Tips

Pure paper

Spend 10 minutes laying out the nature and type of the data you are after Spend 10 minutes writing down the sources where you are likely to encounter each required data Start chasing !

Tip : when procuring documents there is always a trade-off between immediacy of availability and cost a well planned research is one that leaves more $ in the case-team dinner pot ! Tip2 : it is uncanny how the document you need on D day is the one you thew away on day D-1. Never throw, always file away. Tip3 : other team members will randomly access your file. Do develop a filing system that is easily understandable by all ...

Generic Research

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