Is Your Strategy OnTarget? Step 4 of 10: Quantify the Investment Required and the Return Expected

Success means different things to different people; therefore, with business initiatives, it is critical to clearly articulate expectations in terms of the return that is expected and the investment that is required. Desired Business Outcomes must be communicated in a crisp, clear and compelling manner; only then, can you align your efforts to achieving it.

Have you taken the time to really think about the investment that is required to achieve success as you have defined it? This investment can be greater than just time, money and effort… it can also include things like opportunity costs and your professional reputation. As a business leader who is working to protect and grow your organization in very competitive times, it is extremely important to identify and stay focused on the things that matter.  This article will focus on some of the tools that are available for doing just that.

One of the best examples I have for this subject takes me back to the late 1990s when I first graduated from Business School. I was blessed to land a job with The Coca-Cola Company (Ticker Symbol: KO) and my work there still influences many of the fundamental things I practice today. Let me tell you a little about my role at KO. I worked in the North Avenue Tower which is located in downtown Atlanta in the Coca-Cola Building where I served in a liaison role between IT and the Finance Function. I worked as an internal consultant supporting Treasury, Tax, Coca-Cola Financial Corporation, Investor Relation and the Credit Union. My job was to work with the division leaders on what Coca-Cola called “Destination Planning” and the delivery of strategic IT initiatives. So, what is Destination Planning? Let me answer it this way… Lewis Carroll frames up this topic best by saying, “If you don’t know where you are going, any road will get you there.”  Well, the folks at Coca-Cola know exactly where they are going, and they express it this way on their website:

Our mission, vision and values outline who we are, what we seek to achieve, and how we want to achieve it. They provide a clear direction for our Company and help ensure that we are all working toward the same goals.

Our Mission

Our mission declares our purpose as a company. It serves as the standard against which we weigh our actions and decisions. It is the foundation of our Manifesto.

• To refresh the world in body, mind and spirit.
• To inspire moments of optimism through our brands and our actions.
• To create value and make a difference everywhere we engage.

Our Vision

Our vision guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable growth.

• People: Being a great place to work where people are inspired to be the best they can be.
• Portfolio: Bringing to the world a portfolio of quality beverage brands that anticipate and satisfy people's desires and needs.
• Partners: Nurturing a winning network of customers and suppliers, together we create mutual, enduring value.
• Planet: Being a responsible citizen that makes a difference by helping build and support sustainable communities.
• Profit: Maximizing long-term return to shareowners while being mindful of our overall responsibilities.

Our Values

Our values serve as a compass for our actions and describe how we behave in the world.

• Leadership: The courage to shape a better future
• Collaboration: Leverage collective genius
• Integrity: Be real
• Accountability: If it is to be, it's up to me
• Passion: Committed in heart and mind
• Diversity: As inclusive as our brands
• Quality: What we do, we do well

In summary, Coca-Cola’s success is not by accident… they are very intentional about where they are going and how they are going to get there. Because of this clarity, the leaders are able to do a better job in supporting their managers and holding them accountable for achieving and sustaining results. This, in a nutshell, is Destination Planning. 

Let me tell you a little more about how this looked in practice when I was there years ago… on an annual basis we would review our 5-year plans, department by department, with the goal of aligning our efforts and resources to the company’s manifesto for growth. At the time, there were two focus areas in this annual cycle, Baseline Planning (which are the ongoing activities to keep the business running) and Discretionary Planning (which consists of evaluating and approving capital projects). My focus was on the latter and I am going to share some of the principles we followed.     

Before any capital project gets funded at KO, there must be a business case of some sort that clearly outlines the investment required and the return expected for a given project. The projects are then prioritized according to a few guiding questions, including but not limited to the following:

• Does the capital project enable the strategy?
• Does it add economic value?
• Is it a regulatory requirement for our business?
• What are the impacts if the project is not done?

As you can imagine, there are some politics that come into play and in many cases project approval goes to the executives that make the best business case for their projects. It is a healthy system that varies slightly from year to year, but the core thinking seems to survive. Without sharing any sensitive information, I want to include a generic business case template that can be used for evaluating the investment required and the return expected for a given initiative.  

Sample Business Case

• Executive Summary: Provide a concise description of business case objectives, plans and your recommendations.  
• Background: What specific problem are we solving and/or what opportunity are we working to capitalize on with this business case?
• Strategy: How does this business case support the strategic growth agenda?
• Unique Circumstances: What unique circumstances, issues, opportunities exist with the plan, such as environmental or regulatory considerations? 
• Expected Benefits: What are the strategic and economic benefits of the plan?
• Investment Required: What are the costs associated with delivering this initiative? Include a 5-year pro-forma analysis including NPV for project comparison.
• Risks:  What specific risks are involved with the plan and how is this risk mitigated?
• Scenarios: Provide clear differentiated strategic, operational and economic options to consider.
• Most aggressive: Boldest vision / plan. How big could this idea / plan be going forward?
• Most conservative: Most practical plan which is easiest to execute with speed and low risks.
• Next Steps / Timing: What are specific next steps, including required approvals? What is timetable? When does a decision need to be made?
• Accountabilities: Who is the person responsible for successful execution of the plan with what resources (business and functional team members)?

Once the business cases are compiled for the various initiatives being considered by the division leaders, the key executive (usually the CFO) leading this effort pulls the leaders into a room to make their case for approval. Scarce resources are then allocated accordingly, projects are funded, and then plans get pushed down to the delivery teams for execution. It is not as easy as it sounds, but that is the basic process and, the principals are somewhat universal.

In summary, it is important to plan your work and work your plan. Understanding exactly where you are going and quantifying the exact investment that is required to get there will dramatically improve your chances of success. The real benefit of having this type of approach is that it removes a great deal of uncertainty by clarifying things on the front end. 

Document your desired outcomes, quantify the investment required and remember, things that get measured get done.

About the Author:

Bill Price is the Founder and CEO of www.TheOnTargetCo.com. He is an expert in Strategic Transformation and can be reached at: [email protected] or 678.923.6068.