Defining
a Strategy Audit
A strategy audit
involves assessing the actual direction of a business and comparing that course
to the direction required to succeed in a changing environment. A company's
actual direction is the sum of what it does and does not do, how well the
organization is internally aligned to support the strategy, and how viable the
strategy is when compared to external market, competitor and financial
realities.
The
Purpose
The purpose of a
strategy audit is to arm managers with the tools, information, and commitment
to evaluate the degree of advantage and focus provided by their current strategies.
An audit produces the data needed to determine whether a change in strategy is
necessary and exactly what changes should be made.
Why
conduct a business strategy audit?
Nearly
all the major initiatives undertaken by corporate executives today are called “strategic”.
With everything having high strategic importance, it is becoming increasingly
difficult to distinguish between the many priorities and imperatives that are initiated
in organizations. When everything is clearly strategic, often nothing strategic
is clear. When everything is designated as a high priority, there are, in
reality, no priorities at all.
However,
when the overall strategic direction is clearly understood by everyone in your organization,
the following benefits occur:
• Organizational capabilities will be aligned to support the
achievement of your strategy
• Resources will be allocated to different business processes in
priority order according to the importance of that process and its contribution
to competitive advantage
• Your company or organization can excel in the market place or in
its business/commercial sector.
Category
of Business Strategy Audit
They are two
categories
v The
internal assessment
v The
external or environmental assessment, which make up the major elements of a
strategy audit.
The
Internal assessment
Once
the company's environment has been examined and analyzed, managers should consider
the qualities and characteristics of the organization itself that influence
what can be accomplished in terms of strategy. This section is about organizational
assessment. The steps shown below will provide insights into the effectiveness
of the company's current strategy, and provide guidelines for increasing
strategic effectiveness.
• Strategy
Clarification. Strategy clarification
helps the leadership team determine what business they are in, the direction of
the business, and framework or criteria for making strategic decisions in the
future. If people at any level of a business are unclear about any of these
three areas, it is difficult for them to focus their attention, cooperate with
other teams, and organize their efforts to gain competitive advantage in the
marketplace.
• Viability and
Robustness. Measuring viability and
robustness helps a leadership team test strategies and ideas against future
world scenarios to determine whether the strategies can be achieved and
sustained. By looking at both market and financial viability and robustness in
different scenarios, a management team can see what will create advantage in
the future and what key measures need to be implemented to monitor changes in
business conditions.
• Business Processes. The term
business process refers to the overall work flow within a company and includes
elements such as product design, manufacturing, and delivery. A good process
analysis will help a leadership team to see what must be done given the
company's strategy, and how those processes can be improved.
• Capabilities. Capabilities are
bundles of separate skills required to deliver the products or services that
give a business competitive advantage. There are two parts of a capability
assessment. First, the capabilities needed to execute the strategy must be
determined. Second, the current level of ability in terms of those capabilities
must be assessed. Without knowing what capabilities should be focused on and
improved, competitive advantage will be difficult to achieve.
• Organization Design and Resourcing.
This part of the analysis looks at alignment issues between the environment,
the strategy, and the skills required to achieve that strategy, and the
organization structure. During this step, a management team can design an
organization that aligns systems in a way that will allow them to execute a strategy.
Unless the systems within a business are aligned to improve effectiveness or efficiency,
strategy statements are merely plaques on the wall that are seldom realized.
• Culture. Culture refers to the set
of shared values that influence behavior and direction over time. The style of
management and the beliefs and assumptions commonly held by people in the
organization must be determined in order to ensure alignment and execution of
the strategy.
Having
completed each of these assessments, they must be integrated by the audit team.
In this process, audit team members should attempt to answer one fundamental question:
Is our strategy in alignment with the external environment?
To
answer this broad question, the following issues should be addressed:
• Do our capabilities match our customer requirements?
• Do we offer something required by our customer that is better than
the offerings of our competitors?
• How are customer demands changing?
• How are competitors changing?
• How are our internal capabilities evolving to keep pace with those
changes?
External
or Environmental Assessment
A
conventional corporate mission of a business is to provide distinct products
and services to customers at a value superior to that offered by competitors.
Without a strategy, valuable resources will be diluted, the work of employees
will be unfocused, and distinctiveness will not be achieved. The external
environment assessment provides any business with a critical external link
between its competitors, customers, and the products/services it offers.
The
fundamental reason for examining an organization’s environment in the process
of clarifying strategy can be summarized thus:
• Ensure that the company is meeting the needs evident in the
environment
• Prevent others from meeting those needs in a better way
• Create or identify ways to meet future or emerging needs.
The
success or failure of a company often depends on its ability to monitor changes
in the environment and meet the needs of its customers and prospective
customers.
An organization’s
business environment is never static. What is viewed as uniqueness or distinctiveness
today will be viewed as commonplace tomorrow as new competitors enter the
industry or change the environment by modifying the rules by which companies
compete. Consequently, an effective strategy will do more than help a company
to stay in the game. It will help it to establish new rules for the game that favour
that company. Successful companies do more than simply understand their environments.
They also influence and shape the circumstances around them.
Companies
that fail to influence their environments automatically concede the opportunity
to do so to their competitors.
Hence, Plans for change must be widely
owned - Those people ultimately responsible for implementing strategy
(typically front-line employees) should be consulted for their ideas about what
changes should be made and how they should be made. Otherwise, very little
change is likely to happen.
Implementation should start with what is
core to gaining advantage - In other words, start with core business processes,
'pick the low hanging fruit' first, make those changes that will make the most
visible difference.
”. In case you are affected by this article forward your opinion, question, inquires and consultation, and problems, to: slybizinfobank@gmail.com or syolanconglomerate@gmail.com
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