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evaluating business strategy with a value chain approach

Evaluating Business Strategy

evaluating business strategy

by Kenneth Rudich

The last post, “Top-down, Bottom-up Business Strategy Development,” established that, in today’s climate of relentless uncertainty, a business strategy must be flexible and adaptive, not static.
 
It then went on to suggest a specific approach for accommodating this need, which entailed the employment of two different but mutually compatible types of strategy: scripted strategy and improvisational strategy.  Together, they form a tandem that encourages the continuous development and refinement of an organization’s business strategy.

evaluating business strategy

Such a framework as described above implies an active and ongoing evaluation focused around three key questions:

  1. Where are we?
  2. Where do we want to go?
  3. How do we get there?

Though the same questions can be applied with equal effectiveness throughout the entire organization, the answers will invariably differ depending on the strategic level of thinking involved.
 
At the high level, with its long term view, strategy provides broad direction for navigating the business forward.  Whether this involves the prospect of maintaining current momentum or making adjustments to address a new state of affairs, it sets the stage for keeping the business on a sustainable path.  This is where the concept of a scripted strategy is often seen at work.

At the operational level, strategy seeks to discover the operating details for realizing the high level design.  It digs into the nitty-gritty of determining what works and what doesn’t, with an emphasis on moving the organization from where it is to where it wants to go.  This is where the concept of improvisational strategy typically comes into play.
 
Within this overall strategic framework, there is a large diversity of thought and practice.  It moves across time – past, present, and future.  It moves from the abstract to the concrete.  And it can involve the addressing of one or more issues at the same time.
 
Strategist and author Dr. Bernard Boar says, “Most of the time, most of us engage in mundane thinking to solve our daily problems.  All we need to do, to meet our needs, is to think about one issue, in the present, and in the concrete, at a time.  Anything more sophisticated would be overkill.”  Strategic thinking, he asserts, is considerably more complex than that.

maintaining business strategy continuity and coherence

All businesses, whether large or small, face the challenge of maintaining the continuity and coherence of their business strategy.  Given the complexities involved – the different vantage points, angles, and perspectives – it becomes necessary to have an effective means for tracking what’s happening; including, how well all the various operational parts are coming together to form the whole.  The last thing any business wants is to have some operating parts out of sync with others, or a misalignment between the operating strategy and the higher level strategy.

The mere existence of this challenge presents a strong argument for using a value chain to model the business strategy.  For most businesses, the marketing strategy exerts a big influence on the business strategy.  Its tendrils tend to touch every area of the business.  For instance, if there’s a bottleneck in the distribution channels, there’s bound to be a customer value fulfillment problem.
 
The idea is to use the value chain as a framework for creating a decision support system.  By inserting performance measures throughout the firm’s value chain, it becomes, in effect, a data-driven trajectory model, where the trajectory is a function of all the decisions ever made about what to do next.
 
As such, it becomes an organization-wide decision support tool.  It can facilitate the ability to drill down into the data and analyze specific parts of the operation, or it can drill up to evaluate how well the individual parts are converging within the context of the higher level strategy.
 
Moreover, this assessment can be done on a continuous basis with the help of modern analytical information technologies.  So whether strategies (and tactics) are top down or bottom up, are scrupulously scripted or generated through actions taken, the value chain model keeps everything on the radar screen for management to see.
    
This capability fits nicely with the advice of well known management guru and author Peter Drucker.  He says, “Checking the results of a decision against its expectations shows executives what their strengths are, where they need to improve, and where they lack knowledge or information.”  He adds that such assessment is necessary at all levels of an organization.

a diagnostic tool for evaluating strategy

Converting the value chain into a data-driven decision support system can give decision-makers a powerful diagnostic tool for evaluating both the appropriateness of, and the execution of, the business strategy.  I’ll seek to explore this subject more thoroughly in future posts.

Related Articles:

A Value Chain Approach

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