Frameworks: What, Why, and How

The What and Why of Frameworks

A framework is an analytical tool to make sense of a business situation efficiently and make good decisions. Because most business situations are multifaceted and have incomplete and unstructured information, frameworks help us identify what is important and set aside what is not. With simplification and focus, we can be selective about the information we seek and draw useful conclusions efficiently.

Understanding what a framework is, how it should be used, and how it should not be used is best accomplished by first looking at some examples:

4P – Product, price, place, promotion

7S – Shared values, strategy, structure, systems, skills, style, staff

On the right you can see SWOT, 5-Forces, and the BCG growth-share matrix.

As these examples indicate, a framework comprises a set of logically interconnected concepts that is used to extract the most useful information and conclusions from a situation and guide decision making. Frameworks are developed from some combination of research, experience, and logic. Over time, frameworks are modified as people discover their shortcomings in analyzing an ever-changing world. Or the world changes so significantly that new frameworks are needed to understand it.

For example, it is useful to add ‘complements’ to the 5-Forces framework to better apply it to today’s knowledge driven and increasingly digitized industries. The framework was created in the late 1970s by considering U.S. industries in preceding years. By the turn of the century, industries had changed enough to merit modifying the original framework by adding a sixth factor, complements, to it. And as the 1990s unfolded, the concept of strategy proved inadequate to describing the utterly new kinds of startups being created using the rapidly growing internet. Venture capitalists began talking of business models to capture the novel ways in which internet-based startups worked. The logical next step was creating frameworks to capture what is a business model.

The How or the Dos and Don’ts of Applying Frameworks

Perhaps it is their simplicity that often results in frameworks not being applied rigorously. Most commonly, they are used to just sort information and describe what is going on. No conclusions and implications are drawn. Analysis connects problem and solution. In the absence of conclusions and implications, this connection is lost and solutions proposed may not solve the problem well.

Another risk in using frameworks to just sort information is that we become focused on information that is given to us (and which must be sorted) and we neglect seeking new information which could lead to novel insights. Applying frameworks should be about both sorting and seeking information (and, of course, drawing conclusions and implications).

Instead of supplementing thinking, frameworks tend to supplant thinking. This stems from the assumption that a framework is adequate for analyzing a situation thoroughly. That is rarely the case. Because frameworks are designed to be applied widely, they fit many situations loosely, not precisely. For example, the 5-Forces framework is used to analyze an industry but surely those five factors do not capture everything that is important in every industry. This is especially risky when applying a framework created decades ago to a contemporary, online, digitized, knowledge and data driven industry. It is better to adopt the 80-20 rule in applying standard frameworks – it explains 80% of what is going on in a situation while the remaining 20% may require additional frameworks or original thinking without any standard framework. Taking this approach will ensure that we don’t rely so completely on standard frameworks so as to not practice original thinking that may yield novel insights.

Finally, know the analytical purpose of a framework and know what it is not meant to do. It will help you decide when to use what framework.