Dear Mohamed,

I agree with Igor. However, please allow me to simplify and provide more details.

There are various tools to monitor Strategy Implementation, and it all depends on whether they are for Corporate-level, Business-level (e.g. specific product group or geographical area) or Functional-level (e.g. Marketing, Operational, HR or Finance) strategies. One of the tool that is more applicable for corporate strategy is the Balanced Scorecard, where using measurable KPIs identified, we can track the changes to them over time. The Balanced Scorecard is often translated down to also the business level and the functional level to monitor and improve such corporate level strategy.

For Business level strategy, it is often positional assessment as noted by Igor. Here, we can position the business in views of competitors (e.g. to identify gap areas using the Growth Share Matrix) and to compete similarly or differently (e.g. using focus, differentiation or niche strategy). We can then gather performance indicators in view of these axes or variables such as market share, growth or financial performance.

Functional strategy relates to functional performance. For example in Marketing, we may want to capture customer satisfaction, customer orders and market share in Customer Relationship Management (CRM). Depending on the projects, as depicted by Igor, you can further compare 'before' and 'after' results but the measurement again depends on the function and project.

Hope this will make measurement clearer to you.

Best wishes

Prof Kuah

Dear Mohamed,

Strategy implementation requires projects, policies and position.

Projects is the easiest past to measure -- we compare planned and really implemented projects, marking also project adjusted through their implementation and abandoned project (substituted by other projects or just cancelled).

Position assessment requires benchmarking of the firm at the beginning and at some next period of strategy implementation on relative prices, relative quality and relative unit costs (against competitors). Market share is often used to measure some strategic progress, but this is a rather weak measure not always representative.

Policies is the hardest thing to measures. Usually instead of really implemented policies researchers and practitioners measures the degree of implementation of certain administrative procedures, but this is not the same thing. Thus, there always some room for subjective judgement of strategy implementation remains,

bests,

Igor Gurkov 

Dear Mohamed,

I agree with Igor. However, please allow me to simplify and provide more details.

There are various tools to monitor Strategy Implementation, and it all depends on whether they are for Corporate-level, Business-level (e.g. specific product group or geographical area) or Functional-level (e.g. Marketing, Operational, HR or Finance) strategies. One of the tool that is more applicable for corporate strategy is the Balanced Scorecard, where using measurable KPIs identified, we can track the changes to them over time. The Balanced Scorecard is often translated down to also the business level and the functional level to monitor and improve such corporate level strategy.

For Business level strategy, it is often positional assessment as noted by Igor. Here, we can position the business in views of competitors (e.g. to identify gap areas using the Growth Share Matrix) and to compete similarly or differently (e.g. using focus, differentiation or niche strategy). We can then gather performance indicators in view of these axes or variables such as market share, growth or financial performance.

Functional strategy relates to functional performance. For example in Marketing, we may want to capture customer satisfaction, customer orders and market share in Customer Relationship Management (CRM). Depending on the projects, as depicted by Igor, you can further compare 'before' and 'after' results but the measurement again depends on the function and project.

Hope this will make measurement clearer to you.

Best wishes

Prof Kuah

If you are trying to see how your strategy changes the outcomes (i.e. financial performance of the firm or project, or the unit that you want to measure), you can use the residual income approach. Among practitioners, this is popularised by the works of Stern or Rappaport as Economy Value added (EVA) or its variants CFROI.

In essence, you can track how your strategy impacts the following:

a. Residual income = RoIC less WACC where RoIC is the return on Invested Capital and WACC is the weighted average cost of capital. You can also substitute WACC with the hurdle rate of your investment.

b. RoIC = (EBIT / Revenues) * (Revenues /Invested Capital) * (1-t) where t is the tax rate.

In this disaggregated form, you can link your strategy to how it impacts EBIT or Revenues, which measures the operational efficiency, and on the efficiency of your Invested Capital utilitilisation (i.e. how much revenue is earned for each unit of invested capital employed). 

c. WACC is your usual kd * ((r) * (1-t)) which is the cost of debt after tax, weighted by the proportion of debt in your capital, and ke * B(rf + rp) where rf is the risk free rate and rp is the risk premium adjusted for the beta of the cash returns. In practice, the beta for the share price is used, which is not entirely correct.

d. Value add is simply the residual income divided by the hurdle rate (or WACC as some practitioners use). My preference is to use the hurdle rate. This is in reality the application of the annuity formula as a simplification, where the firm is assumed to be an ongoing concern.

Rappaport or Stern has a more extensive description of the methodology.

Regards,

Ricardo

My experience is that sometimes the strategy has not considered different factors important for the achivement of the goal desired, so before trying its implementation, it should be first  reanalyze and reevaluate very carefully  if the organizational strategy as a whole has been well designed, inclusive by other members of the team or even outsiders (consultants) for  other insights.

And from that point  the leader should organized with the right people (talented and trained for the job) meaninful actions for the success of the whole strategy establishing the right indicators that would really measure each relevant action and its consequences for the  sucess of the final strategy.

A strict follow up to the actions is a must to ensure its implementation and success.

You might be interested in the attached papers.

You might be interested in the attached papers: