Different approaches to Strategy formulation

Abstract

A clear and well-defined strategy formulation and strategy implementation, which are important corporate governance issues, are needed to help a manager take the right decisions to obtain superior performance. However, defining and implementing the strategy are two difficulties in many organizations. There are many reasons why organizations are not able to meet their performance expectations (Verweire & Van den Berghe, 2004). One of the most obvious reasons is the inability of companies to define and create customer value (and hence shareholder value). Organizations such as hospitals and nursing homes find it extremely difficult to define a unique strategic position in an ever-changing competitive arena within the healthcare sector. Trying to excel in all fields (e.g. delivering service, best price, operational excellence, ...) is an illusion. The real value proposition has to be mapped by considering the most important dimensions of customer value. However, having a clear vision and well-defined strategy is not enough. Kaplan & Norton (2001) see the ability to execute the strategy as an even bigger management challenge than determining the right vision and the quality of the strategy itself. They point to the importance of adequate performance management systems as a critical success factor for implementing strategies. More and more companies are acknowledging that performance measurement systems need a focus, by linking them to the strategy of the organization. Many academicians and performance management consultants see a solution in new performance measurement systems. These initiatives perhaps seem to be attractive but there is still a lack of integration. Therefore, rather than developing new performance measures or measurement systems, we need a more integrated approach towards performance management.