The lesson of focus and choice is certainly a driver of success with strategic initiatives. Effective leaders have the discipline to focus, choose the best target, and pursue: it is the #1 characteristic of outstanding performers.
Fewer Initiatives Means Better Organizational Performance?
I am often asked, “Is there a correlation between the number of strategic initiatives and good organizational performance?”
However, the academics have yet to establish irrefutable proof that fewer projects lead to better profitability. Read on and decide for yourself!
1. Few Initiatives = Top Tier in Industry; Many = Bottom Tier
Booz & Company collected data from 1813 C-Level respondents from firms worldwide. Booz’s data reveals:
- Firms that select a fewer priority initiatives are 16% more likely to be in the top tier of their industry than those who have no priorities or many priorities for initiatives. The data suggest that the number of strategic initiatives is optimal in the range of three to six programs.
- Firms that have many “priorities” (or no list of priorities at all) are 10% more likely to find themselves near the bottom of their industry.
Booz states this conclusion:
As an executive team’s priority list grows, the company’s revenue growth declines relative to its peers.
2. “Far Too Many Projects” → “Best Projects Starved”
Dr. Robert Cooper and his colleagues at McMaster University conducted numerous studies of the methods and results of new product portfolios over the past two decades. They conclude,
“Most firms confessed to having far too many projects for the available resources. The result is that resources are spread very thinly across new product projects, so that even the best projects are starved for people, time, and money. The end result is that projects take too long to reach the market. The bottom line is that there is a lack of focus, which creates a plethora of other problems.”
3. A Case Study from Harvard
Harvard University’s Steven Wheelwright and Kim Clark have written a seminal book, Revolutionizing Product Development: Quantum Leaps in Speed, Efficiency, and Quality. In one chapter, they examine the project portfolio of a company they call PreQuip. They note the problems of too many projects and no prioritization:
“By piling on project after project, failing to identify critical projects, and succumbing to short-term pressures, they [top management of PreQuip] had systematically underinvested in the most important projects for the company.”
“The problems at PreQuip are not unique. Most organizations fail to realize the strategic potential in new technology or markets and the next-generation projects because there are too many projects, and because they pay too little attention to the strategic mission of the development effort and too much attention to short-term pressures.”
Wheelwright and Clark conclude,
“In PreQuip’s case (and in the case of every other company we have studied), the difficulty and significant of those choices have made strong leadership from strategic management imperative. Without that leadership, organizations that have habitually overcommitted themselves will have great difficulty killing and postponing projects, or resisting the short-term pressures that drive the organization to spend the bulk of its resources ‘fighting fires.’”
4. “The Most Frequent Trap is Initiative Overload”
Alan Brache and Sam Bodley Scott’s book, Implementation: How to Transform Strategic Initiatives into Blockbuster Results, is one of the first books to address the management of strategic initiatives. They provide more reinforcement for how initiative overload undermines strategy and creates waste,
“The most frequent trap into which organizations fall is initiative overload. A business, regardless of its nature, size, complexity, and infrastructure, has a finite project capacity. Money is limited, person-hours are limited, mind share is limited, and the change-absorption bandwidth is limited. Unaware of their organization’s limitations, executives frequently launch more initiatives than can be effectively and efficiently implemented. The typical outcome? Twelve initiatives are adequately implemented and three end up as road kill. A better result? The five most pivotal initiatives are spectacularly implemented.
5. Here is The Death Spiral
The following diagram was prepared by a manager at a Texas Instruments to help his executives understand what was happening.
Start in the upper left with “new opportunity” and follow the arrows to see a system story of how piling on projects on insufficient resources causes shortcuts that affect quality that creates the need for more projects.
This causal loop diagram shows a common organizational problem: too many projects for the resource pool. This diagram illustrates decision making as a system, where accepting too many projects creates a “death spiral.”
6. Nodding Heads
Finally, I will share a personal experience that shows that overloading the project pipeline is a real significant pain.
I am frequently in front of audiences. I will say,
“Executives tell me that they believe that people will speak up when they are getting overloaded with work. However, most project managers are afraid to speak up because they fear that expressing their limitations will be perceived as a sign of weakness. Thus, the piling on continues.”
As I look at the audience, I often get nods of approval. The message that project participants most want executives to hear is that too many projects and unclear priorities cause frustration. People will come up to me and say, “I know exactly what you are talking about because I’m living it. Then they ask, “How can a junior person speak “truth to power?”
My first answer is this, “Here is what is happening:
Executives and practitioners are operating out of different mental models and not telling the truth to each other!”
How? We need to arm ourselves with facts, and have the courage to share those facts with people who have the power to set organizational priorities.
Conclusion: High Performers Focus on The Vital Few Rather than the Trivial Many
World class organizations focus on the vital few projects, instead of the trivial many. If you want to improve your revenue and profitability performance, you will get better performance by limiting your portfolio to a few key strategic initiatives. And it’s worth abiding by the definition: not everything is a strategic initiative. As it becomes clear which are the strategic initiatives, it becomes easier to give them sufficient resources and the best of leadership.
If you are chasing more than one rabbit, you are going to end up exhausted and hungry!
Do you have any additional evidence about the relationship between number of initiatives and performance to share?
- Eight Distinctions between Portfolio Management & Program Management (leadingstrategicinitiatives.wordpress.com)
- Balanced Score Cards and Strategic Initiatives (leadingstrategicinitiatives.wordpress.com)