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Monday, January 9, 2023

How to Prioritize Strategic Projects

PRIORITIZING STRATEGIC GOALS:

Imagine you have a few ideas for projects and are trying to decide which one to do first. Here are three things to think about for each so you can compare them and figure out which one is the most important for your organisation.

1. Having the same goal and direction
The first thing to look at is how well each strategic initiative fits with the mission and direction of your business. If they are all being taken seriously, they probably all meet these criteria. Still, it's easy to get caught up in new ideas and forget this step, leaving projects on the table that don't really fit with your company's mission.

Review the mission statement and value proposition for your business. For example, maybe you own a sports company that makes durable, cheap sportswear and equipment for kids and gives money to kids in need with every sale. How well does each strategic initiative fit with this mission?

Next, make it clear what your long-term strategic plan is. Maybe you want to boost sales and give away more than a million soccer balls.

Use these criteria to judge each project. If it doesn't fit with both, it shouldn't be as important.

2. The investment's possible return and its effect on key performance indicators
Next, think about how much money each project might bring in (ROI). Don't just think about the money; also think about the time and risk involved. Basically, how likely is it that each project will be "worth it"?

Use this formula to figure out the expected return on investment:

(Expected Net Profit / Cost of Investment) x 100 = Expected Return on Investment
If one project has a high potential ROI but more risk, it might not be the most important one. You might, for example, decide to give more importance to a project with a slightly lower expected ROI but less risk.

It's important to remember that every company has different metrics it uses to track and measure success. These are called key performance indicators, or KPIs. For example, your company may place a lot of emphasis on getting new customers instead of selling to people who have already bought from them. When figuring out the ROI of each strategic initiative, think about how it might affect the KPIs that are most important to your business.

3. Value expected to be created
Lastly, figure out how much value each strategic initiative could bring to the people who matter to your organization.

The value stick has four knobs that control:

Willingness to pay (WTP) is the customer's highest price for your product or service.

Price is how much people have to pay for goods or services.

Cost is how much a business spends on making goods or providing services.

Willingness to sell (WTS) is the lowest price that suppliers are willing to accept for the materials needed to make goods or services.

You can move these four levers up or down to create value for your customers, your company, your suppliers, and your employees.

Customer delight is the value that the customer gets out of something. It is affected by WTP and price.

Firm margin is the amount of value that a business gets from its prices and costs.

Cost and WTS have an effect on supplier surplus, which is the value that the firm's suppliers and employees get out of the business.

With this framework in mind, make a list of the ways your company creates value. Oberholzer-Gee calls these "value drivers." Value drivers are things that make WTP go up or WTS go down.

Using value drivers, you can make a value map, which is a visual tool that helps businesses figure out what problems, needs, and wants their products or services can solve or meet for potential customers.

When you make a value map, you have to think about the top 10 ways your product is valuable, compare your performance on those value drivers to that of your competitors, and look for any flaws that could be ways to improve.

In fact, if you try to be great at everything and spread your resources evenly across all your value drivers, you end up being average at everything. Successful companies use their resources to improve a few key value drivers and cut back on less important product features and service aspects.

After putting your value drivers in order of importance, connect them to your strategic initiatives. Use this to put the projects with the most value at the top of the list. If there isn't a clear winner, choose the project that helps the most underserved group of stakeholders.

ASSESSING THE BIG PICTURE

These three things don't happen in a vacuum; they all have an effect on each other. If a strategic initiative helps a lot of different stakeholder groups, it probably gives a good return on investment and hits key performance indicators (KPIs). In addition to making money, I hope that your company's goal is to create value for customers, suppliers, and employees.

Together, these factors can help you figure out which projects have the biggest effect on the things that matter to you.

ATTAINING STRATEGIC ALIGNMENT

After putting your strategic projects in order of importance, you must make sure your team is on the same page. This needs good communication so that each employee knows the overall direction of your company, its specific goals, and the strategic priorities that will help make them happen.

Also, it's important for managers to explain to their teams how each person's work fits into the priorities. Knowing how their work affects the business not only makes their daily tasks clearer, but also gives them a new sense of motivation and purpose, which can help move your strategic initiatives forward.

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