Evaluating business strategy

In the issue of MANAGEMENT TIPS “Evaluating your Strategy,” originally published in August 2019, we presented the SAF model of Johnson, Scholes and Whittington, that considers three main “success criteria” in the evaluation of a strategy. Their criteria are suitability, feasibility and acceptability.

We return to the subject of strategy evaluation to present another equally valid approach, proposed by Richard Rumelt in “The Evaluation of Business Strategy,” which appeared in W. Glueck’s 1980 text Business Policy and Strategic Management, 3rd ed., New York: McGraw Hill.

In the article, the author emphasizes the importance of strategy evaluation as an essential step in the company’s orientation process towards superior results. Although it is difficult to demonstrate conclusively that a given strategy is ideal for a company at a given time, it should be evaluated.

According to Rumelt, of the various tests that can be applied to a business strategy, most fit the criteria of consistency, consonance, advantage and feasibility, as illustrated in Figure 1.

Consistency: the strategy must not present mutually inconsistent goals and policies, as the strategy derives from policies and goals.

  • Consonance: the strategy must represent an adaptive response to the external environment and the critical changes that occur within it.
  • Advantage: the strategy must enable the development and/or maintenance of a competitive advantage in the chosen segment.
  • Feasibility: the strategy must not overtax available resources, nor create unsolvable problems.

A strategy that does not meet one or more of these criteria can have gaps and fail to perform any of the main functions necessary for the survival of the business.

As a process, strategy evaluation is the result of a set of events and activities shaped by the company’s governance, control, recognition and reward systems, information and planning systems, structure, history, and organizational culture. As such, its performance is more directly linked to the maturity of the company’s strategic management.

In conclusion, a company’s ability to maintain its edge in a competitive and changing environment can be best served by managers who are able to maintain a simultaneous view of the strategy and the strategy’s evaluation. They must be able to discern and understand the strategy in the midst of other daily activities. They must be able to build and maintain structures and systems that make strategy evaluation an important objective.

Does your company’s strategy pass the test and meet these four criteria?

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