The value of an auditing business plan.
Executives now use the term “strategic” to describe nearly all their big projects. With everything now being of paramount strategic significance, it is becoming more and more challenging for organizations to distinguish between competing priorities and imperatives. Sometimes, even when everything seems strategically sound, nothing is. Having no objectives at all is the result of labeling everything as urgent.
But when everyone in your organization is on the same page with the company’s overall strategic path, you’ll see these results:
The resources of your organization will be geared toward helping you reach your goals.
The order in which business procedures receive resources is determined by how essential they are to the company’s success in the marketplace.
Achieving market dominance is within the reach of your firm or organization.
A strategy audit is conducted so that managers can assess the extent to which their present strategies are advantageous and focused. An audit provides the evidence required to decide if and what kind of plan adjustment is required.
What Is an Evaluation of Strategy?
A strategy audit compares a company’s current course of action with the course of action it needs to take to thrive in an ever-evolving marketplace. What a business does and does not do, the degree to which its internal structures are in place to support its strategy, and the strategy’s viability in light of external market, competitive, and financial realities all contribute to the company’s actual direction. Internal analysis and external analysis, also known as environmental analysis, are the two main components of a strategy evaluation.
The following structure is taken from The Corporate Strategy Audit (see References). Its goal is to provide a clear roadmap for performing an internal self-assessment audit without the need for formal training or expensive consulting services. Please note that the complete 124-page Audit contains additional Questionnaires, Checklists, and comprehensive guidance that is not included in this summary.
First, an evaluation of the external environment
Traditional business objectives focus on satisfying consumers with unique offerings at prices that can’t be matched by rivals. Without a plan, it will be difficult to avoid wasting time and money on unproductive activities and to concentrate the efforts of workers. An essential link between a company’s competitors, its customers, and the goods or services it gives can be found in the external environment assessment.
The basic justification for defining strategy through environmental analysis is as follows:
Make sure the business is catering to the obvious environmental demands.
Stop other people from satisfying those wants more effectively
Make or find solutions to problems that may arise in the future.
Monitoring environmental shifts and adapting to the demands of current and potential consumers can make or break a business.
The commercial landscape in which a company operates is always changing. As new rivals join the industry or alter the environment by modifying the rules by which companies compete, what is viewed as unique or distinctive today will be viewed as commonplace tomorrow. As a result, a winning plan will do more than just keep a business afloat. It will aid the business in redefining the rules of competition in its favor. Businesses that thrive do more than just analyze their surroundings. They have a hand in molding the world around them. If a company doesn’t take steps to shape its surroundings, its rivals will seize the chance for themselves.
Procedures for an Environmental Impact Statement:
First, get a bird’s-eye view of the surrounding world.
The first part of an environmental assessment is to identify and study the major factors that will alter, affect, and influence the business. Examination of environmental factors yields an understanding of the business as a whole.
Among these components are:
Money and Finance
Manufacturing potential
Reasons related to technology
Competition from similar products
Competition from upstarts
Aspects of the Economy
Aspects of Politics
Influencing variables
Aspects of Geography
Aspects of Society
The answers to the following queries provide a helpful framework for analyzing these problems. They are best used explicitly in an interview setting and indirectly when conducting data analysis:
How do financial markets respond to innovations, and what is the industry’s outlook for the future?
What developments have the potential to alter the playing field?
Who are the top players in this field? Why are they doing that? Why?
In this field, what elements have proven to be the most important?
What new factors might present an organization with an opportunity to alter the norm?
What will the successful companies and individuals of the future be like?
What are the benefits (and drawbacks) of being a business leader/follower?
Where did this sector of the economy start?
Second, learn every facet of your business or sector.
Standard categorizations of industry/sector elements include rivals, customers, and stakeholders. Typical inquiries directed at each major rival include:
A BUSINESS ANALYSIS
Questions of Strategy:
Who are your competitors, and what are their strategies? In what direction do they seem to be going?
What is the main focus of their company?
Is there a difference in price, turnaround time, product, or service?
Do they serve a specific market or do they have a worldwide presence?
Capabilities:
What is it that they excel at that no one else does?
Which areas are they particularly vulnerable to?
In what ways are they similar to others?
Aims of the Company:
Where do most of their sales come from?
Which kinds of company proposals do they decline?
Who are their key alliance members? So why are they working together? Why would they want to do that?
Just what is it that they’re up to now that nobody else is doing?
EVALUATION OF FINANCES
Internal Finance Strength:
How much money do competing businesses make every year?
To what do you attribute their (cash-based) prosperity, and why?
How do they divide up the cash?
How quickly, and in what ways, are they expanding?
Expected Financial Market Strength:
Do rivals face funding limitations or do they have deep pockets?
Is this impression in line with the introspective assessment? Is that so, and if not, why not?
How would you rate the company’s success on the stock market? Why?
What are the limits and possibilities of the financial markets for them? Why?
REVIEW OF THE ORGANIZATION
Senior Leadership:
Is the business still at the forefront or has it fallen behind? Is that the case, and if not, why not?
Does it appear that the company’s leadership is making progress?
Organization:
How centralized or decentralized is the company?
Is the parent business merely a holding firm or does it play an active management role?
Is there a general consensus that the company operates efficiently and effectively?
People:
What is the employment rate like? Does the business have too many or too few workers?
When you manage a group of individuals, do you primarily have their best interests (human or professional) in mind? What repercussions does this have on the firm?
When hiring, what qualities do you look for most?
Culture:
Is the atmosphere driven by achievement?
Bureaucratic?
Flexible?
Customers and other stakeholders should be provided with a similar set of inquiries (or see the full Audit for ready-made questionnaires).
Third, put it all together to form a picture of the surroundings.
The audit team should take a step back after collecting the results of the stakeholder analysis, client analysis, and competitor analysis (aforementioned). By bringing everything together, the team will have a better grasp of the context in which the company works.
There are two facets to this integration that must occur: first, the organization’s internal processes must be merged with an external analysis of the industry’s trajectory and the company’s probable response to it.
The Corporate Strategy Audit provides an in-depth structure for doing just that. In a nutshell, it should detail major shifts in the external environment and how those shifts affect the company’s ability to compete. It should answer the essential issue of what sort of business will be necessary for the company to thrive in the future and how it can affect the external environment in which it operates.
The analysis should also highlight the internal requirements and capabilities necessary for the business to fulfill external demands. The organizational evaluation should then be used to compare these demands to the identified strengths. The team can then assess how well the company’s plan fits into its external context.
Organizational Evaluation Section 2
Managers should look beyond the external world to the internal qualities and characteristics of the organization that impacts strategic outcomes. Organizational analysis is the topic of this subsection. Insights into the present strategy’s efficacy and guidelines for improving said efficacy can be gained by following the steps outlined here.
Definition of the Plan. To better guide future strategic decision-making, leadership teams benefit from a clearer understanding of their company, its future trajectory, and the criteria by which to evaluate potential options. A company’s ability to focus, collaborate, and organize its efforts to obtain a competitive advantage in the market is hindered if its employees at any level lack clarity in any of these three areas.
Prosperity and Stability. A leadership team can determine if their strategies and ideas are viable and robust by putting them through a series of tests against potential future world situations. Management can foresee what will give them an edge in the future and what crucial measures need to be put in place to keep tabs on the state of the market and the company’s finances under a variety of hypothetical situations.
Methods of doing business. The word “business process” is used to describe the comprehensive sequence of activities that occur within a company. A thorough process analysis can shed light on the tasks that must be completed in order to implement the business strategy, as well as suggest ways in which these tasks can be refined.
Capabilities. In order to provide the goods and services that give a company an edge over its rivals, it must possess certain capabilities. Capability evaluations consist of two stages. The capabilities required to carry out the plan must be identified first. Second, one must evaluate one’s present proficiency in light of those abilities. It will be difficult to gain a competitive edge if it is not known which capabilities should be prioritized and enhanced.
Resource Allocation and Organizational Structure. This section of the analysis focuses on the gaps that exist between the external setting, the strategy, the personnel resources, and the organizational framework necessary to implement the strategy. Organizational design is the process by which a management team aligns its processes to carry out a strategy. Strategy declarations are meaningless wall decorations unless the internal processes of a company are streamlined to increase productivity.
Culture. Culture is the collective beliefs and norms that shape an organization or group’s actions and decisions over time. To ensure alignment and successful strategy implementation, it is important to understand the prevailing management style and the beliefs and assumptions held by the organization’s members.
Once the audit crew has finished each of these separate evaluations, they must combine the results. Members of the audit team should be asking themselves, “Is our plan in alignment with the external environment?” throughout the process.
In order to provide a comprehensive response to this query, we must consider the following:
Do our strengths correspond to what the market needs?
Do we supply an essential service or product, and is it superior to what the competition provides?
What shifts have you seen in the expectations of your target audience?
In what ways are rivals adapting?
How are our in-house resources adjusting to meet the challenges posed by the new realities?
The group will be able to make the adjustments recommended by the audit once these concerns are answered. When making these adjustments, keep in mind the following three things:
As the saying goes, “strategy drives structure,” which means that a company’s present organizational boundaries and structures shouldn’t dictate its choice of a winning competitive strategy. Instead, your recently completed analyses of the environment and your organization’s structure should serve as the basis for your choice of tactics.
Transformation plans require widespread buy-in from stakeholders, so it’s important to get input from those who will be directly affected by the strategy’s execution—typically, frontline workers. Otherwise, not much is going to shift.
The most obvious improvements can be made by beginning with the most fundamental aspects of a company’s operations; in other words, by “picking the low-hanging fruit” first.
As an added bonus, here are some of the most typical blunders made by auditing teams working on company strategies.
assuming that all info is created equal
Avoid acting on survey results.
The failure to connect rewards, management, and other forms of morale support to strategic goals.
Lack of forethought regarding which functions should be kept in-house and which should be contracted out
Lack of focus on essential procedures that must be of the highest quality
Misalignment of internal resources and consumer needs
It’s plain and easy not to tell everyone in the company about the results of the audit or the new direction the company is taking.
The comprehensive Business Strategy Assessment mentioned here was edited by Andrew Carey. Cambridge Strategy Publishing (http://cambridgestrategy.com) is the imprint responsible for its release. Andrew’s professional background includes stints in writing, editing, marketing consulting, publishing, team facilitation, and advising for company growth. He also works as a psychologist in private practice.
Read also: 10 Ideas To Start Your Own Business – A Guide For 2023
