A good business strategy defines and prioritizes the actions required to achieve long-term goals. Yet many business owners struggle with business strategy evaluations, as many evaluation methods are confusing and difficult. The Rumelt evaluation method – named for its creator, Richard Rumelt of the UCLA Anderson School of Management – attempts to simply the process using four criteria to assess whether a strategy is efficient, effective and aligned with a business’s mission and goals.
Check for Consistency
Rumelt's first criteria is to review short-term goals, objectives and policies to make sure each one supports your long-term business strategy. This is especially important if your business is experiencing growth, as decisions made in response to growth may alter your business’s direction. Consistent connections allow your business to function as a cohesive team-oriented unit, with most problems or concerns tracing back to differences among people rather than business operations.
Red flags that point to inconsistencies between short-term goals and long-term strategy plans include interdepartmental conflicts and competition, miscommunications or lack of communication and authority challenges.
Assess Your Strategy's Adaptability
Secondly, Rumelt suggesting that you determine how well your strategy matches and adapts to its environment. Start this two-part assessment by first determining whether your strategy is helping your company realize the social and economic ideals outlined in your business mission. Next, look at whether – and how well – your strategy acknowledges, manages and deals with changing economic and legislative trends. A well-developed strategy encourages anticipation and a proactive – rather than reactionary – response to a changing environment.
Competitive Advantage Analysis
The third Rumelt criteria is to analyze your business strategy to make sure it allows you to develop, promote and sustain your company’s competitive advantage. For example, assess whether your strategy encourages innovation and creativity or whether it demands process-oriented thinking. This affects whether your business is able to distinguish itself from direct competitors – now and in the future – by offering distinctive products or services, by developing specialized resources such as patents and trademarks or by developing a reputation as a business having employees with superior skills.
Evaluate Your Business Strategy for Feasibility
The final Rumelt criteria is to evaluate your business strategy as a whole to assess its long-term feasibility. For example, examine the strategy from a financial perspective and identify its limitations. Assess staffing in terms of requirements, knowledge and the skill set required to achieve long-term strategy goals. Also, consider whether core personnel, including both managers and employees, are willing to contribute to and support the business strategy and the direction in which it’s taking your company.
Based in Green Bay, Wisc., Jackie Lohrey has been writing professionally since 2009. In addition to writing web content and training manuals for small business clients and nonprofit organizations, including ERA Realtors and the Bay Area Humane Society, Lohrey also works as a finance data analyst for a global business outsourcing company.