Every time business leaders decide to invest in their business, particularly by embarking on new strategic initiatives designed to generate value, they are placing a bet. The outcome is not guaranteed, but they believe it will work or they wouldn’t waste the time or money.
Yet, only one in four strategic initiatives is returning value. When I speak to executives and share that point, they are surprised. But when I ask them why that is, they have no problem identifying the cause.
The most common cause is under-resourcing an initiative. Another common cause? Not effectively communicating what is expected and holding people accountable. One of the reasons most often cited by executives (essentially an admission) is the lack of “homework” before pulling the trigger. Leaders are just too busy to thoroughly vet ideas that their experience tells them should work.
Here are a few questions every leader should ask before making any bet on their business.
4 Key Questions
Does it fit with our strategy? Just because our competitor does it doesn’t mean it is a good idea for us. Walmart and Target don’t follow the same strategy and aren’t good at the same things. Walmart is about low cost and invests in the supply chain while Target is about brands and fashion and wants its store and products to appeal to the eye.
Do we have the resources? If you try to do a big idea on a small budget, you may get what you paid for. If you really believe in it, don’t starve it. However, you may not have to commit all of the resources at once.
Consider a stage gate development process where resources increase as the project passes various feasibility checkpoints so the investment is commensurate with the risk. As you learn more, the risk is reduced, and investment can increase.
How can we get the resources? Most companies are doing too many things and not doing any of them well enough to truly register in the market or add value to their product or brand. Be sure to limit the priorities or projects to the number you can adequately fund and do them extraordinarily well.
While it seems you will be moving slower, you will actually make progress much faster, and you will earn value with each step, allowing you to fund the next projects more easily and build momentum. A few big things (if they are the right things) will add much more value than a lot of little things done modestly well.
What are the leading indicators of success? Every project should be broken down into steps and evaluated along the way. Set the team up for quick wins that continue to encourage and inspire progress. Similarly, if the project continually misses goals, it is time to reevaluate.
Singles or Home Runs?
One of the questions you may be asking yourself as a business leader is “Are singles better than home runs?” The answer is your favorite and mine: It depends. To some extent, it is a matter of risk tolerance, and only the board and the business leaders know that answer. It also depends on financing and resource availability and how much flexibility you have. Having said that, I will always encourage my clients to think bigger.
Thinking bigger costs nothing. Thinking bigger doesn’t take any more time. Chances are if you don’t invent the next industry home run, someone else will. So why not think bigger, if you take the time to answer the questions above?
Singles are a given. Every business expects this year to be better than next. Every business should be thinking about product extensions, new customers in a strong market segment and how to increase efficiency. Those are required to simply stay in the game.
Home runs, on the other hand, take your business to the next level. They are what it takes to see your organization grow significantly and be healthy for the long term. They take a bigger bet, but it is less about the size of the bet than it is about managing the risk.
Organizations can place big bets and beat the odds. I have seen it; my clients have proven it. But don’t play loose with the company’s money. Do the diligence to make it a great bet!
