When considering when and how strategy should be developed, there are two schools of thought – those people who consider it an annual activity, and those who view it more as an incremental process throughout the year. This article discusses the benefits of both approaches – but also why they can complement each other well. Rather than viewing the one-off annual process and the continual evolution as at odds with one another, they may complement each other well.
The benefits of annual strategy reviews
Annual strategy reviews are often what people think of when they hear the word strategy – an annual planning process that evaluates the firm and its current position, as well as competitors and sets the direction for the company for the coming year. Such strategic reviews are often coupled with budgeting – helping allocate resources within the company and plan for the coming year.
There is some logic to conducting strategic reviews periodically – decisions made on strategy are intended to be long-term. They involve making significant commitments of resources, and many decisions are hard to reverse. Given that the time frame for many of these decisions is in the years (or potentially decades) outlook, determining and reviewing them on an annual basis is not necessarily a bad thing.
Similarly, coming together periodically for one-off reviews also allows management to take a step back from the day-to-day running of the organization. It is easy to fall into the trap of focussing solely on tactical decision-making – smaller implementation considerations. Coming together for an annual review is one way of stepping away from the day-to-day decisions involved in running the firm to concentrate on the more high-level strategic considerations.
The role of continuous strategy reviews
While annual strategy reviews are useful for periodic considerations, by their nature of being annual, they are not well suited to the changes and pivots that may be required during the year. If a competitor for example makes a major move, you may need to evaluate if and how you want to respond.
Continual reviews of strategy – either with ad-hoc reviews as needed, or monthly examination of the firm – can help address the ongoing changes and pviots required in strategy. There are times where it wouldn’t make sense to wait until the next planning cycle to make a change – periodic reviews help identify changes in the environment and allow you to make adjustments as neeeded.
How periodic and continuous strategy review complement one another
Rather than seeing annual strategy reviews and continuous reviews as at odds with one another, it should be clear that there are benefits of both approaches, that together compensate for one another.
Annual strategy reviews are good for taking a step back, and setting the overall direction of the company, but are less suited to the pivots that may be required during the year. Continuous strategy reviews are better suited for dealing with the environmental changes that may necessitate strategic changes. But the focus on the day-to-day can mean that most fundamental considerations of the direction that the company is taking do not happen. Together, annual and continuous reviews can help obtain both a high-level view, allowing the broad direction to be set, as well as the more specific implementation consideration required to respond to evolving changes.
Final thoughts: Actively consider and review your strategy
It is important to recognize that whether your reviews of firm strategy are annual, continual, or a combination of both, the key thing is that you are actively reviewing and reflecting on how to compete.
A danger is that firms see the limitations of strategic planning – for example, that not everything can be account for in advance – and in turn decide that there is no benefit in developing a strategy. Taking this all-or-nothing approach can quickly result in firms not paying any consideration for how they are competing, forgoing a strategy that can help in achieving consistency in decision making throughout the firm.