Strategy evaluation aims to ensure that the strategic plan is yielding the desired out-

comes and, if not, identify where and why performance is falling short. It involves ver-
ifying whether the strategy is helping the organization navigate its internal and ex-
ternal environments successfully and if it’s contributing to the growth and success of
the business.

Strategic Management Process

Strategy evaluation process

The strategy evaluation process involves several interconnected steps that are contin-
uously repeated to ensure the strategy remains effective and relevant. Here are the
main stages in the strategy evaluation process:

1. Setting Objectives: The first step in any strategic evaluation is clearly defining
what you hope to achieve with your strategy. These objectives should be SMART:
Specific, Measurable, Achievable, Relevant, and Time-bound.

2. Developing Key Performance Indicators (KPIs): Once the objectives are clear, the
organization needs to define the KPIs to measure the strategy’s effectiveness.
KPIs are quantifiable measurements that reflect the critical success factors of an
organization.
 3. Data Collection: This stage involves gathering data on the previously estab-
lished KPIs. This data could be quantitative (e.g., sales figures, customer reten-
tion rate) or qualitative (e.g., customer satisfaction surveys, employee feedback).

4. Analysis: In this stage, the collected data is analyzed to see if the strategy is
working as intended. This may involve comparing actual results to projected re-
sults, benchmarking against industry standards, or using statistical methods to
identify trends and patterns.

5. Interpretation: Based on the analysis, evaluators interpret the results to under-

stand the strategy’s performance. This is where the evaluators can conclude
whether the strategy is meeting its objectives, where it’s failing, and what might
be the causes.

6. Action: If the interpretation of the data reveals that the strategy isn’t effective
or if there are areas that could be improved, this is where adjustments are made.
Actions could include modifying the strategy, developing new tactics, providing
employee training, or reallocating resources.

7. Reporting: Finally, the evaluation results and proposed actions are reported to
decision-makers and other relevant stakeholders. This ensures transparency and
allows for further input and discussion.

8. Review: Regularly scheduled strategy reviews should be conducted to ensure its

continued relevance and effectiveness. This helps an organization adapt to
changes in its internal and external environment.

This entire process is iterative and should be repeated periodically, not only when the
strategy fails to meet objectives but also as part of a proactive and continuous im-
provement approach to strategic management.
Strategic Management Process

Importance of strategy evaluation

Strategy evaluation plays a pivotal role in strategic management for several reasons:

1. Measuring Performance: Through the evaluation process, organizations can

measure their performance against the established objectives. This allows them
to identify if they are on track or if adjustments need to be made.

2. Identifying Areas for Improvement: Regular strategy evaluations can help pin-
point areas where the organization is not performing as well as expected or ar-
eas that can be improved. It highlights strengths and weaknesses and provides
direction for future strategy formulation.

3. Resource Allocation: Strategy evaluation can inform effective resource alloca-

tion by identifying which strategic initiatives are performing well and deserve
more investment and which ones are underperforming and may need to be
deprioritized.

4. Responding to Change: Markets and competitive environments are dynamic.

Regular evaluation of strategy helps organizations stay agile and adapt to
changes in market trends, customer behavior, regulatory changes, and competi-
tive activity.
 5. Reducing Risk: By regularly evaluating strategy and making necessary adjust-
ments, organizations can reduce the risk of strategic failure and improve their
chances of achieving their objectives.

6. Ensuring Accountability: Strategy evaluation ensures accountability by monitor-

ing performance against the strategic plan. This helps keep everyone focused
and aligned with the strategic objectives.

7. Improving Decision-Making: The insights gained from strategy evaluation can

greatly improve decision-making. By knowing what is working and what is not,
leaders can make informed decisions about the organization’s future course.

Regular strategy evaluation is crucial for ensuring that a strategy is effective, objec-
tives are met, and the organization is responsive to changing conditions. It contrib-
utes to better decision-making, improved performance, and increased likelihood of
achieving strategic objectives.

Strategy evaluation example

Let’s consider an example of strategy evaluation in the context of a tech startup that
has set a strategic goal of increasing its market share by 25% in the next two years.

1. Setting Objectives: The startup’s strategic objective is to increase its market

share by 25% within two years.

2. Developing Key Performance Indicators (KPIs): KPIs could include the number of
new customers acquired, the retention rate of existing customers, the company’s
net promoter score (NPS), and its revenue growth rate.

3. Data Collection: The company begins gathering data. This might involve track-
ing the number of new customer sign-ups, conducting surveys to calculate the
NPS, monitoring revenue growth, and tracking customer churn rate.

4. Analysis: After a year, the startup analyzes the data. They find that while new
customer sign-ups are increasing and revenue growth is on track, the churn rate
is higher than the industry average, and the NPS score has declined slightly.
 5. Interpretation: The startup concludes that while attracting new customers,
they’re not retaining existing ones satisfactorily, which might impact their NPS.
This could hinder their progress towards the 25% market share increase.

6. Action: The startup decides to invest in improving its customer service and en-
hancing its product based on feedback from existing customers to reduce the
churn rate and improve the NPS. They also tweak their marketing strategy to
target better potential customers who are more likely to stay with the service
long-term.

7. Reporting: The results of the evaluation and the subsequent decisions are then
communicated to the startup’s stakeholders, including employees, investors, and
board members.

8. Review: The startup continues to monitor their KPIs and conduct regular strat-
egy evaluations, tweaking their approach based on the insights they gain.

This example demonstrates how strategy evaluation can help a business identify po-
tential issues, make informed decisions, and stay on track toward achieving its strate-
gic goals.