In the eight steps of strategic decision-making process, the fifth step: analyzing strategic factors is the most important. In developing any strategy or before making any decision, there needs to be a clear definition of the problem. Defining a problem answers the questions what is the need or what needs a solution. Lack of a clearly define problem would automatically lead to poor or inadequate strategy formulation which will eventually lead to poor decision-making. Albert Einstein said that if he was given one hour to save the planet, he would use 59 minutes defining the problem and one minute in resolving it. This statement indicates the importance of defining the problem. Toyota is a good example of a company that clearly defined its problems by creating the “five why’s” technique that has been critical in decision-making as well as six-sigma process improvement.
After clearly defining the problem, an organization needs to review and revise the corporate mission and objectives as necessary. At this stage, the organization needs to align the goal statement to the problem statement. For instance, if the problem statement is late delivery of ordered products, the goal statement should be reducing the current delivery time by half. The firm needs to formulate SMART (specific, measurable, actionable, relevant and time-bound goals).
After the problem statement and goal statements are clearly defined and aligned, it becomes more easy and clear for an organization to seek alternative solutions meant to solve a particular problem.