Strategic Options: Formation, Evaluation, and Selection

The purpose of strategy is to make better-informed decisions in response to a strategic challenge. In strategic problem-solving, analysis lays the groundwork for decision-making. Consequently, firms tend to invest substantial effort into the analysis part of problem-solving, but then struggle when it comes to transforming insights into appropriate decisions and actions. The lack of guidance in management thinking on the transition from analysis to decision-making points to a critical theory-practice gap in the current management literature. In this chapter, we address this dilemma and develop a conceptually rigorous approach for transitioning from analysis to option formation. We examine how first principles-based, insight-driven thinking and analysis not only establishes root causality of a challenge but also lays the conceptual groundwork for transforming insights into suitable courses of action, and the mechanisms by which strategic options are scoped, dimensioned, and crafted. Building on the same principles, we examine how strategic options, once formulated, are evaluated and selected on the basis of criteria derived from the five strategy building blocks (5-SBBs) construct. The chapter closes with a case application that illustrates the applicability of the approach presented to a real-world business transaction.