Do you accept the view that the ultimate test of an organization's strategy is financial performance?

Answer 1

Although financials are an important measure of performance, looking at them alone will not truly allow you to measure strategy optimization. Many financial measures are short term in nature. It can appear that the organization is making money, but the strategy may be eroding the long term value of the organization. If an organization can execute against a strategy that ensures long term viability and growth in the marketplace, this is the best measure of strong strategic performance. Over time, businesses must reinvent themselves because of external factors. Inappropriate reliance on financial measures will not lend to the rigorous requirements of transformation. Business must continue to invest capital in future growth which generally has a short term negative effect on financial performance but it the only way to ensure a viable future. A common example of this is investment in technology. Proper deployment of capital and an appropriate balance of short term returns and long term growth generally provide the best long term return to shareholders. The current marketplace environment has clouded the true role of an investor. Unfortunately today most investors expect high short term results even though investing in stock should be a long term investment in the strategy of the company. This is one of the reasons for the current stock market volatility and the reason that currently, stock prices rarely represent the true value of the company.