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Evaluating strategic options - Coggle Diagram
Evaluating strategic options
KPIs
They need to have three core dimensions - accuracy, materiality and forward impact
The effective use of KPIs can form an invaluable evaluation on how an organisation has previously delivered value and success and can then act as a useful benchmark for the potential strategic route to achieving objectives
If the future KPIs appear to be radically different than the historic KPIs than serious questions ought to be asked
Behind the development of the correct KPIs and always remembering that the first word is 'key' are a defined set of organisational drivers
These drivers need to enable us to evaluate both the current position of an organisation (nd hw it has reached that position and its potential for achieving future success
The building of different scenarios is an important dimension of our ability to determine and evaluate potential success
There is always more than one way to achieve a strategic objective and it is important that we are able to recognise how the alignment of different key drivers will allow the building of different scenarios and the determining of different KPIs
Key Evaluation Criteria
Suitability: Does the strategic option address the realities of the internal, micro and macro environment within which the organisation is operating? This requires
An understanding of the mission and objectivity of the strategy
Use of a SWOT analysis to identify the skills, competencies and resources that are available
An understanding of the culture of the organisation
Acceptability: does the strategic option meet the expectations of stakeholders, in particular with regard to potential risk and return? This requires an understanding of:
The levels of expected returns to differing stakeholder groups
The risk appetite and tolerance of the organisation and its stakeholders
The perceived synergy that will be driven by the achievement of the strategic objectives
Feasibility: will the proposed strategic option actually work in practice, in particular with regard to the availability of the resources required to deliver success? This requires
The ability o drive sustainable change from both a process and a people perspective
The availability of finance and other resources
The likelihood of gaining sustainable competitive advantage
Real options
Real options are defined as the practical achievable options that are available to an organisation within its more generic strategic options. These are often based around concepts of timing
The commitment of resources may often require a delay in the strategic journey until the use of a resource can be justified without causing unnecessary damage to the ongoing operational environment
An organisation needs to understand the point at which a strategic option may need to be abandoned - this is often called an exit strategy. The strategic plan should have identified and formally defined and recorded this through the use of 'critical control point' analysis
The timing of the implementation of real options can be aligned to the different methods of moving between floors in a building
A lift will enable a rapid movement that ignores a number of in-between stages
An escalator will require at least a passing of the different stages
A staircase will require a far more measured approach to the strategic implementation
Evaluation, caution and the human psyche
Rumelt (1980)
suggested that there are four fundamental principles that are required when evaluating corporate strategy
Consistentency:
goals and policies should be aligned to ensure there is o distance or conflict between different divisions and different people
Consonance:
Strategy must be closely aligned with the external environment and able to adapt to environmental change
Advtanage:
there must be always be an understanding of how competitive advantage can be created and maintained
Feasibility
: the organisation must have the ability, the people and the motivation to carry out the strategy