8 Questions to Audit the Effectiveness of Your Strategy

A Good Strategy Is Hard to Find

A good strategy will make or break a company’s long-term profitability. While no company is ever a perfectly well-oiled machine—there will always be ad hoc initiatives, questionable side projects, and other distractions—an organization’s ability to focus on what’s most important for success and allow other activities to be “good enough” is what leads to sustainable above average premiums, lowest costs, or in the best cases, both. A well-stated strategy describes these priorities in a way that is, ultimately, translatable to all levels of the organization, and should even inform what tradeoffs managers should make in many of their day-to-day decisions.?

Using this criteria to judge their work, I find that a surprisingly large number of companies have incomplete or poorly defined strategies.* They may have stated a number of multi-year growth goals, a statement of principles and values, and some vague intentions about improvements in operations. But they often provide very little definition for the specific path (or paths) the company intends to take to achieve its profitability goals—ideally, a path that competitors would find hard to follow. Without this this next level of choices, however, there is no tangible map for the rest of the organization to use to make sure they are all still heading in the same direction.

As a result, there are often groups indirectly working at odds with each other, where the sum of investment does not add up to a greater whole. Or significant time and money is being spent on “me too” initiatives launched out of fear of recent competitor announcements more than forethought. And the expected benefit of scale and returns on capital don’t materialize.??

It’s not that leaders don’t have any sense for what the strategy should be. In many cases, it’s just that they have not taken the time to make their choices explicit, translate it into actionable priorities, and really enforce it over time.

Questions for Auditing Your Company Strategy

To know if your company has a good strategy and is applying it appropriately, I suggest conducting a “strategy audit.” Here are some of the questions I ask at the beginning of a client engagement and continue to diagnose about throughout the work we do together:??

1.?????Is there a clear, comprehensive strategy that managers regularly refer to or invoke when making decisions together or for their own parts of organization? Or is the “strategy” just a list of goals and internal initiatives that may or may not be obviously connected to each other??

2.?????Is the strategy both aspirational enough to drive growth and change, yet practical enough in its choices to be actionable and attainable by your specific organization??

3.?????What choices have not been made that need to be made? e.g. where the organization will focus on creating/extracting value, how it wins in the market/ecosystem in which it plays, etc. Do some choices need to be made clearer?

4.?????Is there agreement around the most important and distinctive capabilities that will lead to a successful implementation of the strategy? Are we investing in making everything incrementally better, or have we prioritized the fewer things that really matter and deserve disproportionate time and resources?

5.?????How well is the strategy understood across the organization, at all levels? Does everyone in the organization have the same interpretation??

6.?????Does the configuration of teams and investment in new processes, systems and talent properly reflect the strategy?

7.?????How well is the strategy reflected in functional and business unit operating plans and budgets? Are these aligned to the corporate strategy?

8.?????How adaptable is your strategy to future uncertainty or disruption? Have you identified options you may need to invest in now to respond to external change? Do you have a playbook for when and how to re-visit either the allocation against these options, or even the strategy as a whole?

Obviously, you want the answer to all of these to be “yes.” And if it is not, then work needs to be done. I have found that some organizations just need to get in a room and have a series of hard, but productive discussions to get the clarity needed. Others, where alignment is further off, may have to start further back in fact-finding mode, or spending more time communicating and listening to feedback from the various edges of the organization.?

Whatever is required, taking the time to audit your strategy and its effectiveness is a good first step to take.

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*There has been a lot written about what good strategy looks like. I tend to gravitate to the “Strategic Choice Cascade” framework described in Roger Martin’s and A.G. Lafley’s book, Playing to Win, which was also used frequently at my old firm, Monitor (now part of Deloitte). But other methods and choice frameworks can also help pose similar questions about what is the essence of a firm and what will feed that advantage in a sustainable way over time.

About me: For the past 16 years, as a scenario planning and strategy consultant, I've been helping clients place strategic bets in the face of industry change and uncertainty. Visit mattranen.com to learn about scenario planning, strategy and more.