Strategic Planning Tip: How to Prioritize for Profitability - Vistage Executive Street Blog

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Strategic Planning Tip: How to Prioritize for Profitability

Did you know that the odds are against you? Only 1 in 4 strategic growth projects actually return value. That strikes me not only as a low number but one of the reasons strategic planning execution so rarely accomplishes the intended goals.

So why is the return so low? There are lots of reasons and when I speak to CEO’s, they have no difficulty citing them. I take that to mean that most companies are guilty of pursuing initiatives that didn’t pay out.

Strategic Planning Tip: How to Prioritize for ProfitabilityThe most common reason is that the company failed to do adequate research into the idea before tackling it. Perhaps there was a sense of urgency in trying to match a competitive move, usually a bad idea to begin with–I refer to it as me-too-ism. Or maybe there was a narrow window of opportunity and so they jumped in without testing if the water was deep enough to not get hurt (or a big enough profit pool to actually make money).

Regardless of why, there is little excuse for pursuing something that hasn’t been vetted. The time taken to study the idea usually pays back in spades–by either stopping a bad investment or increasing confidence and potentially resources for a great opportunity.

According to Harvard Business Review the top reason that strategic plans fail to yield their intended revenue projections is inadequate resources. New ideas are approved but not funded appropriately. Probably because they didn’t do their homework and don’t want to invest much. Even more likely they didn’t know where to find the funds because they didn’t identify anything to STOP doing.

Your true strategy is how you spend your money. So if after a strategic plan you are still funding everything from before and then trying to add new initiatives, chances are that you really haven’t committed to the strategy. The new ideas die from starvation.

Another reason is that the initiative is pursued in a seat-of-the-pants fashion and not planned. In this instance, communication and alignment are often not effective, and derail the project. Strategy’s role is to focus the organization not to create a free-for-all of a bunch of new projects–one for every function–that are not coordinated across the organization for maximum impact.

If you want to see much higher odds of successful initiatives, follow these guidelines:

1. Vet initiatives before they are approved and funded.

2. Only fund the number of initiatives your organization can support and do well in a given time frame. Better to do one really well than 10 that fizzle.

3. Establish a specific prioritization of all initiatives from 1 to x. In case resources are cut back, postpone work on the lowest priority initiatives rather than cut a bit from each.

4. Once the initiative is approved, develop a game plan including milestones, measures and accountabilities to ensure it moves forward smoothly and all areas are aligned.

5. Monitor progress as defined by milestones and tweak approach to reflect results.

Follow these steps and you will experience much more effective results from your next strategic planning effort.

2 Responses

  1. Jose Palomino

    Great points. There always does seem to be a sense of urgency when it comes to growth, but if there’s no growth as a result of no planning, then the growth plan was all for naught anyhow.

    Do you have any general tips for vetting certain things in an efficient way? Any major resources you tend to use?

    valueprop.com/blog

    • Margaret Reynolds

      Hi Jose, thanks for your comment. Yes, I do have several tools that I use to help companies understand how to prioritize among possible strategic initiatives. The first is a decision criteria model that is used to evaluate the options as objectively as possible against desired long term outcomes and the second is a map that compares market performance against competitors that identifies areas of potential investment. If you would like more information on either please feel free to email me directly. Happy to help!