sfa-matrix

What is The SFA matrix? SFA Matrix In A Nutshell

The SFA matrix is a framework that helps businesses evaluate strategic options. Gerry Johnson and Kevan Scholes created the SFA matrix to help businesses evaluate their strategic options before committing. Evaluation of strategic opportunities is performed by considering three criteria that make up the SFA acronym: suitability, feasibility, and acceptability.

Understanding the SFA matrix

With many strategic options to choose from, it can sometimes be hard for a business to determine which will produce the best outcome. Most choices have significant and far-reaching consequences for the business or the individual, so it’s important to choose wisely.

To help businesses evaluate their strategic options before committing, Gerry Johnson and Kevan Scholes created the SFA matrix. Evaluation of strategic opportunities is performed by considering three criteria that make up the SFA acronym.

Suitability

The most important factor in a strategic decision. Will the strategy achieve what the business wants it to achieve? Does it address key opportunities and threats? Suitability encompasses a broad range of criteria such as environmental, market, and expectational suitability. 

Feasibility

Can the business execute the strategy effectively? Can it be financed? Are the right skills or expertise in place? Can resources be obtained in adequate quantities? Is the structure of the organization a good fit for the strategic plan? Are there moral, ethical, or legal concerns?

Acceptability

Does the proposed strategy meet stakeholder expectations? In other words, is the level of financial or reputational risk acceptable? Do potential project outcomes justify the expense? What will be the impact on capital structure, and will any function of the individual, group, or department be altered significantly?

Use of the SFA matrix normally takes place at the end of strategic planning once a strategic analysis has been performed. As a result, complementary frameworks such as Five Forces, SWOT, PESTLE, and SOAR are ideal. 

Evaluating strategic opportunities using the SFA matrix

Evaluating opportunities involves scoring each of them against the three criteria listed above.

Here is the process in more detail:

Define key elements for each of the three criteria

Depending on the industry, each business should qualitatively define several key elements. A logging company, for example, will list environmental impact as a key suitability element and access to electricity as a key feasibility element.

Using a spreadsheet, list each element under its relevant criteria heading in a column on the left-hand side.

Weight each element according to importance. The logging company may assign a weight of 0.7 to low environmental impact and a weight of 0.3 for market demand. Ensure that the sum of all weights for each of suitability, feasibility, and acceptability adds up to 1. 

Then, score every key element against each strategic opportunity using a scale of 1 to 10. For example, the logging company may assign the environmental impact of clear-cut logging (a strategy option) a score of 3. On the other hand, more environmentally friendly selective logging may be given an impact score of 8. 

Multiply the weight of each element by the score assigned in step four. Selective logging is a low environmental impact strategy, so it would receive a score of 8 x 0.7 = 5.6. Then, add each score together. The strategy with the highest score is deemed the most suitable, but teams must avoid combining the best parts of multiple strategies into one.

Some extra guidance on evaluating suitability

Many businesses will find the evaluation of feasibility and acceptability straightforward. However, evaluating suitability can be more problematic.

To make this process easier, it can be useful to consider suitability in terms of three factors.

Strategic logic

Since the 1950s, strategic logic has been quantified by rational or economic assessments that compare potential strategies with a firm’s market position and core competencies. While not an exhaustive list, several methods are used to establish the logic behind a strategy:

  1. Portfolio analysis – this provides clarity on how a potential strategy may help improve the mix or balance of activities in a company.
  2. Value system analysis – an analysis to determine how a potential strategy may improve value system performance. One example is a synergy assessment, which looks at how extra benefit can be derived by connecting activities outside the value system.
  3. Life cycle analysis – these analyses determine where an initiative is likely to be suitable for a specific product life cycle stage. It also considers the relative positional strength of a company in the market.

Cultural fit

This measures the extent to which a strategy will be assimilated within the organization. Cultural fit is not the most important determiner of whether a strategy is accepted. Instead, such strategies must be able to shape and influence culture according to whether or not the company wants to introduce a new way of operating.

If the firm is not seeking to adopt a new paradigm, the best strategies are those that are the most easily assimilated. If, on the other hand, the firm is looking to implement a new culture, the SFA matrix can be used to formulate a strategy that will help employees adapt to the change.

Research evidence

Research evidence clarifies the concrete relationship between strategy choice and organizational performance. This relationship has been studied extensively since the 1970s, with a landmark study of over 3,000 businesses by the Strategic Planning Institute (SPI) just one example.

Collectively, these studies have arrived at several important conclusions for a business assessing suitability in terms of diversification and performance:

  • Diversification is not always profitable and is difficult to achieve in practice. Above a certain threshold, profit potential is reduced by increasing complexity. 
  • Similarly, the benefits of synergy vis-à-vis diversification make sense on paper but are harder to achieve in the real world. This is particularly true of companies that attempt to diversify through acquisitions. 
  • The success of any diversification initiative relies on a set of circumstances unique to each company, such as market structure, company size, or the level of industry growth. It was also found that some initiatives are more successful when enacted over a longer period.

Key takeaways:

  • The SFA matrix enables businesses to evaluate and then select a strategic option from a range of choices. It was created by Gerry Johnson and Kevan Scholes.
  • The SFA matrix considers three key criteria of strategy development: suitability, feasibility, and acceptability. Suitability may be the hardest of three criteria to assess accurately.
  • The SFA matrix calculates weighted scores for predetermined elements the business deems important. Although the elements can be adapted depending on the industry, there must be standardization in scoring and in element identification itself.

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