How to Manage Your Strategic Initiative Portfolio: 4 Basic Steps
Managing your strategic initiatives can become overwhelming if your company doesn’t have the appropriate skills to address them. Reverse this situation and make your strategic initiatives your most powerful tool to drive organizational change.
Before defining the portfolio of strategic initiatives that the company will implement to reach its objectives, executives must first focus on unifying the terminology regarding the initiatives within the company. According to the Project Management Institute, a project is defined as a temporary feat that seeks to deliver a unique product, service or result, and has fixed start and end dates, as well as a defined budget. On the other hand, an initiative refers to a set of closely related projects with similar purposes.
In addition, an initiative portfolio refers to a number of correlated initiatives (strategic initiatives, operative initiatives, continual improvement initiatives, etc.) which are managed in a coordinated manner to create synergies amongst them.
1. Identifying and Defining Strategic Initiatives
Establishing an initiative portfolio has two essential purposes: (1) defining the essence of the strategic change agenda and (2) structuring the required activities for carrying out said change.
Organizations often confuse strategic approach with implementation capacity. When counting the hundreds of projects they already have on their hands, they get overwhelmed thinking that they are too many to manage effectively and try to limit themselves to the five or ten most important ones. However, organizations are usually able to execute much more than they think themselves capable of. For example, in 2001 General Electric reported that they had completed more than 40,000 Six Sigma projects in that year alone. How did they manage to do it? For years, Six Sigma was one of the top five management strategic initiatives, giving them the necessary focus to successfully execute that many projects. That is, in most cases the problem is not in the organization’s execution capacity, but rather in the way it organizes its strategic initiatives.
2. Prioritizing Strategic Initiatives for the Short, Medium and Long Term
To begin the strategic initiative planning process and, thus, have more control over the initiatives’ prioritization and management, it is necessary to sort the existing list of initiatives and programs, eliminate those that are not strictly strategic and then add the new ones required to achieve the organization’s objectives.
Subsequently, these should be organized into short, medium and long term, according to the capabilities that they seek to develop within the organization. Executives should identify which strategic objectives they impact and the milestones they should meet as they are executed.
It is important for organizations to develop initiatives simultaneously in all three horizons. Otherwise they risk being stuck in a short-term, operational and reactive mode.
3. Identifying and Defining Strategic Initiatives
Creating a datasheet for each initiative is highly recommended. It should include its purpose, deliverables, milestones as well as its required resources and the expected impact it will have, both financial and non-financial. When doing this, executives must evaluate each initiative to gauge their feasibility based on their complexity and solidity.
Afterwards, executives must define a financial projection which, at first, will not contemplate the impact generated by growth or investment initiatives. Next, these initiatives are added, each one with its own revenues, costs and expected returns. Thus, the resulting plan will include both the incremental costs and revenues associated with the initiatives, such as their required investment and the savings they generate for the company. As a result, the strategic and operational plans and the annual budget are inextricably linked.
4. Initiative Management and the Strategy-Focused Organization
Managing your organization’s initiatives effectively and consistently does not only let you know exactly what the status is for each of them, it also enables your company to be prepared for any kind of challenge. It provides an opportunity to discuss which projects are performing as expected and which would be best to cancel.
The most successful Initiative Management Practices focus on reinforcing the Five Principles of the Strategy-Focused Organizations.
Managers must begin by defining a manageable number of strategic initiatives and allocating responsibility for each one of them. (Principle 1: Mobilize Change Through Executive Leadership)
Aside from a Strategy Map, the organization requires a methodology to plan and manage its initiatives. (Principle 2: Translate the Strategy into Operational Terms)
Each member of the organization should know exactly what their responsibilities are regarding the initiatives and how these differ from their operational functions. (Principle 3: Align the Organization to the Strategy)
The organization should recognize and reward both individual and team contributions to each initiative’s success. (Principle 4: Make Strategy Everyone's Everyday Job)
To execute the strategy, a key role of top managers should be to manage and optimize the project portfolio. (Principle 5: Make Strategy a Continual Process)
This approach can help organizations cope with the complexity and confusion often associated with project management. Together, the Planning Horizons and the Five Principles of the Strategy-Focused Organizations are key elements to successfully implement strategic change within organizations.
Does Your Company Follow The Best Practices In Strategic Initiative Management?
Studies have shown that a bad execution and NOT a flawed strategy is the cause behind 70% of CEO failures. How well are you executing yours?
At TRISSA we can help you implement a sturdy mechanism to execute your strategy by selecting the right strategic initiatives for your company and managing them according to international best practices. We do so by offering a comprehensive set of services (consulting, executive education, certifications and software solutions) that we can tailor to best fit your company’s needs.
Author: Trissa Strategy Consulting
Source: Brown, Terry S. and Matthew R. Gill. "Charting New Horizons with Initiative Management." Balanced Scorecard Report (2006): 21-24. Online Journal.