Richard Rumelt: Four criteria for evaluating business strategy

Professor Richard Rumelt came out with a brilliant idea on business strategy evaluation by using just four criteria that can dissect how it is working well at present and in the future too. He recommends that consistency, consonance, competitive advantage and feasibility as the four criteria:

Consistency: Primary search option under consistency is to appraise whether internal and external goals are aligned with each other. For example, how the marketing department sets targets for its team and how these are in consistent with the broader market depth the firm seeks. Rumelt especially is concerned with a situation where sudden surge of demand of a particular product consequent to an aggressive sales campaign bringing out strain in the production department resulting in organization-wide conflict. Therefore, the main focus of strategy evaluation must be to remove situations where mutually inconsistent goals are set by either marketing or production departments.

Consonance: A vital ingredient in any business strategy is the ability of adapting to the external environment with short notice. There may be events that are critical or ground shaking occurring in economic, political and social fabric that could directly impact industry. Good example is how lifestyle and fashion, change the demand stature of goods that are used by young people in the market. The changes that happen in the market must be immediately taken upon by the firm so that necessary alterations are done in both marketing & production areas.

Competitive advantage: In the key activities of the business model there must be a provision to create and continually maintain competitive advantage amongst competitors especially in the case of homogeneous products. Rumelt suggests the firm on continued basis, must assess how it is placed in terms of innovation and technology. Being in the top three is essential and to make it there, the firm needs superior resources, superior skills, and superior marketing position.

Feasibility: Ascertaining the feasibility of overall business strategy is the fourth and final criteria. The focus of this aspect of strategy evaluation is to find out the neither ideal position where neither there is over-taxing nor under-utilization of key resources. Besides, implementation of strategy must be seen as fair and objective by all personnel in the entire organization. 

In the production department the skills development and training must be of the state-of-the-art type. To ensure that condition firm must allocate sufficient resources for skills development. Equally important is to allocate funds for the marketing department to undertake training of their staff in improving skill sets in sales and distribution. In such an ideal balance, value proposition by way of products and customer service by way of sales & after-sales go in harmony with the expectations of the target market.

 

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

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E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist