However once the strategy is agreed, signed off on and implementation plans approved, this vitally important document, the guide to business behaviour and direction with all its value creation concepts, its back up assumptions and risk analysis is put aside and rarely holistically reviewed. Naturally as market place pressures, competitor activities and technological advancements are introduced to the mix, some or all of which influence the company’s business direction, the associated individual aspects of the plan are reviewed and amended where necessary. However a complete and holistic review of the overall earlier assumptions which underpin the plan itself are rarely reviewed. Around the table at the regular board meetings, when the plans monitoring processes are reviewed, the discussions are mainly focused on the financial reporting rather than on any deep analysis of the underlying assumptions. These assumptions gave birth to the direction of the business and its objectives during the initial development of the strategic plan. While this might seem a rather harsh statement, I would challenge directors reading this article to examine their own board papers and see if they can identify the last time their board critically reviewed and debated the principal underlying assumptions. Those same assumptions that formed the foundation determining the strategic direction the company was focused on achieving and the associated risk profile the plan envisaged the company would accept in pursuing these objectives.
However, it is interesting to note that within a number of businesses the subject of regular deep analysis of the strategic plan foundation assumptions is beginning to gain traction. Indeed I am aware of some organisations now including this discipline as part of their Governance Charters, this not only forces a discipline on the board but provides a level of comfort to the shareholders that the business model and resulting market place behaviour is being regularly assessed to ensure the company is fit for its stated purpose.
In many instances, in order to ensure total transparency in carrying out this review process, the board has engaged an experienced independent professional to undertake the deep level analysis of their strategic plan and then provide a report to the board similar in purpose to the annual financial audit. I was recently approached to undertake such a review for a major corporate, which had a dominant market position and I found the process to be most enlightening. The majority of the focus in the assumptions was on strategies which produced short term gains (over a three year period) with very little attention being given to the longer term perspective of the industry and the market. This resulted in the company not being prepared, nor having any strategies in place to manage significant disruptive changes to their market environment. Naturally this coloured the base assumptions and the accompanying risk profile, both of which were significant drivers in establishing the over strategic business plan.
Now you could say that the fault for adopting such a short term view lay with those who developed and approved the original strategic plan but that's taking a too simplistic a view of the problem. Most strategic plan developments within corporates follow an internal model that has been successfully employed in the past. However the speed of change in markets and technology advancements demands regular assessments and a more flexible approach to strategic plan development. For sure a more regular review of the deep underpinning assumptions and risk profiles is required, as these are the factors which drive the company's behaviour and market place positioning.
In summary perhaps as a sound business practice, using an independent professional, corporates and in particular public agencies should be undertaking a regular review of their strategic plan to ensure it remains fit for purpose and meets shareholders expectations in terms of successful business leadership and value creation for all stakeholders.
I would challenge directors reading this article to examine their own board papers and see if they can identify the last time their board critically reviewed and debated the principal underlying assumptions.