Over the past few months, one common thought has kept bouncing around my head as I interact with people and businesses: “Wow, they’ve really optimized for the wrong thing.”
Every decision represents a trade-off. Make one thing simpler and at least one thing gets harder. Optimize for one type of event and other types will get harder, or more awkward or more burdensome or, or, or…
- Going to a movie? The theater you’re going to is likely built around revenue per occupant. They put seats way too close to the screen, play ads for 20 minutes before the show disguised as “sneak peeks”, and charge $20 for popcorn and water. How would it change if the theater focused on customer experience?
- Need a taxi from the airport? I hope you like lining up with many others, packing around a ton of cash and then riding in a car that has been ill cared for and has a stench from someone having drunk too much last New Year’s Eve. Uber and Lyft have capitalized on the aging and broken business model.
I could go on, and on, and on, and I’m sure you could as well.
But the scenario that’s most interesting right now is the upcoming cash grab for many organizations where their fiscal year aligns to the calendar year. What is this cash grab? You guessed it, budgeting season.
Teams everywhere will be trying to create budgets for fiscal year 2017. They will define projects, articulate value, capture returns and otherwise create works of fiction about the value that will be returned for the investment of the enterprise.
Let me focus on the part of the budget around projects, or the discretionary dollars.
This “system” is optimized for demand gathering, scrubbing, arguing, prioritization, more scrubbing, more arguing, editorialization, even more scrubbing, arguing at executive levels, false compromise, final approval, and finally abandonment in the next year, when all of those ideas are no longer important.
How do I know? Because I’ve lived this system for two decades from within Information Technology departments. Every 3rd and 4th quarter of the year sees a team of individuals go round-up the “asks” and then we spend 2–4 months sharpening pencils to a point where everything fits. Then in January, divergence starts…
So what if organizations did something different? What if the executives created a clear set of outcomes (e.g., increase revenue, decrease customer churn, etc.), then defined milestones that measured those outcomes (e.g., Achieve $10M in top-line revenue by end of FY2017, etc.) and then asked their subordinates to do the same thing at a layer deeper?
As you traverse that layer cake, each leader can define projects that fundamentally achieve specific milestones. But the trick is defining and agreeing the outcomes and milestones before talking about projects.
Why? This helps optimize the process for overall executive alignment first and foremost and then giving leaders a budget to achieve specific objectives.
Define an objective, align it to an enterprise outcome, build a project around it. Rinse and repeat.
While it’s not perfect, this is a sure improvement over the current system.
When everyone knows what the end looks like, moving in that direction is so much easier. But this will challenge organizations to say what they mean and mean what they say — especially organizations that value transparency.