The Evaluation phase seeks insights into the upside potential

In most business situations, financial performance is a key metric by which a strategy is judged. The Evaluation phase seeks insights into the upside potential, the downside risk, and the underlying value drivers in each of the Strategic Themes.  The purpose is to learn enough to be able to develop a new Strategy – one which is better than any of the ones considered to date – to implement.

The degree of quantitative analysis required depends on four factors:

  • Financial impact of the strategic initiative or project
  • Number of Strategic Themes under consideration
  • Number of Key Uncertainties
  • Range of possible values associated with those Uncertainties

When these parameters are low, a qualitative decision tree approach allows for a quick evaluation, and is likely to give enough insight to allow for a confident strategic choice to be made.  At moderate levels of the above parameters, a semi-quantitative multi-attribute analysis is more appropriate. When these parameters are high, a full-scale probabilistic economic analysis of the Strategic Themes is required to gain the necessary non-intuitive insights.

With corporate strategic initiatives, financial impact may be only one of several objectives.  In such cases, the result of the quantitative financial analysis becomes one input into a higher-level multi-attribute assessment.  With other high-level initiatives – or with governments, non-profit organizations, and the like – quantitative financial analysis may not be practical at all and/or may not address the key value measures.  In these cases, the multi-attribute analysis will often suffice.

However, on most business projects and initiatives, quantitative economic analysis yields rich insights into the key value drivers.

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