Increasing the value of your strategy initiatives

With numerous isolated initiatives running concurrently within an organisation, there is often little idea of how they interact or overlap, leading to no clear overview of the benefits. The result is duplication and the need to repeat initiatives on a regular basis. Research shows that on average, 40% of the value of an initiative is not realised. However, having a logical way of structuring the same initiatives can lead to enormous benefits and a lot more realized value.

Types of Initiatives

The different types of initiatives in an organization can be categorized as follows:

1. System improvement initiatives: Such projects involve using technology to streamline, automate and/or integrate processes and systems across the organization. There has been a strong focus on such projects since the middle of the last decade, especially to introduce enterprise resource planning systems and during post-merger system integration.
2. Performance improvement initiatives: Initiatives to improve the performance of the business are a recurring theme, especially when the business environment is challenging, e.g. during a recession. Typical initiatives include process improvement, cost reduction, efficiency drive, risk management etc.
3. Change of strategy led initiatives: Such initiatives are a result of a change of strategy focus, e.g. concentrating on growth, entering a new market, becoming more customer-focused, complying to government regulation etc. Examples of these types of initiatives include CRM (customer relationship management), Sarbanes Oxley implementation initiative, ISO9000 certification etc.

Reasons for Failure

While such initiatives do deliver some value, the interesting question to understand is why they are a continuous feature of organizations. Why is there a requirement to have similar projects running over-and-over after every few years with enormous amounts of resources spent on them? The reasons lie in the manner in which these projects and initiatives are viewed, instigated and their scope defined.

• Taking a Static View – Essentially these initiatives are one-off exercises that take a static view of the business and its strategies, i.e. a snapshot of the organization in time as a base. By the time a project is complete, and often even before that, the business environment has changed, thus limiting the potential benefits of the exercise just undertaken to a short period of time. The organization then introduces a new slightly changed strategy, calls in consultants all over again, and goes through a similar initiative under a different name.
• Working in Isolation – Most of the time such initiatives are viewed in isolation, largely due to the level of their complexity. However, in reality, most initiatives are integrated and affect each other when operational. The consequence of which is that multiple projects often have redundancies in their scope and the effects of their interaction are not realised. The result is more wastage. For example, an initiative to introduce CRM will warrant a business process re-engineering exercise. However, if an organization is going through a process re-engineering project now, they will have to repeat parts of the project again once the CRM initiatives have been completed.
• Initiatives without Strategy – With many initiatives going on at any one time, there is generally no logical clustering and thus there is no overall view of them. An organization ends up with numerous initiatives, some going in opposite directions. We recently came across a division of a UK Footsie 100 bank which had initiatives in the hundreds running in parallel. Needless to say, they struggle with keeping track of the projects, their alignment to the high-level objectives and their benefits, especially in the long-term. As a result, the initiatives are repeated in the future without an understanding of the benefits they may bring.

How is value destroyed?

Since these initiatives do not reach anywhere close to their full potential and use resources that could otherwise be used on higher value-add projects, they are effectively destroying value for the organization.

Take a strategy lead approach

Instead of starting by looking at initiatives, organisations need first to look at their strategies. By structuring and prioritising their strategies, a clear overview of what is needed to be achieved is determined and initiatives come out as a means of achieving those strategies. By managing a portfolio of strategies rather than a complex combination of initiatives, organizations can eliminate most of the issues mentioned above. Taking an integrated approach allows organizations to structure their initiatives in line with their strategies.

So what does it take to achieve such as approach:

1. Clarify objective at every level – By making explicit what the objectives are for an organization at every level, employees become clear about what they are working towards. Being explicit requires an objective with a numerical, time and quality dimension, and a means of measuring it. E.g. not “We want to have a major market share in the market we operator in”, but “We must achieve a minimum of 25% of market share in the telco market targeting large organizations in Germany, within the next five years. The profit margin must be above 7%”.Vision > Core Objectives > Critical Success Factors > Operational ObjectivesThese objectives must be defined such that the causality between the objectives at different levels is obvious. So achieving the Operational Objectives successfully satisfies the CSFs, achieving the CSFs satisfies the Core Objectives and achieving the Core Objectives satisfies the Vision.
2. Create a Value Delivery System – The VDS is the functional map of the organization. At every level, this determines the organizational unit or department or task that will work towards the objectives at the respective level.Corporate > Functions > Tasks > StepsThe corporate level has the responsibility for working towards and achieving the Vision; the Functional (product management, sales, marketing etc.) targets the Core Objectives; Tasks are defined to achieve the CFSs and so on.
3. Define initiative – Once the objectives are clear, define the initiatives that are required to achieve them. Only initiate projects that work towards achieving one or more of the objectives.
4. Accountability – Allocate responsibility and assign resources for each of the initiatives.
5. Track initiatives – Ensure that there is a method for tracking the level of implementation, performance and benefits for each of the initiatives.
6. Recalibrate regularly – In the volatile environment that organizations operate in, objectives and ways of achieving them change constantly. Thus there needs to be a process of regularly checking to make sure that initiatives still serve the purpose that they were started for. If the objectives at any level have changed, continuing with the old initiatives is a waste of resources.

Benefits

Following the steps above achieves:

• • Alignment between the various business units, functions and department within the organization
  • Cascading of objectives against the now aligned organizational units. This brings the clarity and understanding of who does what and why, into the organization.
  • Prioritization during resource allocation

The consequence is a high level of transparency to view initiatives, their alignment to strategy and the ability to track the performance of initiatives.

At the same time, by having a process of monitoring progress and recalibrating strategy continuously, an organization can make its strategy and initiative execution process more dynamic. Hence it does not have to wait for the annual strategy planning process to make a step-change in direction, but rather make more manageable incremental changes all the time.