“Growth is never by mere chance; it is the result of forces working together.” James Cash Penney, the founder of JC Penney, said this insightful bit long ago – but it’s still true today. Everyone knows that growth is essential for any business to be successful, but what many forget is the forces that must work together to achieve that success.
For instance, when you’re analyzing growth it’s all about joining together forces like return on investment, as well as the magnitude and timing of those investments. The risk, or return profile, of shareholders and investors determines the growth goal (how much to risk with this product) and strategy boundaries. This is the framework for your launching product.
But things get tricky when your business has multiple products you’re trying to promote and you actually have to make logical, thorough decisions on what products get what level of funding and investment.
Before any company gets big, it’s small. Small companies, generally, only have one product and when you only have one product, you’re “all in”. Time passes and your small company grows to be a major corporation with many products. So how do you decide now what products to go “all in” with?
Problems arise because it is hard to agree on priorities and which products are worth investment. There are limited budgets, time frames, and escalating arguments because everyone wants to be a priority.
Many times, the loudest individual, the biggest product or most persistent voice gets the final say; although, that decision may not be the best choice. Or, to avoid conflict and resentment, executives decide to have “equal investment” for all products. But that is also a sub-optimal solution.
Equal investment is not the right decision because:
Both the options above just lead to chaos. A lack of a defined framework for this process ensures chaos and discord.
So if equal investment is not the right choice and neither is just giving the funding to the loudest screamer, then what is?
To paraphrase Peter Drucker and Michael Porter, “Strategy” is about answering two questions: “What business are you in?” and “What business should you be in?” The point here is that you need to create a space where executives make direct decisions regarding these choices. Having real and thoughtful debates is the only way you’ll get there and avoid getting stuck in the perfunctory set of “yes” meetings.
Obviously creating this type of environment is easier said than done. We’ve discussed this in our blog series on strategic planning, but what we’ve found most necessary for creating these types of debates and discussions is to adopt a structured three-step process.
There are many factors you can measure your 2x2 on. There’s competitive intensity, trigger products, product life cycle, revenue or profit impact or plateau effects just to name a few. The important thing is to set these measurements to your desired results. It keeps everyone accountable to the goal your business is working towards.
At the end of the day, it’s important to get it all into simple analytics that supports discussion and debate. Use a simple 2x2 measurement model. Make it enduring. You want it to be able to cascade through your organization. This cascade ensures that people understand what you’re doing and where you’re placing your bets.