Watching reruns of Sex and the City last night, I saw a great title for an episode “Shoulda, Woulda, Coulda”, that perfectly describes the stuff I’m teaching in Strategy. One of the first things we teach in Strategy is analysis of the internal and external environment. The first question I always get is, Why? Why do we bother with environmental analysis? And the answer to that question, like most important life questions, can be found in Sex and the City. The answer is, Shoulda, Woulda, Coulda.
Analysis of the external environment, the political, economic, social and technological (PEST) as well as the industry environments, determines what the organization Should Do. Analysis of the internal environment, the organization’s resources, capabilities and core competencies, determines what an organization Can Do. And finally, managerial preference determines what the organization Wants to Do. The primary challenge of strategy development is to reconcile “Shoulda, Woulda and Coulda”.
The biggest challenge in reconciling these three elements is to admit that they exist and to admit that there are gaps and inconsistencies between the three. For example, many for profit organizations are great at analyzing the internal environment but don’t do a great job understanding the external environment, and would prefer to pretend that managerial preferences weren’t really part of the picture at all. Some not-for-profits do the reverse, it’s all about managerial preferences and the external environment, but they completely ignore the internal environment — resources and core competencies. So step one — do the analysis and understand the gaps between Shoulda, Woulda and Coulda.