Prioritizing for the Long Run

17 08 2011

I was meeting with another executive the other day and we were talking about his new consulting business. And as we talked, we latched on to the subject of product prioritization because this was one of his focus areas. We thought that it would be nice to share a basic tool that clients can use to help them prioritize their projects, development efforts, marketing programs and other activities that generate revenue.

It seems relatively easy to prioritize. Make a list. Rank them. Determine how much money you have to spend. Draw a line. End of subject. Now, in a small owner controlled business, it is probably just that simple- or pretty close to it. The owner can make the decision and have people execute his plan. However when a company grows and you have several “chiefs,” prioritization is not that easy. There is both the hard decision of which projects to do and the equally difficult issues of ensuring every one of your teammates (from executive team all the way down to work groups) understands and executes the plan.

Let’s look at one way to prioritize projects with this emphasis on revenue producing ones. We hear this all the time. The CEO says: “we need to grow our top line. Get people together. Get ideas. And let’s discuss what we can implement.” Is there a relatively simple way to make the decision on which projects to do and if you wind up with resource constraints which projects will fall by the way side?

Decisions can be made based on fiat, whim, or gut feel. But this company is more egalitarian, like most well run companies. Let’s say the CEO convened his executive group. By asking certain questions, it was determined that there are four attributes that are important to the executive team: Market Strategy, Financial considerations, Strategic Fit, and Competitive positioning. Let’s further assume that for each of these attributes, one or more factors can be determined which support those attributes. For example under the attribute of Market Strategy, both market need and market size were important factors. Similarly, the executive team determined several elements which supported the attributes.
All in all, a total of 10 elements were specified. If a project were rated on each of these 10 elements the executive team would be able to determine the goodness of each project. (Side note: It is easier said than done that the executive team will have to agree to all these elements and attributes. There are reasons why it is difficult to quantify not the least of which is that such a system takes away the emotion and the “gut feel” for the decision.). Once these attributes are determined, a simple system can be developed to weight each of the 10 elements from 1 (low weight) to 3 (high weight). Second, each of the elements can be scored on a 1, 5, 9 scale which correlates with specific measures that can be quantified. Finally, a weighted score – combining the weights and score of each element- can be determined. All projects can therefore be measured against each other. See the attached for the basic tool:
Basic Project Prioritization Tool

Once each of the projects is scored, an ordinal ranking can be determined. The executive team can have several options to make their final selection including a) taking the projects in sequence until all funds are used up, b) dividing the projects into quartiles and quintiles and only considering those within the top two groups, c) using 80% of the funds designated to the top projects with the remaining 20% at the discretion of the CEO or other executive, or d) variations of the preceding three options.

Prioritization is inherently difficult but I have described a tool that can be used to help the decision process. It’s not perfect and it will not work for all organizations and executive teams. But the tool can also be used as a means to get alignment on what is important in picking projects/products and instill a discipline for the company which can increase the probability of success. The reason for this is that in reviewing the projects/products each of the attributes and elements should be reviewed at each stage gate or review point.

What other tools have you used to prioritize projects and products? Did you have one tool for everything? Or do you have different tools for cost reduction and revenue producing projects? Do you have a tool for prioritizing IT projects and a tool for marketing projects? How do you allocate funds among marketing, IT, finance, product, R&D activities? These questions need to be addressed by all executive teams. And the good thing about business is that the answers will differ among different companies and in different industries. And those different answers and execution of the plan will make some companies high fliers and others also-rans.

If you need some help in developing these types of analyses, please contact me.

David Friedman