Evaluating Strategic Performance: Concepts and Methodology

Abstract

This paper develops a general theoretical model for the measurement of strategic performance. The concepts are universal and, by applying the methodology through specific quantitative analytic methods, measurable for all forms of strategic activity. The model distinguishes three aspects of strategic performance: (i) strategy itself relative to its goals; (ii) specific executions relative to the strategy itself; and (iii) competing or alternative strategies per se. The methodology for quantifying these aspects of strategic performance is: (i) estimate a strategy’s best potential from its actual best performances; (ii) evaluate individual executions by comparing their results to their strategies’ potentials; and (iii) compare different strategies per se based on their best potentials. These general steps can be implemented by different quantitative analytic methods; one is outlined and others are indicated.

The conceptual framework and derived methods address two problems. First, they provide practicable means of evaluating the three aspects of strategic performance in practice to diagnose the causes of strategic success and failure, to identify efficacious from futile strategies and effectual from unavailing execution, and to compare competing strategies. Second, they supply a fundamental theoretical deficiency common to both academic and practitioner studies which evaluate either strategy performance or execution performance while failing to control or account for the simultaneous effect of the other. These methods can also be applied to investigate broader economic issues, like risk theory or market completeness.

Keywords: strategy, implementation, strategic execution, strategy theory, strategic performance, strategy evaluation

JEL Classification: C00, C10, C90, D24, D80, D81, G10, L10, L20, L30, M10