Unit II.

Analyzing the Current State Environment

At the end of the unit, the student must have;

• Discuss the importance and techniques of analyzing current state of the
business; and
• Understand the business architecture.

Discussion

Current State is a description of the current situation within an organization,

comprising various dimensions including people, policies, processes, and
technologies. (igi-global.com)

Current State Analysis also called as "AS-IS Analysis". Is a management method

for identifying and evaluating a company's processes and workflows. (ca.indeed.com)

Importance of Current State Analysis

• Business Analysis Perspective - to ensure requirements for the future state
are accurately captured so the new system and processes can be designed
to address gaps and requirements appropriately.
• Organizational Change Management Perspective - to understand the
impact of the change – how large, how small, how complex – so strategies
can be developed to assist users through the change curve to quickly adopt
the new systems and processes.

Purpose of Current State Analysis

• The primary purpose for organizational change management is to help
stakeholders more easily navigate the transition from current state to future
state, leading to adoption and increased utilization of the new processes and
technology.
• Also to identify each process's strengths, weaknesses, opportunities, and
threats.
.
Benefits of Current State Analysis
• Helps provide a clear picture of what is changing by identifying gaps in the
current state and requirements for the future state.
• Ensures everything needed to enable the business process has been thought
through and accounted for in the future state.
• Sets expectations for who, what, when, and how activities are to be
accomplished.
• Helps identify weaknesses and opportunities to further improve your process
before implementation.
• Helps stakeholders and users see and understand the change by being able
to visually compare the current and future state.
• Can easily be augmented with screenshots and further details to become
process-driven training, which is more digestible for end users.

Guides for Curren State Analysis

1. Conduct Research. To develop an overview of the company’s current goods,
activities, and services. This helps the individual understanding of the
products and goods offered by the company.
2. Document the Process. The process information can be documented in a
process map. This will help the firm capture the process inputs, systematic
 support functions, full descriptions of completing the process and all process
outputs.
3. Identify the gaps, obstacles, or flaws. To ensure the change is positive,
analysts use present processes to inform future state diagrams and strive to
innovate and experiment with new ideas. This will show the leadership skills
by recommending solutions for the issues.

Tools in Analyzing Current State

1. The Diamond E-Framework. It identifies the key variables that need to be

considered in the analysis and it structures the critical relationships among them.
Strategy is the critical linking variable in the model. Strategy tells you what
opportunities the business is pursuing in the environment, and, by inference,
what resources, organizational capabilities, and management preferences are
required for effective execution. The double-headed arrows in the diagram
indicate that any of the variables can either drive strategy or constrain strategy.

The principal logic underlying the Diamond-E framework is that of consistency,

coherence, and alignment. The idea is that high internal consistency among the
component variables in the Diamond-E will lead to successful performance, while
conflict or inconsistencies will lead to poor performance. Coherence means that the
Diamond-E framework is complete in and of itself as well as being internally logical
and consistent. It follows that a viable strategy needs to be in alignment with the
opportunities and challenges of the environment on the one hand and with the
internal capabilities, drives, and constraints of the business on the other hand.

• Environmental risks arise from potential inconsistencies between strategy and

environment. In the short run, the risk is usually one of miscalculating timing,
 or potential, or competitive reaction: you think that a strategic initiative will
work but there is a chance that you may be misreading the situation.
• Capability risks arise from inconsistencies between strategy and the
resources/capabilities and drives within the firm. In the short run, a new
strategy may simply demand too much from a business unit’s resources and
capabilities.

How To Use E-Diamond Framework?

The objectives of the analysis, depending on circumstances, are to help (1)

assess the appropriateness of the firm’s current strategy, (2) generate new ideas
and strategic proposals, and (3) evaluate specific strategic proposals.
1. The Strategy-Environment Linkage – this requires a careful assessment
of the forces at work in the environment and translates the observations
into the implications for the business in terms of strategic opportunities
and challenges. It is important to assess the environment using
appropriate analytical tools. A thorough analysis using PEST analysis
(political, economic, social, and technological analysis), Porter’s Five
Forces model, and industry value chain analysis is suggested.
2. The Strategy-Resources Linkage – this is to identify the resource
requirements for the current strategy or new strategic proposal and
compare of the required resources with the available or readily available
and identify any resource gaps of the business.
3. The Strategy-Management Preferences Linkage – this includes the
strategic preferences of the managers in the business. The analysis starts
with identifying the preferences to successfully execute the strategy. The
analysis of the strategy–management preferences linkage starts with the
identification of preferences that would be consistent with the successful
execution of the strategy. These are then compared with the preferences
of the business managers who are critical to the execution process.
4. The Strategy-Organization Linkage – this is usually the last step in the
Diamond-E analysis. It includes in identifying the organizational
capabilities required to implement the strategy with consistency. You
should start the strategy–organization analysis by identifying the
organizational capabilities required to implement the strategy, as deduced
directly by the strategy and indirectly from the gaps identified in the
resource and preference analysis. The next step is to check for
consistency between the required capabilities and those evident in the
organization. If these are consistent you can move on to forecast
performance, make choices, and work on execution. If there are gaps,
however, you will need to determine the nature and feasibility of the
changes to develop the missing capabilities.
The figure shows that firms must manage the tension between what they “need”
to do given the competitive environment, what they “can” do given their
organization, resources, and capabilities, and what they “want” to do given
management preferences. In trying to satisfy a market “need,” a strategy may
stretch what a firm “can” deliver. Alternatively, a firm may satisfy key stakeholder
interests at the expense of not delivering exactly what the market needs, as
found in many entrepreneurial firms who are guided by what an entrepreneur
“wants” to do.

2. Value Chain Analysis. Introduced by Michael Porter in 1985. It is the set of

primary activities selected from the industry’s value chain that have been
integrated into the structure of an organization. It is the process of looking at the
activities that go into changing the inputs for a product or service into an output
that is valued by the customer.

Primary activities involve such things as inbound logistics, operations, outbound

logistics, marketing and sales, and after-sale service. Support activities include
firm infrastructure, human resource management, management information
systems, technology development, and procurement. The fundamental principle
is that primary and support activities contribute both to a firm’s costs as well as to
the ability of a firm to deliver value to its customers.

The value chain can be understood at both the firm and industry levels. Different
firms competing in the same industry may choose to perform or outsource some
of the different activities that constitute the industry’s value chain. For example,
Nike chooses to outsource the production of its athletic shoes, while New
Balance performs this function internally. The bottling and distribution functions of
the value chain are often contracted to third parties, which allows Coke and Pepsi
to focus on the activities such as concentrate development and marketing, areas
where they have significant strength. Similarly, firms may choose to give
emphasis to some of the activities. Nike places great emphasis on marketing,
New Balance much less so. As a result, the core activities component of the
strategies of different businesses in the same industry may vary in important
respects. Thinking deeply about such differences is critical to understanding how
firms have chosen to compete in their industries.

3. Competitive Analysis Framework. This is a model or toll that can be used to

compare business plan or marketing strategy with other competitors. It will create
visual structure for a marketing competitive analysis which describes a
company’s competitors and provides detailed information about their sales,
strategies, and marketing efforts.
 Benefits of Competitive Analysis Framework
• Identify market gaps within an industry.
• Find market trends and patterns.
• Analyze effective marketing strategies.
• Identify measurable goals.
• Make data more visually appealing.
• Focus on a specific marketing area.

Types of Competitive Analysis Framework

A. SWOT Analysis. The SWOT framework helps to evaluate the internal

(strengths and weaknesses) and external factors (opportunities and threats)
that impact a business or a course of action. SWOT analysis is often used in
strategic planning to help identify a potential competitive advantage.
B. Strategic Group Analysis is a competitive analysis framework that analyzes
organizations in clusters based on the similarity of strategy.

4. Growth Share Matrix. The Growth Share Matrix is an analysis framework that
classifies the products in your company’s portfolio against the competitive landscape
of your industry. Developed by the founder of the Boston Consulting Group in 1970.