The strategic priorities checklist

Strategy basically refers to the a plan of action designed to achieve a long-term or overall aim. Strategy is inherently complex. We see this in the thick reports and complex frameworks that companies use to describe their strategic choices and how they connect with one another. Describing a strategy favors complexity, but executing it requires simplicity. To influence day-to-day activities, strategies need to be simple enough for leaders at every level of the organization to understand, communicate, and remember — a strategy that gathers dust on a shelf is nothing more than an expensive bookend. A strategy for execution must provide concrete guidance while leaving managers with enough flexibility to seize novel opportunities, mitigate unexpected risks, and adapt to local conditions. The act of codifying past choices into an explicit strategy, moreover, reinforces historical commitments and locks a company into inertia. Complex strategies, particularly those that include detailed plans, tend to be long on guidance but short on flexibility.

Strategic Priorities are the values that enable the organization to achieve its goals. Strategic Priorities will enhance the competitiveness of the company. Smart leaders understand that their job requires them to identify trade-offs, choosing what not to do as much as what to do. Strategic priorities should be forward-looking and action-oriented and should focus attention on the handful of choices that matter most to the organization’s success over the next few years.The following objectives will help you craft strategic priorities that will be effective in setting a shared strategic agenda for your organization:

1. Limit the number of priorities to a handful. Restricting the number of strategic priorities to three to five has several advantages. Most obviously, having a small number will be easier to understand, communicate throughout the organization, and remember. Rather than overwhelming employees with the full set of all choices and interdependencies that make up a company’s strategy, communicating a few strategic priorities can focus attention, effort, and resources on the things that matter most now. The best priorities serve as strategic guardrails. If they know the parameters they must work within, managers and employees can fill in the blanks based on their local knowledge and circumstances.

Having too many priorities is a mistake, but having too few can be a problem as well. One wholesale energy company we studied declared a single strategic priority: to manage risk and preserve value. This was a worthy goal, to be sure, but one that was far too abstract to provide useful guidance to employees. A single priority in isolation is rarely enough to drive a strategy that requires multiple initiatives to work together.

2. Focus on mid-term objectives. Strategic priorities act as a bridge between long-term aspirations — embodied in a vision or mission — and annual or quarterly objectives. The types of initiatives that have the biggest impact (for example, building data analytics capabilities, integrating online and physical stores, or entering a new market) typically take a few years. Of course, there are exceptions: A financial turnaround, for example, would require an immediate focus on short-term cash generation and debt reduction. But in general, we’ve found a good rule of thumb is “three to five in three to five” — three to five strategic priorities that can be accomplished in three to five years.

Once you’ve set mid-term priorities, it’s important to stick to them. When a team announces five-year priorities and changes them a year later, employees dismiss those objectives (and their successors) as the “flavor of the month” that they can safely ignore. British fashion retailer Burberry Group plc offers a good example of staying the course. When Angela Ahrendts (in the above image) joined Burberry as CEO in 2006, she announced five strategic priorities (including intensifying non-apparel sales, accelerating retail-led growth, and investing in underpenetrated markets) and selected quantitative metrics for each. Ahrendts stuck with the priorities for seven years, updating employees and investors regularly on progress against each goal, which reinforced the message and the company’s commitment to achieving those objectives. During this period, Burberry’s share price handily outperformed competitors and the broader market.

3. Pull toward the future. Strategy should guide how a company will create and capture value going forward, rather than codifying how it made money in the past. In dynamic markets, ongoing success typically requires innovation and change. The things that position a company for the future — for example, entering unfamiliar markets, building innovative business models, or developing new capabilities — differ from business as usual. Both are critical, but they often pull in opposite directions.

Maintaining a healthy balance between the status quo and innovation is hard work. Well-oiled capabilities, established resources, organizational structure, metrics, and rewards favor a company’s legacy business, and employees will naturally default to activities that are familiar, straightforward, and produce predictable results. Keeping the trains running in the core business is necessary for success, but these routine activities will usually take care of themselves without having to be prioritized at the corporate level. Innovation and change, by contrast, require ongoing attention. New activities are difficult, frustrating, uncertain, and require sustained effort and monitoring to be successful. This is where strategic prioritization can help. Prioritizing forward-looking initiatives can tip the scales in favor of the activities that can ensure future vitality but are most likely to fail without sustained effort.

Striking the right balance between sustaining a legacy business and building for the future requires judgment — there is no cookie-cutter template for getting it right. To gauge whether things are in balance, we suggest leaders look at the mix of priorities in terms of those that support and refine the current business model (for example, cost reduction, operational excellence, serving current customers, extending existing products) versus the objectives that take the company in a new direction (for example, entering new markets, building digital capability, non-incremental innovation). Leaders can also ask how different the business would look in three to five years if they were to achieve all their objectives. No mix of priorities is right for every company, but we have found that leadership teams that don’t examine their strategic priorities tend to overweigh business as usual.

4. Make the hard calls. Apple Inc. CEO Steve Jobs often stood at a whiteboard during strategy retreats and personally led discussions among the company's top 100 leaders to set strategic priorities. The assembled team would generate a long list of possibilities and after much wrangling and discussion, they would whittle them down to a rank-ordered list of 10, at which point Jobs would strike out the bottom seven to ensure the company focused on the most critical priorities.

In organizations of any size, there will be dozens or hundreds of competing and often conflicting priorities. The discipline of honing priorities down to a handful can force a leadership team to surface, discuss, and ultimately make a call on the most consequential trade-offs the company faces in the next few years. When executives make the hard calls and communicate them through the ranks, they provide clear guidance on the contentious issues likely to arise when executing strategy. But making trade-offs among competing priorities is difficult — they are dubbed “tough calls” for a reason. Prioritizing different objectives results in “winners” and “losers” in terms of visibility, resources, and corporate support. Many leadership teams go to great lengths to avoid conflict, and as a result end up producing toothless strategic priorities.

5. Address critical vulnerabilities. Even when you recognize the importance of making the hard calls, it’s often difficult to know where to focus. Strategy is inherently complex and the sheer number of possible objectives can overwhelm teams. So how can executives move from a complex strategy to a handful of strategic priorities?

A key insight comes from military strategists, who have long acknowledged the complexity of armed conflict. Military planners often visualize the field of operations as a complex system of enemies, allies, infrastructure, popular support, and other features that collectively influence who wins and who loses a war. They then hone in on the so-called “centers of gravity” — the parts of the system that are both critical to the enemy’s success and most vulnerable to attack. Business leaders can deploy a similar approach by identifying the “critical vulnerabilities,” the elements of their own strategy that are most important for success and most likely to fail in execution. In for-profit organizations, pinpointing the most important actions means thinking through — and, ideally, quantifying — how the objective would help create and capture economic value. How much would a potential priority increase customers’ willingness to pay? How much would it decrease costs to serve target customers? How much would a priority deter new entrants or competitors by building a moat around the fortress? What new revenue streams would a proposed objective open up?

Some elements of a company’s strategy — for example, a well-known brand or well-honed capabilities — will be critical to success but may not require sustained attention or investment. While important, these may not be priorities. Instead, companies should prioritize initiatives or activities that are at the greatest risk of failure without the sustained focus and investment support that strategic priorities can provide. When identifying critical vulnerabilities, it’s important to look at both the elements of strategy that are at risk due to external factors (such as shifting customer preferences, disruptive technologies, or new entrants) and internal challenges (need for culture change, organizational complexity, or need to build new competencies).

6. Provide concrete guidance. A company’s strategic objectives should be tangible enough that leaders and employees throughout the organization can use them to prioritize their activities and investments (and also to help them decide what to stop doing). Unfortunately, many leadership teams agree on vague abstractions that everyone can get on board with, confident that the resulting platitudes will not constrain their options.

Many associate concrete guidance with financial targets. Revenue and profitability goals are indeed specific, but they quantify where management wants to end up without providing direction on how the company should get there. Using financial targets as strategic priorities, then, is the business equivalent of a coach telling the team what the final score should be without explaining how to beat their opponents. Rather than relying solely on financial targets, leaders should start with the key actions required to execute their strategy, and translate these into metrics that provide concrete guidance on what success would look like. By tracking progress against metrics, leaders can maintain a sense of urgency over the months or years required to achieve the goal, identify what’s not working to make midcourse corrections, and communicate progress along the way — even before financial results are in — to keep key stakeholders on board.

Top executives can quickly assess whether their strategic priorities are sufficiently concrete by asking middle managers what they would stop doing based on the priorities. The answers will quickly expose fuzzy objectives. Leaders can also test concreteness by taking each strategic priority, stripping it of flowery prose and buzzwords, and seeing what’s left. For example, once you remove the marketing spin and buzzwords from a statement like “we put muscle behind innovation, making a step change in the pace of commercialization,” there’s not much substance left.

7. Align the top team. Unfortunately, lack of agreement on company objectives is fairly common among top teams. Executing strategy often requires different parts of the company to work together in new ways (such as when a company moves from selling stand-alone products to integrated solutions or when a retailer blends online and retail sales). Strategic priorities should reinforce one another to ensure the different parts of the company are moving in tandem. At a minimum, the priorities shouldn’t conflict with one another or pull the organization in opposing directions. The best strategic priorities hang together and tell a coherent story about how the company as a whole will create value in the future. They should also provide guidance on how to adjudicate the conflicts that will inevitably arise as different parts of the organization try to execute the strategy in the trenches.

Strategic priorities should lay out what matters for the company as a whole to win and should reflect the interdependencies among the choices. If senior executives pursue goals that aren’t aligned with one another, the disagreements will filter down the silos, and the various teams will work at cross-purposes. Management teams sometimes diverge because each function wants to promote its own pet objective: Human resources might want to say something about “world-class talent,” for example, while finance might want to highlight how the company delivers “industry-leading shareholder returns.” Rarely is anyone considering the trade-offs among these objectives, their interdependencies, or whether meeting unit-level objectives will affect the company’s ability to succeed. These priorities can reinforce, rather than break down, organizational silos.

Executives rightly focus on how to craft a great strategy, but often pay less attention to how their strategy can be implemented throughout a complex organization. To steer activity in the right direction, a strategy should be translated into a handful of guardrails that provide a threshold level of guidance while leaving scope for adaptation as circumstances change. Strategic priorities are a common tool to drive execution, but in many cases these objectives are not as effective as they could be. By following a few guidelines, executives can articulate a strategy that can be communicated, understood, and executed.