When should you review your business strategy?
You might want to ask yourself “when should I review my business strategy?”
A strategy review is not a trivial task (at least when done properly), so you should only carry out a review when you really need to.
That said, there are several events that should prompt you to review your business strategy:
- A significant new entrant in the marketplace (not just new competitors, but major new suppliers or customers can dramatically alter the competitive landscape)
- Withdrawal of a significant market player – perhaps through insolvency or a tactical retreat
- Merger of major players in your competitive arena
- Development of new technologies that facilitate new products, production processes or ways of doing business
- Major legislation or regulatory changes that affect your operating environment
- Fundamental changes to the economic or business landscape
To be relevant triggers for reviewing your strategy, such events need to be potential “game-changers”: major developments with medium- or long-term effects. You should also look out for developments in complimentary and substitute markets as well as those in your current field.
Not all such changes will be dramatic revelations – quite often, the significance of new developments takes time to emerge. You need to be alive to new developments as often an accumulation of small changes leads to a big shift in the competitive landscape.
There is no substitute for continually monitoring the business environment. If any of these game-changers occur in your business environment, they create an opportunity to rethink your business strategy – and they might transform your business.
Returning to the question, one response might be “Not during the budgeting process”. Although the annual budget often prompts a rethink of your strategy, you really need to have locked down your strategy before you start the budgeting process – then use your strategy to inform your budget.
It is advisable to ask a few strategic questions before embarking on your budget process:
- Is my current strategy still suitable for current trading conditions and my current operating environment?
- Is my current strategy still feasible? Or, put another way, Does my business have the right resources and capabilities to deliver its strategic goals?
- If my strategy is achieved, will it still deliver acceptable returns?
- If you can’t answer “Yes” to these three questions, you probably need to review your business strategy before preparing your budget.
So, the best answer to the question “When should I review my business strategy?” is “Whenever a game-changing shift happens in your operating environment”. You therefore need to keep monitoring the environment for such changes. Also you should check annually that your strategy is still relevant, well in advance of preparing your budget.
Of course, if you don’t have a proper business strategy in place you should start developing one now as a matter of priority.