Making Choices & Focusing Effort for Long Term Value
What does a start-up B2B professional services company writing a blog and sharing it over social media have in common with a multi-national behemoth retailer that is building a series of multi-million dollar premium “Roasteries” that sell $10 cups of coffee? They are both taking purposeful action that will deliver long term value, while sacrificing immediate term results. In other words, they have made strategic choices about where to focus their resources.
After having completed an assessment of your organization’s capabilities and the environment in which you are operating, you need to identify your strategic options and decide where to deploy your limited resources. This post will describe the process for making these important decisions and is the fourth post in an 11-part series describing the trajectorE Navigation System (tENS), a 10-step process for defining and executing strategic growth and improvement projects. If you missed the earlier posts, you can find them here.
The comparison above is possibly the only time that trajectorE management will be compared to Starbucks, at least for a while. The point however is that no matter how large or how mature a company you are, you have limited resources that need to be allocated in a way that is in the best interest of the business and that is usually going to involve a trade-off between long term value and immediate results. In the case of a start-up, the primary resource is your time, while in the case of a large organization, it takes the form of management focus and money. In Starbucks’ case they have enough money and management horsepower to pursue six strategic initiatives over a five-year horizon, while we here at trajectorE are focused on two over the next twelve months (sorry, you don’t get to see ours!). It’s intuitive as well that the company’s maturity level influences the time horizon over which you can plan. A 45-year old company is in a much better position to plan over a 5-year timeframe than an 8-week old start-up.
The process of deciding which initiatives, or themes, to focus on is a continuation of the analysis we covered in the last post. Once you have assessed your internal capabilities and the environment in which you are operating, you need to process this information and produce options. These options can be generated as ideas that come to you and your team as you are completing the analysis or can be generated methodically by combining your organization’s strengths with potential market opportunities, finding ways to address your weaknesses or identifying steps to mitigate market threats. If you are looking to grow your business, there are a number of options available: new product offerings to your existing market, new offerings to new markets (be careful with this!), expanding to new markets or targeting new segments within existing markets (eg. Starbucks’ new Roasteries).
After generating a list of options, it is helpful to describe what each option would look like in qualitative terms. What would the outcome of that scenario look like? How would we practically implement that? What would our organization look like if we did that? Do we have the resources to pursue that? Engaging the leaders from each area of the business in this discussion is important so that all these different perspectives converge to give a 360 degree view of the potential benefits, costs and implementation challenges associated with each option. In some cases, a detailed scenario analysis may be warranted. This is often the case in industries such as the natural resources sector, where strategic choices often manifest themselves in new production facility investment decisions. These follow a rigorous feasibility analysis process with discounted cash flow analysis based on projected commodity prices and capital cost estimates. In many other cases however, such a detailed analysis is either not warranted or possible given the number of unknowns. In those cases, a more qualitative approach can be taken, which can involve the leaders of the organization discussing what the best case, worst case and likely outcomes of a given option will produce. Another very important dimension through which you need to process these alternatives is by asking yourselves which ones will lead you more toward achieving your Mission and which ones will divert you off course. This is the kind of simple perspective that can get lost when in the weeds of detailed discussion on likely benefits and implementation issues.
With the options identified, the likely outcomes estimated and some of the implementation issues noted, it is now time to make a decision. The ideal way to make a decision that will maximize ownership, leading to smoother implementation, is for the leaders participating in this process to reach a consensus on the option(s) to pursue. If however, consensus cannot be reached then someone needs to make a call. In my experience, while it can be frustrating when a decision is made that you do not agree with, it is worse still to churn in analysis and discussion because nobody wants to make a decision. The senior leader of the organization is responsible for the overall performance of the business and needs to represent it to a Board, investors or equivalent and so that person has to be the ultimate decider. Business is not a democracy, however it is doomed to fail if it is run as a dictatorship so a balance must be struck. In making this decision, there is as much (or more) art and gut feel required as there is analysis of likely outcomes and pros & cons. By deciding which strategic initiatives to allocate resources to, the decision also needs to ensure that it clarifies what initiatives will not be allocated resources. Since time and focus are limited resources, any ounce of this that is dedicated to one of the options that was not chosen is diluting the organization’s ability to successfully execute the chosen path. So, despite the fact that some members of the team may have wanted to pursue other initiatives, they need to put their individual preferences to the side in the interest of the larger organization and support the decision once it has been made. Anything less than that is showing a lack of leadership on their part and risks precipitating larger cultural issues if others identify dissent.
Once it has been decided which initiatives to pursue, it is important to accurately capture and document this in the form of minutes or some document that doesn’t get lost amongst all the other less important documentation your business generates. You should do this before everyone gets up and leaves the meeting, offsite, phone call, or wherever you are holding this discussion. This is not a matter of covering you butt in case something goes wrong later, but rather a way to ensure that everyone clearly understands what decision is made and serves as a reference later on to ensure everyone remembers what was decided. I have too often sat in meetings where decisions were made and after such a long and exhausting discussion, different people walked away thinking that different decisions were made. Also, if not documented in some form, it can be common for people to forget the nuances of the decision. To avoid this, ensure that you write down the choices that were made, in as much detail as possible, including any steps or actions to be taken to achieve the stated goals. The implementation plan will be refined later, however it is important to document these early agreed-upon tactics.
Conclusion
After completing the review of your organization’s internal capabilities as well as the environment in which you operate, your organization now needs to translate that into a set of strategic initiatives. These initiatives should be limited in number based largely on the resources available and should be chosen based on the likely benefits they will deliver, the likelihood of their successful implementation and their contribution toward fulfilling the organization’s Mission. It is important that once the decision is made, all the leaders of the organization support the initiatives chosen, regardless of whether they were their preferred options since without this support, the initiatives will not be successful and divisions within leadership will precipitate larger cultural issues within the organization. With the strategic initiatives selected, the next step is to translate these into actionable, SMART goals. The process for doing this will be covered in the next post in this series.
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