Strategy Review, Evaluation, and Control

TL;DR

Strategy review, evaluation, and control are crucial steps to ensure your chosen strategy stays relevant and performs as expected. You need to continuously monitor internal and external factors, measure performance against objectives, and take corrective actions. This cyclical process helps adapt your strategy to changing conditions and achieve long-term goals.

1. The Mental Model

Think of strategy as a journey: you plan your route (formulation), start driving (implementation), and then periodically check your map and fuel gauge (evaluation) while adjusting your steering (control) to stay on track or reroute if necessary (review).

2. The Core Material

Strategy review, evaluation, and control form the final, but continuous, stage of the strategic management process. They ensure that the strategy formulated and implemented is achieving its objectives and remains appropriate for the organization's environment.

Reviewing the Strategy

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This involves looking at the underlying bases of your strategy. Are the assumptions you made about the industry, competition, and your own capabilities still valid? External factors like economic shifts, technological advancements, or new regulations, and internal factors like changes in organizational strengths or weaknesses, can drastically alter the strategic landscape.

Key questions to ask during review:
* Have major external forces (economic, social, technological, competitive) changed?
* Have major internal forces (management, marketing, finance, production, R&D) changed?
* Is your strategy still appropriate given these changes?

Evaluating Performance

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Evaluation involves measuring how well the strategy is working. This requires establishing clear performance objectives and key performance indicators (KPIs) during the formulation stage. You'll compare actual results against these planned objectives.

Common metrics for evaluation include:
* Financial measures: ROI, profitability, sales growth, market share.
* Operational measures: productivity, efficiency, quality, customer satisfaction.
* Non-financial measures: employee morale, innovation, environmental impact.

The Balanced Scorecard is a popular framework for evaluation, providing a comprehensive view beyond just financial metrics. It looks at performance from four perspectives: financial, customer, internal business processes, and learning & growth.

Controlling for Deviations

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Control is about taking corrective actions when evaluation reveals significant deviations from your planned performance or when review indicates a need for strategic adjustment. This isn't just about fixing problems; it's about making sure the organization stays aligned with its strategic direction.

Actions can range from minor adjustments to major strategic changes:
* Refining operational processes: improving efficiency, changing product features.
* Reallocating resources: shifting budget or personnel to different initiatives.
* Revising objectives: if initial targets were unrealistic or the environment changed drastically.
* Formulating new strategies: if the current strategy is no longer viable.

This entire process is cyclical and iterative. It's not a one-time event but an ongoing commitment to adaptability.

graph TD
    A["Set Objectives & Formulate Strategy"] --> B["Implement Strategy"]
    B --> C["Measure Performance (Evaluation)"]
    C --> D{"Are we achieving objectives?"}
    D -- "Yes" --> E["Continue Current Strategy"]
    D -- "No" --> F["Review Underlying Bases (External/Internal Changes?)"]
    F --> G{"Strategy still appropriate?"}
    G -- "Yes, minor deviation" --> H["Take Corrective Actions (Control)"]
    G -- "No, major shift needed" --> A
    H --> B

3. Worked Example

Let's say a fast-casual restaurant chain, "GreenLeaf Salads," has a strategy to be the market leader in healthy, customizable lunch options in urban areas.

Review: After two years, they review their strategy. They notice a new trend: major competitors are offering plant-based meat alternatives, and their own customer surveys show increasing demand for sustainable sourcing. Original assumptions about ingredient costs are also changing due to climate impacts on agriculture.

Evaluation: They evaluate performance. While sales are up 10% (meeting their growth target), customer satisfaction for 'innovation' is down, and their market share, while stable, isn't growing as fast as projected. Profit margins are slightly squeezed due to unexpected increases in organic produce prices.

Control:
1. Refine operational processes: They decide to pilot a new supply chain initiative to source more locally, potentially reducing cost volatility and improving sustainability messaging.
2. Reallocate resources: They shift R&D budget to explore plant-based protein options and update menu design to highlight new sustainable ingredients.
3. Revise objectives: They adjust their market share growth target slightly downwards for the next year, acknowledging increased competition and ingredient challenges, while setting a new objective for customer satisfaction related to menu innovation.
4. Formulate new tactics: They launch a marketing campaign emphasizing their commitment to local, sustainable ingredients, differentiating themselves from competitors' plant-based offerings.

This example shows how GreenLeaf didn't just abandon their core strategy, but reviewed its foundations, evaluated its current performance, and then made targeted adjustments to control its trajectory and remain competitive.

4. Key Takeaways

• Strategy review, evaluation, and control are continuous processes, not one-off tasks.
• Review involves assessing if the strategic assumptions (internal and external) are still valid.
• Evaluation compares actual performance against established objectives and KPIs.
• Control means taking corrective actions to realign performance with strategic goals or adapting the strategy itself.
• The Balanced Scorecard offers a comprehensive framework for strategy evaluation.
• Effective strategy management requires adaptability and a willingness to make changes.

Common Mistakes to Avoid:
- Ignoring early warning signs: Don't wait for a crisis to review or evaluate your strategy.
- Over-relying on financial metrics: Broaden your evaluation to include non-financial, qualitative factors.
- Failing to act on feedback: Evaluation is useless without taking appropriate control actions.
- Becoming too rigid: Strategies need to be flexible enough to adapt to changing environments.

5. Now Try It

Imagine you're the CEO of a company that manufactures high-end bicycles. Your current strategy is to dominate the premium road bike segment through superior engineering and exclusive dealer networks. Design a simple strategy review, evaluation, and control plan for the next 12 months. What 3 external factors would you monitor? What 3 key performance indicators (financial and non-financial) would you track? And what 2 potential corrective actions might you take if performance deviates significantly?

Success looks like: A concise list of factors to monitor, specific KPIs to track, and plausible control actions directly related to your strategy and the monitored factors.