It’s critical to understand – and forecast – the direction of performance

Organizations use strategic initiatives to deliver benefits to strategic stakeholders, who want measurable performance outcomes. A clear understanding of what causes performance outcomes is a force for energizing the program’s design. This article defines performance outcomes as forecasted trends of a critical results area.

Performance outcomes crystallize the vision
and help to identify the high-priority projects.

You can energize your strategic initiative by understanding performance outcomes. I will explain the key points in the following paragraphs.

Examples of Performance Outcomes

Here are two examples of performance outcomes:

• Executives at Domino’s regarded its Pizza Turnaround as a success – in part – because it increased the performance outcome of same store sales . Its program vision – to launch a new pizza that could win (prevail over its direct competitors) a national taste test – was a driver for this key business metric.
• The travel and hospitality industry uses revenue per available room (revpar) as its key indicator. This is computed as the occupancy × average room rate. A strategic initiative – such as a promotional program – should pay off in an improvement in the trend.

The Program Leader’s Job is to Drive the Strategic Initiative

Many strategic initiatives flounder in transitioning from strategy formulation to strategy implementation. The culprit? Ambiguity.

The program manager needs to step up and drive the initiative. An important early task for the leader of a strategic initiative is to

Identify the performance outcome
that is most valued by your “investors.”

I put the word investors in quotes to encourage you to think about your stakeholders in a broad way. People invest more than money; they invest with their time, attention, and emotions.

Performance Outcomes are Trend Lines

Outcomes measure business performance. As an example of a strategic initiative, consider a retailer with a goal of increasing revenues generated by coupons, presently $5 million of sales per year. Let’s assume this strategic initiative has the vision to double coupon sales, in each of the next two years: to $10 million during Year 1 and $20 million during Year 2. It will use Twitter couponing as the technology.

Our model building starts with these two assumptions: 1) the baseline performance is $5 million (which would render as a flat line, given the previous assumptions), 2) the goal of the strategic initiative is to create business growth of $10 million in each of the next two years.

Determine the Shape of the Outcome Curve

Modeling a performance outcome is a blend of art and science. You make some educated guesses and draw a trend line, such as the example displayed on the nearby graphic.

Here are a few tips:

• I find it best to show the date of the launch of strategic initiative (the diamond on the graphic) and the “the point of inflection,” (the triangle on the graphic) where the benefits being yielded by the strategic initiative will begin to show their effect. Complex systems have more points of delay, thus you should anticipate a delay of time between the start of the strategic initiative and the point where the effects are noticed. As an example, the illustration shows that there is approximately six months of continued performance at baseline levels.
• Then turn your attention to the question, of “What is a realistic slope and shape for this trend?” You will have to use your best judgment to figure out if it will slope upward quickly or slowly, or will it oscillate? Too, most businesses have seasonality where buying behaviors will peak. Will you model that seasonality or statistically smooth it?

Develop a preliminary forecast of outcomes

Build a Cause-Effect Model

Cause-effect models – and the related tool of causal loop diagrams – enable the team to challenge the organization with this question, “What does this organization need to do to create the outcome?”

Returning to the example of creating revenues through online couponing, the team would assess the factors have the most influence in achieving the result. For simplicity, let’s say that the experts on the team tell us that the two most important factors are the face value of coupon and the timing of the coupon. I would charter projects to optimize these two factors.

Conceptual models help people can better manage concepts that are visible and explicit rather than abstract or invisible and assumed. If you are personally skilled in the technique, that is great. If you lack that skill, find and bring experts onto the team.

Strategy Validation

Often strategy documents are filled with numerous activities; it is hard to discern the priorities. You can use cause and effect models to support strategy validation. The focus question is straightforward:

Given this set of activities,
what is the most likely outcome?

How to Energize the Strategic Initiative

Model building helps the strategic initiative team gain a better understanding of:

• The actual workings of a strategy, particularly how its outcomes are produced by cause and effect relationships.
• The interrelationships between the parts of the strategy.

What do you do with this understanding? I would use this enhanced understanding in concert with the Five Ways to Socialize a Vision and the Four Driving Questions. People need to understand something before they offer their commitment. Too, I would note this essential benefit in the context of the role of the Program Manager as the Chief Decision Architect:

Understanding the relationship between activity and outcomes
leads to better decisions
about how to achieve the desired outcomes.

Getting clarity over outcomes is one of the most important activities in developing a strategic initiative. What are your experiences with developing cause and effect understandings of outcomes?

Related Articles

• Validation: How to Get Strategy Right (leadingstrategicinitiatives.wordpress.com)
• Strategic Initiatives Drive Growth and Innovation in the Travel Industry (leadingstrategicinitiatives.wordpress.com)
• Interpreting Strategy Documents: More Insights and a Valuable Tip! (leadingstrategicinitiatives.wordpress.com)
• The Purpose of a Strategic Initiative is Closing a Performance Gap (leadingstrategicinitiatives.wordpress.com)
• How to Identify Strategic Assumptions (leadingstrategicinitiatives.wordpress.com)