Deviation Analysis is a critical component of strategic evaluation and adjustment. It involves comparing actual performance against planned performance to identify variances and understand their causes. This process helps organizations to make informed decisions about necessary adjustments to their strategies.

1. Planned Performance: The expected outcomes based on strategic objectives and plans.
2. Actual Performance: The real outcomes achieved over a specific period.
3. Variance: The difference between planned and actual performance.
4. Root Cause Analysis: Identifying the underlying reasons for variances.

1. Define Performance Metrics: Establish clear, measurable indicators that align with strategic objectives.
2. Collect Data: Gather data on actual performance over the evaluation period.
3. Compare Performance: Analyze the differences between planned and actual performance.
4. Identify Variances: Highlight significant deviations that require attention.
5. Conduct Root Cause Analysis: Investigate the reasons behind the variances.
6. Develop Action Plans: Formulate strategies to address the identified issues.

Let's consider a hypothetical company, Tech Innovators Inc., which set a strategic objective to increase its market share by 10% over the past year.

• Planned Market Share Increase: 10%
• Actual Market Share Increase: 6%

• Planned Market Share: 30%
• Actual Market Share: 28%

• Planned Market Share: 30%
• Actual Market Share: 28%
• Variance: -2%

• Variance: -2% (Actual market share is 2% less than planned)

• Possible Causes:
  • Increased competition
  • Ineffective marketing strategies
  • Delays in product launches

• Action Plan:
  • Enhance competitive analysis to better understand market dynamics.
  • Revise marketing strategies to improve brand visibility.
  • Streamline product development processes to avoid delays.

Scenario: A retail company, Retail Masters, aimed to increase its quarterly sales by 15%. However, the actual increase was only 10%.

Task: Perform a deviation analysis to identify the variance and suggest possible causes and corrective actions.

1. Define Performance Metrics:

   • Planned Sales Increase: 15%
   • Actual Sales Increase: 10%

2. Collect Data:

   • Planned Sales: $1,000,000
   • Actual Sales: $950,000

3. Compare Performance:

   • Planned Sales: $1,000,000
   • Actual Sales: $950,000
   • Variance: -$50,000

4. Identify Variances:

   • Variance: -$50,000 (Actual sales are $50,000 less than planned)

5. Conduct Root Cause Analysis:

   • Possible Causes:
     • Decreased consumer spending
     • Ineffective promotional campaigns
     • Supply chain disruptions

6. Develop Action Plans:

   • Action Plan:
     • Conduct market research to understand consumer behavior.
     • Revamp promotional strategies to attract more customers.
     • Improve supply chain management to ensure product availability.

1. Define Performance Metrics:

   • Planned Sales Increase: 15%
   • Actual Sales Increase: 10%

2. Collect Data:

   • Planned Sales: $1,000,000
   • Actual Sales: $950,000

3. Compare Performance:

   • Planned Sales: $1,000,000
   • Actual Sales: $950,000
   • Variance: -$50,000

4. Identify Variances:

   • Variance: -$50,000 (Actual sales are $50,000 less than planned)

5. Conduct Root Cause Analysis:

   • Possible Causes:
     • Decreased consumer spending
     • Ineffective promotional campaigns
     • Supply chain disruptions

6. Develop Action Plans:

   • Action Plan:
     • Conduct market research to understand consumer behavior.
     • Revamp promotional strategies to attract more customers.
     • Improve supply chain management to ensure product availability.

1. Ignoring Small Variances: Even small deviations can indicate underlying issues that may escalate if not addressed.
2. Focusing Only on Negative Variances: Positive variances should also be analyzed to understand what is working well.
3. Lack of Root Cause Analysis: Without identifying the root causes, corrective actions may not be effective.
4. Inadequate Data Collection: Incomplete or inaccurate data can lead to incorrect conclusions.

Deviation Analysis is essential for maintaining strategic alignment and achieving organizational objectives. By systematically comparing planned and actual performance, identifying variances, and understanding their causes, organizations can make informed adjustments to their strategies. This process ensures that the organization remains agile and responsive to changes in the competitive environment.

In the next topic, we will explore Strategy Adjustment and Review, where we will discuss how to implement the insights gained from deviation analysis to refine and improve strategic plans.