Strategic Planning: Gaining the Competitive Advantage
Perception or Reality?
One of the biggest challenges facing business leaders is the lack of resources such as time, funding, and skilled labor. Is that really a reality or is that just a perception? What if the fix was just as easy as looking at the situation from a different perspective and implementing strategies that optimize your available resources?
According to Cambridge Dictionary, perception is defined as: “a thought, belief, or opinion, often held by many people and based on appearances.” If we all face the same limitations (to a degree), should you really perceive them a detriment or a way to help in leveling the playing field for organizations of all sizes relatively speaking and the competitive advantage is in how you strategically use your available resources?
So keeping with this train of thought, maybe gaining the competitive advantage isn’t really about the quantity of resources, but more about how you strategically use the resources you have? Let’s talk a little further about one of the more important pieces of the strategic planning process that should just about guarantee you are making decisions that will provide you with a competitive advantage.
Gaining the Competitive Advantage
How do you gain and leverage a competitive advantage? It all starts with a well-defined Strategic Plan and determining what strategic initiatives are going to get you the biggest return on investment (ROI) with the least amount of opportunity cost. Most consultants encourage business to dream big when you are determining your goals. Then they work with business leaders to scale back those dreams to something that is realistic, but also provides a stretch goal and maximizes the ROI for the organization.
How do you pick which goal will provide the best ROI? Do you just close your eyes and randomly select one of your goals? Nope, it’s not quite that easy, but you can simplify the process. Just like any good builder, you need the necessary tools to build your foundation. The toolkit outlined below can be used during the strategic planning process to better prioritize the completion of the goals. The ranking system helps to ensure you are focusing your resources strategically to get the biggest ROI possible.
Step 1: Build Your Toolkit – ROI Ranking System
Sounds easy, right? It is if you have a clear understanding of your goals and have the right tools and techniques to measure ROI and the associated opportunity costs. The first step in building your ROI toolkit is ensuring everyone is speaking the same language and assessing each goal value using the same measurement criteria. One way to do this is to develop a Strategic Planning ROI Ranking System using terminology that is meaningful for your organization – see the sample table below. Again, perception plays a key role in how we interpret information, so using your own organizational vernacular removes any ambiguity in the plan.
Once you have your ranking system down and the common terminology, it’s time to move onto step two and start assigning tangible and intangible measurements for additional scoring.
Step 2: Assign Estimated Financial Values and Benefits
Step two involves creating a matrix which provides tangible (financial, decreased waste, increased satisfaction scores) and intangible (happy employees/customers) benefits to get a true understanding of the initiative’s ROI. Be thoughtful in the information you include in your matrix, the more you can fully define and assign tangible values in the matrix, the better ROI projections you will receive and the better your prioritization results will be for the organization. Here’s a few items to consider when estimating and assigning values:
Impact on the strategic direction of the organization: Mission Critical, Mission Important, etc.
Initial financial investment in product, service or initiative.
Financial investment in upgrading or purchasing new product, service or initiative.
How the initiatives will increase/decrease your bottom line in the short-term and long-term. Consider times when short-term losses can be expected with the understanding they will net long-term, sustainable gains.
Opportunity costs for bypassing other initiatives - tangible and intangible.
Business interruption costs/duration - systems down, training time, downsizing due to increased productivity, customer service dissatisfaction, increased/decreased travel.
Technology advancements such as employees having the ability to work remote - increases talent pool, increased employee satisfaction, and/or the ability to reach more customers. On the flip side, think about increased insurance/workers’ compensation/payroll taxes costs for employees working remote, state required benefits, additional training, new policies.
Step 3: Rack and Stack
Who said business leaders don’t get to have all the fun? Once you’ve done all the hard work of building your toolkit, determining your tangible and intangible benefits, and plugging values in your matrix, it’s time for the fun part – rack and stack. This is where you use the various rankings and calculations meaningful to your organization to determine what initiatives to complete based on ROI, opportunity costs and available resources. The more details you can provide in the matrix (just make sure they add actual value), the better the decisions you will make.
Remember transparency is key to getting buy-in on initiatives. Sharing the decision-making process with your leadership team at a minimum provides tangible reasons on why each initiative was selected and others passed over. For an even stronger level of buy-in, bring your leadership team in as much as possible on the process and use it to generate excitement about the future.
If you would like more information on building effective strategic planning toolkits or optimizing organizational effectiveness, please contact Key Elements Consulting.