Rumelt's Criteria for Evaluating Strategies

Richard Rumelt developed four criteria for evaluating strategies:
Consistency
    Are the external strategies consistent with (supported by) the various internal aspects of the organization? You must examine all the various functional and internal management strategies employed by the organization and compare them with the external business strategy.
Consonance
    Are the strategies in agreement with the various external trends (and sets of trends) in the environment? To answer this questions, you need to look at all the major trends that impact the selected strategy - both positively and negatively. 
Feasibility
    Is the strategy reasonable in terms of the organization's resources?

·         Money and capital

·         Management, professional, and technical resources

·         Time span

Advantage
    Does the strategy create and/or maintain a competitive advantage?

·         Resources

·         Skills

·         Position

CONSISTENCY

A strategy should not present inconsistent goals and policies. Organizational conflict and interdepartmental bickering are often symptoms of a managerial disorder, but these problems may also be a sign of strategic inconsistency. There are three guidelines to help determine if organizational problems are due to inconsistencies in strategy:

• If managerial problems continue despite changes in personnel and if they tend to be issue-based rather than people-based, then strategies may be inconsistent.
• If success for one organizational department means, or is interpreted to mean, failure for another department, then strategies may be inconsistent.
• If policy problems and issues continue to be brought to the top for resolution, then strategies may be inconsistent.

CONSONANCE

Consonance refers to the need for strategists to examine sets of trends as well as individual trends in evaluating strategies. A strategy must represent an adaptive response to the external environment and to the critical changes occurring within it. One difficulty in matching a firm's key internal and external factors in the formulation of strategy is that most trends are the result of interactions among other trends. For example, the day care explosion came about as a combined result of many trends that included a rise in the average level of education, increased inflation, and an increase in women in the workforce. Although single economic or demographic trends might appear steady for many years, there are waves of change going on at the interaction level.

FEASIBILITY

A strategy must neither overtax available resources nor create unsolvable subproblems. The final broad test of strategy is its feasibility; that is, can the strategy be attempted within the physical, human, and financial resources of the enterprise? The financial resources of a business are the easiest to quantify and are normally the first limitation against which strategy is evaluated. It is sometimes forgotten, however, that innovative approaches to financing are often possible. Devices such as captive subsidiaries, sale-leaseback arrangements, and tying plant mortgages to long-term contracts have all been used effectively to help win key positions in suddenly expanding industries. A less quantifiable, but actually more rigid, limitation on strategic choice is that imposed by individual and organizational capabilities. In evaluating a strategy, it is important to examine whether an organization has demonstrated in the past that it possesses the abilities, competencies, skills, and talents needed to carry out a given strategy.

ADVANTAGE

A strategy must provide for the creation and/or maintenance of a competitive advantage in a selected area of activity. Competitive advantages normally are the result of superiority in one of three areas: 1) resources, 2) skills, or 3) position. The idea that the positioning of one's resources can enhance their combined effectiveness is familiar to military theorists, chess players, and diplomats. Position can also play a crucial role in an organization's strategy. Once gained, a good position is defensible—meaning that it is so costly to capture that rivals are deterred from full-scale attacks. Positional advantage tends to be self-sustaining as long as the key internal and environmental factors that underlie it remain stable. This is why entrenched firms can be almost impossible to unseat, even if their raw skill levels are only average. Although not all positional advantages are associated with size, it is true that larger organizations tend to operate in markets and use procedures that turn their size into advantage, while smaller firms seek product/market positions that exploit other types of advantage. The principal characteristic of good position is that it permits the firm to obtain advantage from policies that would not similarly benefit rivals without the same position. Therefore, in evaluating strategy, organizations should examine the nature of positional advantages associated with a given strategy.