A strategic audit assesses your current business strategy, how suitable it is for your business and whether your company is in position to execute the strategy. Performing a strategic audit on a regular basis is crucial to the success of the business, as the strategy needs to constantly be taking into account market conditions and changes. So how does a strategic audit work?
It Asks The Right Questions
Your strategic audit should make you consider the most basic questions about the business and the market and help you answer them more substantially. For example, “what business am I in?” might seem like a simple question with a simple answer. But you need to think past the obvious answer and take a closer look. A ‘retail clothing store’ is a simple answer, whereas upon closer inspection the answer should extend to ‘retail store offering luxury clothing to a high-end market’.
It Evaluates Your Current Strategy
The strategic audit asks you to look at how your business views itself currently in the marketplace, and where it wants to view itself. As part of this, a SWOT analysis will be done to reassess the strengths, weaknesses, opportunities and threats, ensuring your current strategy is working towards success based on these. If the findings are different and your current strategy is no longer in line with these, then it needs to be re-evaluated.
It Highlights Strategic Risks
Failing to recognise risks has proven to be the undoing of many businesses, and traditional audits rarely incorporate risk identification in the process. It’s important to highlight the risks to your success, which could include a drop-off in demand for your products/services or a critical manager leaving the company to work with a competitor. A strategic audit sheds light on these risks, allowing you to decide which ones are the most significant and how you can act to avoid a critical situation down the line.
It Assesses The Need For Resource Changes
If your business goals don’t match up with the resources you currently have available, then you must either change your goals or adjust the resources available. For example, if you want to open up a new store in the next year, but you currently have negative cashflow at your current store, you have to assess if the goal is realistic. Another example would be if your goal was to bring a new innovative product to market, but have no research and development dedicated to discovering innovative products.
Implementing The Strategic Audit
The findings of the strategic audit will need to be implemented, but it isn’t as simple as that. You also need to consider how you will measure and evaluate the performance of the implemented changes. It’s advisable to create a plan for how you intent to measure the effectiveness of the implementation, to evaluate whether or not the changes worked as intended. It is important to perform regular strategic audits and measure implementation in order to keep on top of shifts in the environment and ensure you are always on the right path.