process management | CorporateIntel

If you’ve ever been in a planning meeting with me, you are familiar with this question: What does winning look like? This is how I like to frame decisions around initiatives we are considering. If we can define success in advance, we will know if we achieve it. If we have no idea what winning looks like before we commit resources to a project, how do we know if it was worth it once we deliver the work product?

We all know what winning looks like in sports. If one team has a higher score than its opponent, that team wins. Simple enough, but is it also winning if there were so many injuries in the latest game that half the team can’t play in the next game? What if the team’s coach coach delivers the win, but on a series of controversial decisions that damage team morale for the rest of the season? What if someone cheats? Some of winning is straightforward, but not all of it.

Let’s consider a working example in business.

Let’s say we have an idea for a new set of features we think we want to create for our e-commerce platform. One way to decide what winning looks like is a simple ROI (return on investment) calculation. Suppose the project cost is a million dollars. The first thing we want to do is get back that million dollars through incremental profits. Remember always that revenue is not profit. We have to take all our fixed and variable costs out of sales before we achieve a contribution to earnings. A million dollars of revenue does not pay back a million-dollar investment, but if our contribution margin on those sales is 20%, then we need an incremental $5m of revenue to produce $1m of incremental cash (presume that general and administrative costs are unchanged to simplify things).

Let’s say then we’ve articulated the minimum payback to break even we need on $1m of investment is $5m of incremental sales (that is, revenue we would not have received without the new initiative). Of course, no one wants to break even in business, we want a multiple of that investment back. Do we want 5x, 10x, or more? A lot of that depends on the scale of the business, but let’s say we want 5x our investment to call it a win. That’s $25m of sales generating $5m of cash for a 5x return.

The next question we might ask is how soon do we want that return. Some of that will depend on the numerous initiatives competing for investment. If two potential initiatives are evaluated to deliver the same 5x return, but one can do it in six months and one can do it in a year, I’d say we go with six months. So the cash we produce is important, but so is the time we have to wait to get it back.

Does winning end there? Is selecting an initiative solely based on return on investment and time? Seldom are those the only factors in play. We need to think about the strategic value of our initiative. Does it lift our customer count? Sometimes that is even more important than the incremental cash we are producing, particularly if we are focusing on the lifetime value of a customer. In this case we might set a goal that the new initiative increases our customer count by 5% in no less than a year. If we know what those customers are worth to us in the long run, we might go back and pick the initiative with the one year return on investment over the six month time frame if the additional customers we are acquiring are all the more valuable.

Another factor in winning might be market positioning in the competitive environment. Let’s say we’re convinced the feature we’re considering is something our customers have been requesting in customer service feedback, because no one else does it very well. Winning in this instance might be about acquiring market share above other metrics. When we launch the feature, if we see our online orders increase by 5% while a competitor’s volume stays the same or declines, we might call that winning, particularly if we can translate that gain in market share into higher customer count or improved lifetime value.

The point here is not to enumerate all the ways we might factor winning, but to force a robust dialogue ahead of committing to an initiative that builds a consensus around the work we will do together. If we collect data in advance, set goals for the improvement of key performance indicators (KPIs), ardently debate the relative merits of the various initiatives before us, and then make an informed choice, we can clearly measure the success or failure of the initiative. If we just reach to heaven for inspiration, how can we know if we won or lost?

Wise business leaders know that if we discuss upfront what winning looks like and then fail to achieve it, there is no blame to be assigned. We haven’t failed at all, we have learned in an experiment that mattered and held consequence. The argument is for better process management, to spend the time in advance discussing what winning looks like so we know it when we see it or don’t see it. Failure to invest that time ahead of committing resources to an initiative is indeed a form of failure, even if the initiative happens to succeed (how you know it succeeded when you didn’t address that in advance is another story entirely).

Don’t move forward without deciding what winning looks like. Crafting a thesis of the change you are trying to affect and the benefits you intend to bring establishes a benchmark for measurement. Insisting on this step early in product development will not only improve the odds of success, it will improve the teamwork and ability to share in the success a team creates together.

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Photo: Pixabay

There’s no time like the present to set goals. Here’s a framework I use for myself and those I manage or advise.

I generally try to classify projects into three levels of priority before I consider adding resources to anything on deck: Air, Water, and Food.

In the unlikely event everything classified under Air, Water, and Food is done and behind us, I might move onto the next realm of importance, but generally, if it’s not Air, Water, or Food, it is going to get a very low priority,

I’m stealing broadly from Maslow’s Hierarchy of Needs, but suppose you were an astronaut in orbit and the red light in the capsule appeared. How do you set priorities? Largely by survival.

Without air, you have seconds to live.

Without water, you have days to live.

Without food, you have weeks to live.

Everything after that is discretionary.

Whether you are setting high-level goals or project priorities, try ranking your options into these categories.

What is Air?

In a services business, it might be customers.

In an e-commerce business, it might be secure uptime.

In product development, it might be an innovative, competitive technology solution that is worth marketing because it will surprise and delight customers.

“Air” initiatives are the items on your to-do list that if not attended to immediately may cause a business to be gone very soon. Sometimes they are obvious. Take the examples above. If you don’t protect your customers in a services business, you don’t have a business. If you don’t have a product worth selling, you don’t have a business. If you are selling online and you are not safely live to the world, you don’t exist.

It’s relatively easy to see the obvious examples of Air, but sometimes they are counterintuitive. I often write about People, Products, Profits—in that order. Are people, or the talent that drives your company, Air? The answer is absolutely yes—we cannot accomplish much of anything without the right team, but none of us has the unlimited capacity to hire everyone we want. It is precisely because talent is Air that it takes discipline to know which people you need now and which may have to wait. Your budget will always create some constraints, as will the availability of people you wish to recruit and the forced ranking of your priorities.

Of all the choices you make, Air should be the least subjective. When you feel it leaving the room, you know you are doing something vitally wrong. Don’t let Air get away from you, or the next two points won’t matter.

What is Water?

In a services business, it might be tailoring what is offered to individual customer needs.

In an e-commerce business, it might be sufficient variety of differentiated listings to attract and retain customers.

In product development, it might be the process management that lets you create a dependable schedule.

“Water” initiatives are what you need to build the business once you are certain the Air around you is sustainable. These are the projects in your organization that are essential, the ones that cannot be postponed unless there is an Air-eliminating crisis to address. Of course, if there are too many crises in an organization, you will never get to Water, and that will only keep you going slightly longer than losing Air.

Consider the example of product development: Air is ideation, the vision that will set your offering apart from those of your competitors. Water is the ability to deliver it. If you can’t create a project plan and product development schedule that you can actualize within your financial means, the concept won’t have any value. You need to be demanding about Water, but you also need to be realistic.

How important is knowing Water when you see it? Take the metaphor to its extreme: Suppose you have an abundance of Air, but you can’t get to Water. How long will you last? That’s how important Water is. It’s not Air, but it’s not far behind. Use discipline when you deem something Water. Everything that isn’t Air can’t be Water, or you’ll never have enough.

What is Food?

In a services business, it might be referrals, reputation, or word of mouth,

In an e-commerce business, it might be reliable customer service.

In product development, it might be the parsing of features and benefits to plan generational updates that improve upon each other.

“Food” initiatives allow you some discretion. You can live a relatively long time with just Air and Water, so you get to decide what constitutes Food and how to procure it creatively. If you make a mistake anointing something Food, perhaps prioritizing one product feature over another, if you’re wrong it probably isn’t the end of the world. That doesn’t mean you can be cavalier about determining your alternatives, but at least you’re out of the realm of immediate time pressure and into a set of choices where course correction is possible, even if you make a sizeable error in judgment.

I often suggest to people that one of the common elements of Food is time. Some people will think time is Air or Water, but a ticking clock is not the same as a clock that is not wound or has no power source. Time is something we all have to navigate, and we never have enough because of the deadlines we establish for ourselves or the demands of meeting customer needs. I prefer to manage time the way a good sports team works the game clock. There is an element of urgency with a game clock, but not desperation. You can use it as a motivational tool, or as a way to outsmart competitors. Time is always critical, but when it is too critical, innovation can take a hit.

Balance the Elements

Have a look at all the conflicting priorities around you. Force yourself to rank them into Air, Water, and Food. Chances are you’ll discover you are trying to solve for Food when you should be trying to solve for Air or Water. That might be why you are going in circles or nowhere at all. I have taken part in some heated constructive conflict about how to classify any given task in an organization, but I have seldom seen the framework for this kind of healthy argument fail to create a productive dialogue.

Agreed priorities are empowering. When you achieve consensus around Air, Water, and Food, you are making critical progress in your team building and goal setting. Measurable success is often lurking in meticulous editing.

Most important, if what you are working on is beyond the scope of Air, Water, Food and you’ve left these priorities behind, stop what you are doing immediately and rethink your course of action. If you haven’t got Maslow working in your corner at that basic level, the battery in your clock may be about to take away all your choices.

Own the clock. Always own the clock.

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Photo: Pixabay