BABOK® Guide v3: Strategy Analysis

1. Introduction

Strategy Analysis is a key knowledge area in the Business Analysis Body of Knowledge (BABOK®) Guide version 3, published by the International Institute of Business Analysis (IIBA). It focuses on understanding business needs, examining the current state of an organisation, defining a desired future state, assessing risks and recommending an appropriate change strategy.

The main purpose of Strategy Analysis is to help an organisation understand why change is necessary, what the change should achieve and how the organisation should move from its current position to its desired future state.

Business analysts use strategic thinking, critical analysis and stakeholder collaboration to ensure proposed changes align with business objectives. They also assess whether an organisation has the capabilities, resources and readiness required to achieve its goals.

Strategy Analysis applies to strategic and tactical initiatives. These include digital transformation, process improvement, software implementation, regulatory compliance, cost reduction and improvements to customer experience.

2. The Strategy Analysis Knowledge Area

Strategy Analysis helps business analysts understand the context behind a business need and identify suitable approaches to addressing it.

An organisation might experience declining revenue, inefficient processes, outdated technology, customer dissatisfaction or new regulatory requirements. Before recommending a solution, the business analyst must understand the underlying problem and the results the organisation wants to achieve.

The Strategy Analysis Knowledge Area consists of four main tasks:

1. Analyse Current State.
2. Define Future State.
3. Assess Risks.
4. Define Change Strategy.

These tasks are connected. Understanding the current state provides the foundation for defining the future state. Comparing both states reveals gaps and potential changes. Risk assessment identifies factors that might prevent success. The change strategy then outlines how the organisation should achieve the desired outcomes.

The business analyst works with stakeholders throughout this process to validate assumptions, evaluate options and maintain alignment with business objectives.

3. Strategy Analysis Core Concepts

Several core concepts support Strategy Analysis.

Business Need

A business need is a problem or opportunity requiring attention. It explains why an organisation needs to make a change.

Examples include:

• Reducing operational costs.
• Improving customer satisfaction.
• Increasing revenue.
• Meeting new legal or regulatory requirements.
• Replacing outdated systems.
• Improving the accuracy of business information.

The business analyst investigates the underlying need rather than immediately assuming a particular solution is required.

For example, a company might request a new customer relationship management system because staff struggle to access customer information. Investigation might reveal that the main issue is poor data quality and inconsistent processes. The organisation might therefore need process improvements and better data management rather than a complete system replacement.

Current State

The current state describes how an organisation operates today. It includes people, processes, technology, information, resources, policies, organisational culture and external influences.

Understanding the current state helps identify existing capabilities, limitations, problems and opportunities.

Future State

The future state describes the desired conditions after a change. It explains what the organisation wants to achieve and how success will be measured.

A future state should reflect business objectives, stakeholder needs, available resources and relevant constraints.

Change

A change is the transformation required to move from the current state towards the future state.

Changes might affect organisational structures, employee responsibilities, business processes, technology, policies or customer interactions.

Solution Scope

Solution scope describes the capabilities and boundaries of a proposed solution. It identifies what the solution is intended to address and helps distinguish included work from activities outside the agreed scope.

Value

Value refers to the worth, importance or usefulness of something to a stakeholder within a particular context. Value might include financial returns, improved efficiency, reduced risk, better customer experience or stronger regulatory compliance.

Context

Context includes the circumstances and external factors influencing a change. Examples include market conditions, legislation, competition, technology trends and organisational culture.

4. Analysing the Current State

Analysing the Current State is the process of examining an organisation's existing environment to understand its capabilities and determine why change is needed.

The business analyst investigates the organisation's internal operations and external environment. This helps establish a reliable baseline for future decisions.

Key areas of analysis

Organisational structure: Understand reporting relationships, responsibilities, decision-making authority and communication channels.

Business processes: Examine how work is completed, where delays occur and whether unnecessary steps or duplicated activities exist.

People and capabilities: Assess employee skills, knowledge, experience and readiness to adopt new ways of working.

Technology and infrastructure: Review existing systems, applications, integrations, data quality and technical limitations.

Policies and regulations: Identify internal policies, contractual obligations, legal requirements and compliance constraints.

Organisational culture: Consider attitudes towards change, leadership support, collaboration and established working practices.

External environment: Examine competition, economic conditions, customer expectations, technological developments and industry regulations.

Why current state analysis matters

Without a clear understanding of the current state, an organisation risks investing in a solution that fails to address the real problem.

For example, if a company experiences delays in supplier payments, the business analyst should examine the invoice submission process, approval responsibilities, finance systems and payment controls. This investigation might reveal that delays result from unclear approval limits rather than insufficient software.

Outputs of current state analysis

The analysis provides a documented understanding of the current environment, existing capabilities, identified problems, business needs, constraints and opportunities for improvement.

These findings inform the definition of the future state.

5. Tools and Techniques for Analysing the Current State

Business analysts select techniques according to the problem, available information, stakeholders and delivery approach.

Interviews

Interviews allow the analyst to gather detailed information from stakeholders about their experiences, concerns and expectations.

Workshops

Workshops bring stakeholders together to discuss processes, identify problems and agree on priorities. They are particularly useful when several departments have different perspectives.

Document analysis

The analyst reviews existing policies, process documents, reports, system specifications and performance records to understand how the organisation operates.

Process modelling

Process modelling represents the steps, decisions and interactions involved in a business process. It helps identify bottlenecks, duplicated work and unnecessary hand-offs.

SWOT analysis

SWOT examines strengths, weaknesses, opportunities and threats. It supports an understanding of internal capabilities and external influences.

Root-cause analysis

Root-cause analysis investigates why a problem occurs rather than focusing only on its visible symptoms. Techniques include the Five Whys and fishbone diagrams.

Data analysis

Data analysis helps establish baselines, identify patterns and quantify the impact of existing problems.

Stakeholder analysis

Stakeholder analysis identifies people and groups affected by a change, their interests, their influence and their information needs.

The analyst combines these techniques where appropriate and validates findings with subject matter experts, end users, managers and other relevant stakeholders.

6. Defining the Future State

Defining the Future State involves describing the desired outcomes of a change and establishing what the organisation needs to achieve.

The business analyst considers business objectives, stakeholder needs, available capabilities, constraints, assumptions, dependencies and the value expected from the proposed change.

The future state must be sufficiently clear to guide decisions about solution scope, requirements and implementation.

Setting SMART objectives

SMART objectives are:

• Specific: Clearly describe the intended outcome.
• Measurable: Identify how progress or success will be measured.
• Achievable: Reflect available capabilities and resources.
• Relevant: Support the organisation's business objectives.
• Time-bound: Include a defined timeframe.

For example, instead of stating, "Improve invoice processing", an organisation might set the objective, "Reduce average invoice approval time from five working days to two working days within six months."

The second objective provides a measurable target and a deadline.

Defining future capabilities

The analyst identifies the capabilities required to achieve the future state. These might include automated workflows, improved reporting, revised policies, staff training, new technology or changes to organisational responsibilities.

Considering constraints

Constraints limit the available options. They might include budgets, deadlines, regulatory requirements, technical limitations, staff capacity or contractual commitments.

Evaluating potential value

The analyst considers expected benefits against implementation costs, ongoing operational costs, risks and opportunity costs.

Opportunity cost refers to the value of the best alternative forgone when an organisation chooses one option over another.

Outputs of future state definition

The outputs include future-state objectives, desired outcomes, relevant measures, required capabilities, assumptions, constraints, dependencies, potential value and an understanding of the solution scope.

7. Tools and Techniques for Defining the Future State

Several techniques help business analysts describe and evaluate the desired future state.

Benchmarking

Benchmarking compares performance, processes or capabilities against relevant industry standards, competitors or recognised best practices.

Business process modelling

The analyst models the proposed future process to show how activities, decisions and responsibilities should work after the change.

SWOT analysis

SWOT can also support future-state definition by identifying opportunities to build on strengths, address weaknesses and respond to threats.

Balanced measures and KPIs

Key performance indicators (KPIs) help the organisation monitor whether the change produces the intended results.

Examples include:

• Average processing time.
• Cost per transaction.
• Customer satisfaction scores.
• Error rates.
• Percentage of requests completed within service targets.

Stakeholder collaboration

Stakeholders validate whether the proposed future state is realistic, useful and consistent with business objectives.

Gap analysis

Gap analysis compares the current state with the desired future state. It identifies the differences the organisation must address.

For example, if the future state requires automated approval notifications but the current system relies on manual emails, the gap might involve workflow automation, system integration, revised responsibilities and staff training.

8. Assessing Risks

Assessing Risks involves identifying and evaluating uncertainties that might affect the organisation's ability to achieve its objectives.

A risk represents the possibility of an event or condition affecting an outcome. Risks might arise from assumptions, constraints, dependencies, technology, people, external factors or the proposed change itself.

Types of business risks

Operational risks: Disruption to daily activities, staff shortages or process failures.

Financial risks: Unexpected costs, reduced returns or budget overruns.

Technology risks: System failures, integration difficulties, cybersecurity incidents or data migration problems.

Regulatory risks: Failure to comply with relevant legislation, standards or contractual requirements.

People and adoption risks: Employee resistance, insufficient training or limited stakeholder engagement.

Delivery risks: Delays, resource constraints, dependencies and changing requirements.

Reputational risks: Loss of customer confidence or damage to the organisation's reputation.

Risk assessment process

The analyst identifies risks, evaluates their likelihood and impact, prioritises them and works with stakeholders to determine suitable responses.

A risk register helps record each risk, its cause, potential consequences, owner, assessment and planned response.

A simple risk matrix classifies risks according to likelihood and impact. High-likelihood, high-impact risks generally require greater attention than low-priority risks.

Risk attitudes

Organisations differ in their attitudes towards risk.

Risk-seeking organisations are willing to accept greater uncertainty in pursuit of potential benefits.

Risk-neutral organisations evaluate risks and benefits without a strong preference for either higher or lower risk.

Risk-averse organisations prefer to minimise uncertainty and avoid exposures they consider unacceptable.

These attitudes influence decisions about investment, technology, implementation and change.

Risk response strategies

Possible responses include:

• Avoiding a risk by changing the proposed approach.
• Mitigating a risk by reducing its likelihood or impact.
• Accepting a risk where the organisation considers the exposure tolerable.
• Transferring or sharing aspects of a risk through suitable contractual or other arrangements.
• Pursuing an opportunity where the potential benefits justify the associated uncertainty.

The appropriate response depends on the risk, the organisation's risk tolerance and the expected value of the change.

9. Defining the Change Strategy

Defining the Change Strategy involves determining the most appropriate approach for moving from the current state to the desired future state.

The business analyst uses the findings from current state analysis, future state definition and risk assessment to evaluate available options.

The strategy should explain what needs to change, why the change is required and how the organisation intends to achieve the desired outcomes.

Factors influencing the change strategy

Business objectives: The proposed strategy must support the organisation's priorities.

Organisational readiness: The analyst considers whether people, processes and technology are ready for the change.

Costs and benefits: Options are evaluated against implementation costs, operational expenses and expected value.

Risk: The analyst considers potential negative consequences and how the organisation will manage them.

Stakeholder impact: The strategy accounts for changes to responsibilities, working practices and customer interactions.

Dependencies: The analyst identifies activities, systems, decisions or resources that must be available before implementation.

Transition requirements: The organisation might need training, data migration, parallel operations, phased deployment or temporary workarounds.

Choosing an implementation approach

A business analyst might recommend a phased implementation when a large change creates substantial operational risk. A pilot might be appropriate when assumptions need testing before wider deployment. A direct transition might suit a smaller change with limited disruption and well-understood requirements.

The analyst presents options and supporting evidence to the appropriate decision-makers. The business analyst supports the decision but does not automatically own every strategic or investment decision.

Change strategy and solution scope

The change strategy explains the proposed route towards the future state. Solution scope describes the capabilities and boundaries of the solution intended to address the business need.

Both must be communicated clearly to stakeholders to maintain a shared understanding of the intended change.

10. Practical Business Case Study

Consider a company experiencing long delays in approving employee expenses.

Current state

Employees submit expenses through email. Managers approve requests manually, and finance staff enter details into a separate spreadsheet. Receipts are sometimes missing, approval responsibilities are unclear and employees frequently ask finance for updates.

The business analyst gathers information from employees, managers and finance staff. The analyst reviews processing times, maps the current workflow and identifies duplicated data entry and unclear approval rules.

Future state

The company wants a controlled expense management process with digital submissions, receipt uploads, defined approval limits and clear status tracking.

The business objective is to reduce average approval time from five working days to two working days within six months.

Risk assessment

The analyst identifies potential risks, including staff resistance, inaccurate migrated data, system integration problems and unauthorised approvals.

The team proposes staff training, data validation, access controls, testing and a pilot implementation.

Change strategy

The analyst compares the available options, including improving the existing process, configuring an existing platform or implementing a new system.

The preferred approach is selected based on cost, feasibility, risk, expected benefits and alignment with business objectives.

The implementation begins with a pilot involving one department. The team gathers feedback, resolves problems and measures results before expanding the solution.

Measuring success

The company compares post-implementation performance against its baseline. Measures include average approval time, missing receipts, processing errors, overdue requests and user satisfaction.

This case study demonstrates how current state analysis, future state definition, risk assessment and change strategy work together.

11. The Role of the Business Analyst in Strategy Analysis

The business analyst helps an organisation make informed decisions by connecting business needs with practical change options.

Key responsibilities include:

• Identifying and clarifying business needs.
• Analysing the current operating environment.
• Engaging stakeholders and validating findings.
• Defining measurable future-state objectives.
• Identifying gaps between current and desired capabilities.
• Assessing risks, assumptions, constraints and dependencies.
• Evaluating alternative change approaches.
• Communicating recommendations and their implications.
• Supporting alignment between business objectives, requirements and solution scope.
• Helping define measures for evaluating the value of change.

The analyst also needs strong communication, critical thinking, problem-solving, facilitation and analytical skills.

12. Strategy Analysis in Predictive and Adaptive Approaches

Strategy Analysis takes place within different delivery approaches.

In a predictive approach, the organisation often defines more of the expected scope, requirements and implementation plan before delivery begins. This approach is useful when the business need, solution and constraints are sufficiently understood.

In an adaptive approach, the organisation works iteratively and uses feedback to refine its understanding of the problem and the solution. This approach is useful when uncertainty is high or stakeholder needs are likely to evolve.

Both approaches require analysis of the current state, definition of intended outcomes, consideration of risks and decisions about how change should proceed.

The level of detail and timing of analysis differ according to the circumstances.

13. Common Challenges in Strategy Analysis

Business analysts should recognise several common challenges.

Unclear business needs: Stakeholders request solutions before defining the underlying problem. The analyst should investigate causes and desired outcomes.

Conflicting priorities: Departments have different objectives. The analyst should clarify trade-offs and support evidence-based decisions.

Unrealistic future-state objectives: Targets exceed available resources or organisational capabilities. The analyst should assess feasibility and revise assumptions.

Incomplete risk analysis: Teams overlook dependencies, adoption challenges or external influences. The analyst should engage relevant stakeholders and review risks throughout the change.

Resistance to change: Employees fear disruption or lack confidence in new processes. The organisation should communicate the reasons for change and provide appropriate support.

Poor measures of success: The team implements a solution without a clear way to assess value. The analyst should define baselines, targets and measurement responsibilities before implementation.

Addressing these challenges early improves decision-making and reduces the likelihood of pursuing a change that fails to meet business needs.

14. Conclusion

BABOK® v3 Strategy Analysis provides a structured approach to understanding business needs and planning organisational change.

The four main tasks are Analyse Current State, Define Future State, Assess Risks and Define Change Strategy.

Together, these tasks help business analysts understand the existing environment, establish measurable objectives, identify risks and recommend a suitable route towards the desired outcomes.

Effective Strategy Analysis depends on stakeholder collaboration, critical thinking, evidence-based decisions and clear communication. It also requires an understanding of organisational capabilities, constraints, external influences and the value expected from change.

For aspiring business analysts, mastering this knowledge area supports practical work in process improvement, digital transformation, software delivery, business planning and organisational change. It also provides a strong foundation for further study of requirements analysis, requirements life cycle management, solution evaluation and other BABOK® knowledge areas.