Strategic control is a term used in management and business strategy. It refers to the process by which an organization tracks and monitors its strategy as it is being implemented, detecting any problems or potential issues as early as possible and taking corrective action.
Strategic control involves several steps, including:
- Setting strategic objectives: These are the goals the organization wants to achieve through its strategy. These objectives should be SMART – Specific, Measurable, Achievable, Relevant, and Time-bound.
- Implementing the strategy: Once the objectives are set, the organization implements its strategy.
- Monitoring performance: The organization tracks its progress toward its strategic objectives. This may involve collecting data on key performance indicators (KPIs), such as sales, customer satisfaction, market share, etc.
- Comparing actual performance with objectives: The organization assesses whether it is on track to achieve its strategic objectives. The organization must understand why these exist if discrepancies exist between the actual performance and the objectives.
- Taking corrective action: If the organization is not on track to achieve its objectives, it may need to adjust its strategy or implementation. This could involve changing the strategy, revising the objectives, or altering how it is implemented.
Strategic control is a crucial part of strategic management because it helps ensure that an organization’s strategy is effective and moving toward its goals. It’s a continuous, dynamic process that requires regular review and adjustment to respond to changes in the external environment or internal conditions.
Strategic Alliance: Meaning, Types & Examples
Types of strategic control with their examples
Strategic control types typically fall into four main categories:
Premise Control:
Premise control is one type of strategic control that focuses on the assumptions or premises upon which a strategic plan is based. These assumptions could be about external and internal factors such as market trends, consumer behavior, competition, political environment, legal regulations, technological advancements, etc.
Premise control aims to systematically and continuously check whether these assumptions are still valid and relevant. If the premises have changed, the strategy may need to be adjusted, as decisions based on outdated or incorrect premises can lead to strategic failure.
Let’s take an example:
Consider a company that has developed a strategic plan based on the premise that there will be steady economic growth in its key markets over the next five years. The company’s product development, marketing, and expansion strategies are based on this assumption.
Premise control, in this case, would involve regularly monitoring economic indicators such as GDP growth, employment rates, inflation, and other relevant metrics in those key markets. If the economy starts to decline or grow more slowly than anticipated, the company would need to reassess its strategies. They might need to delay expansion plans, adjust their product development timeline, or modify their marketing strategies to respond to the changing economic conditions.
Thus, premise control acts as an early warning system, allowing companies to recognize changing circumstances and adjust their strategies proactively. This allows for more agile decision-making and helps prevent major strategic missteps.
Implementation Control:
Implementation control is a type of strategic control that focuses on executing the strategic plan. It is used to ensure that the activities are leading to the desired strategic outcomes and to detect any problems or deviations as early as possible. This control can provide timely information about the progress and identify when a strategy is not turning out as expected.
Implementation control involves three main steps:
- Setting Milestones: At the beginning of the strategy implementation, management sets key milestones or targets the organization aims to reach within specific periods. These milestones serve as markers to indicate whether the strategy is on track.
- Monitoring Performance: As the strategy is implemented, management tracks the organization’s performance against the set milestones. This could involve monitoring key performance indicators (KPIs), such as sales, market share, customer satisfaction, etc.
- Taking Corrective Action: If the organization is not meeting its milestones or if there are discrepancies between actual performance and the plan, management needs to identify the reasons and take corrective action. This could involve adjusting the strategy or how it’s being implemented.
An example of implementation control might be a software company with a strategy to develop and launch a new software product within a year. They would set milestones for different stages of the software development process, such as design, coding, testing, and launch. Regular check-ins would be done to monitor progress, and corrective action would be taken if there were delays or issues.
Overall, implementation control helps ensure that strategies are carried out as planned and that any issues are detected and addressed promptly.
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Strategic Surveillance:
Strategic surveillance is a type of strategic control that involves broad-based and general monitoring of events inside and outside the organization. The purpose is to uncover events or trends that were unexpected, and that might impact the strategy of the organization.
Strategic surveillance is not focused on any specific area but’s designed to detect unexpected events that could affect the organization’s strategy. This could include changes in the political or regulatory environment, new technological advancements, changes in consumer behavior, market conditions shifts, or competitors’ moves.
For instance, suppose a company is in the tech industry. The strategic surveillance process in this company would likely involve keeping a close eye on new technological advancements and competitive actions. If a major competitor releases a ground-breaking new product, the company, through its strategic surveillance, would detect this and then could reassess its product development strategies in response.
Another example could be a company that operates in multiple countries. Strategic surveillance for this company might involve monitoring political news and events in those countries. If a major political event could affect the business climate, the company could adjust its strategy as needed.
The main advantage of strategic surveillance is that it allows organizations to remain adaptable and flexible, capable of responding to changes in their environment as they occur. It is, however, more reactive in nature compared to premise control or implementation control, which are more proactive and systematic.
Special Alert Control:
Special alert control is a form of strategic control designed to deal with immediate and drastic changes in an organization’s internal or external environment. It is an intense and rapid form of control that gets activated by unexpected and significant events that can substantially impact the organization’s performance or survival.
These events could include a wide range of situations such as sudden changes in the economy, unexpected actions by competitors, regulatory changes, major shifts in consumer behavior, natural disasters, political instability, or significant internal events like a major product failure, labor strike, or a substantial drop in sales.
When a special alert situation occurs, the normal routine of strategic control is suspended, and an intense, focused analysis of the situation is carried out. This often involves a cross-functional team of senior executives who gather to assess the situation, its potential impact on the organization, and the appropriate response.
For example, if a company in the pharmaceutical industry faces a sudden new regulatory rule affecting one of its key products, a special alert control would be triggered. The company would then immediately assemble a team to assess the impact of the new regulation, and based on their analysis, they would decide whether to adjust the production process, modify the product, or even discontinue it.
Special alert control allows an organization to respond quickly and effectively to sudden, unexpected situations, helping it navigate through crises and protect its strategic interests. It underscores the importance of agility and adaptability in today’s fast-paced and unpredictable business environment.
All of these types of strategic control play an important role in ensuring that an organization’s strategy is effectively implemented and that it achieves its objectives. They enable the organization to respond quickly and effectively to changes in its environment or internal conditions and help ensure that the strategy remains aligned with its overall goals.
Strategic Business Unit in Strategic Management with Example
Strategic Control Systems
Strategic control systems are management tools used to track an organization’s progress toward its strategic goals, identify any issues or problems, and take corrective action if needed. These systems can take many forms and may involve various tools and techniques. Here are some examples:
- Balanced Scorecard: Developed by Robert Kaplan and David Norton, the balanced scorecard is a performance measurement framework that adds strategic non-financial performance measures to traditional financial metrics. It provides a balanced view of an organization’s performance by considering four perspectives: financial, customer, internal process, and learning & growth.
- Strategy Maps: Strategy maps visually represent an organization’s strategic objectives and the relationships between them. They can help an organization ensure that all its activities are aligned with its strategy and that it is moving toward its goals.
- Key Performance Indicators (KPIs): These are specific metrics an organization uses to track its progress toward its strategic objectives. They may include financial metrics like sales or profit margins and non-financial metrics like customer satisfaction or employee turnover.
- Management Information Systems (MIS): These systems provide managers with the information they need to make informed decisions. This can include data on sales, customer behavior, market trends, etc.
- Benchmarking: This involves comparing an organization’s performance with similar organizations or best practices in the industry. Benchmarking can help identify areas where the organization is underperforming and needs to improve.
- Budgeting and Financial Systems: These systems help monitor financial performance and allocate resources in line with strategic objectives.
- Risk Management Systems: These systems help identify, assess, and manage potential risks that could interfere with the organization’s strategic objectives.
- Project Management Systems: When strategies are implemented through specific projects, project management systems help ensure these projects are completed on time, within budget, and achieve the desired results.
All these systems and tools are part of strategic control systems, providing a mechanism for monitoring and adjusting an organization’s strategy as necessary. They ensure alignment between the strategic objectives and the operational activities.
