Your organizational goals have been set, and several strategic initiatives are on the table. What’s next? Do you pursue them all, or choose one or two?
One mistake business professionals can fall into when transitioning from strategy formulation to implementation is taking on too much at once. It’s easy to assume that, because each strategic initiative is valuable to the overall business strategy, they should all be pursued.
Yet, the strongest strategists know that trying to spread effort and resources over too many projects can lead to burnout, confusion, and unsuccessful results. According to Bridges Business Consultancy, nearly half of organizations fail to reach their strategic goals, making it imperative to prioritize and maximize the chances of reaching yours.
Here’s a primer on three factors to consider when prioritizing initiatives and how to align for strategic success.
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Imagine you have several proposed initiatives and are trying to assess which to pursue first. Here are three factors to consider for each to compare them and determine which is the highest priority for your organization.
1. Alignment with Purpose and Direction
The first factor is how well each strategic initiative aligns with your company’s mission and intended direction. If they’re being seriously considered, they all likely align with these criteria. Yet, it can be easy to get wrapped up in new ideas and accidentally overlook this step, potentially leaving projects on the table that don’t closely align with your company’s purpose.
Revisit your company’s mission statement and value proposition. For instance, maybe you own an athletic company that produces durable, inexpensive youth sportswear and equipment and donates to children in need with every purchase. How well does each strategic initiative align with this mission?
Next, clarify what your strategic vision for the future is. Perhaps you aim to increase sales and donate over one million soccer balls.
Assess each initiative through these lenses. If it doesn’t align with both, deprioritize it.
2. Potential Return on Investment and Impact on Key Performance Indicators
Next, consider each initiative’s potential return on investment (ROI). Think not only from a financial standpoint but also in terms of effort and associated risk. Essentially, how “worth it” does each initiative have the potential to be?
To calculate the anticipated financial ROI, use this formula:
If one initiative has a high potential ROI but comes with increased risk, perhaps it’s not the top priority. You may, for example, decide to prioritize an initiative with a slightly lower anticipated ROI and decreased risk.
It’s important to remember that every company has different key performance indicators (KPIs)—metrics they use to track and measure success. For instance, your company may heavily emphasize new customer growth as opposed to repeat customer sales. When considering each strategic initiative’s ROI, think of its potential impact on the KPIs that matter most to your organization.
3. Anticipated Value Creation
Finally, assess the value each strategic initiative could create for your organization’s stakeholders.
In the online course Business Strategy, Harvard Business School Professor Felix Oberholzer-Gee explains the value stick, a tool for visualizing a company’s value creation for various stakeholders.
The four levers on the value stick are:
- Willingness to pay (WTP): The highest price a customer is willing to pay for your product or service
- Price: The amount customers must pay for goods or services
- Cost: The amount a company spends on producing goods or services
- Willingness to sell (WTS): The lowest amount suppliers are willing to accept for the materials required to produce goods or services
These four levers can be increased and decreased to create value for different stakeholders: your customers, firm, suppliers, and employees.
- Customer delight represents the value captured by the customer and is influenced by WTP and price.
- Firm margin represents the value captured by the business and is influenced by price and cost.
- Supplier surplus represents the value captured by the firm’s suppliers and employees and is influenced by cost and WTS.
With this framework in mind, list the ways your company creates value—Oberholzer-Gee calls these “value drivers.” Value drivers include anything that raises WTP or lowers WTS.
You can use value drivers to create a value map, which is a visual tool that helps organizations determine the needs, challenges, and desires its products or services can solve or fulfill for potential customers.
Creating a value map prompts you to consider the top 10 ways your product provides value, directly compare your performance on those value drivers to your competitors’, and notice any shortcomings that could be opportunities to improve.
You may be tempted to try to improve every value driver, but Oberholzer-Gee cautions against this in Business Strategy.
“No company can excel at every value driver,” Oberholzer-Gee says. “In fact, if you strive to be exceptional everywhere—if you spread resources evenly across all your value drivers—you end up being mediocre throughout. Successful companies deploy their resources to strengthen a few value drivers, and they cut back on product attributes and dimensions of service that are of lesser importance.”
After prioritizing your value drivers, map them to the strategic initiatives. Use this to prioritize the projects that create the most value. If there’s no clear frontrunner, select the initiative that provides value to the most underserved stakeholder group.
Related: A Beginner’s Guide to Value-Based Strategy
Assessing the Big Picture
These three factors don’t exist in a vacuum—that is, they all influence each other. If a strategic initiative creates value for multiple stakeholder groups, it likely provides a return on investment and targets important KPIs. Hopefully, your company’s purpose includes creating value for customers, suppliers, and employees, in addition to turning a profit.
In tandem, these factors can help you assess which initiatives have the biggest impact on the areas you care about.
Attaining Strategic Alignment
After prioritizing your strategic initiatives, you must ensure your team is aligned. This requires effective communication so each employee understands your company’s overall direction, its specific goals, and the strategic priorities that will make them possible.
In addition, it’s important for managers to share with their teams how everyone’s tasks will contribute to those priorities. Understanding the impact of their efforts not only provides clarity to employees' daily work but a renewed sense of motivation and purpose—which can help drive your strategic initiatives forward.
Do you want to learn more about how to craft a successful strategy for your organization? Explore Business Strategy—one of our online strategy courses—and download our free guide to formulating a successful business strategy.
