A controversial principle in annual planning
“You only have room to pull two levers that can propel your business forward. ”
It’s that time of year again – annual planning. A time when leadership teams are under a ton of pressure from all sides to consider everything as a priority. This is why there are a lot of planning frameworks and best practices that help us take the numerous and competing priorities facing us and hammer them into a plan that we can present. I think they are mostly all fine save for a critical missing principle:
We understand how to prioritize and even what to prioritize. But it is not clear how much can we really prioritize.
Without establishing a principle that tells us how much to prioritize, even a great planning process will produce a mere balancing act of compromises. Compromises that will yield compromised results. In other words, a lost year characterized by a volume of activity and no clear bankable progress.
How much can you really prioritize?
My experience with growth stage SaaS companies has taught me a difficult truth: in the end, there is only room for two overarching priorities:
1. The one Existing Thing you will continue to invest in.
2. The one New Thing you must invest in.
Yep, it sounds crazy to say you will only invest in two major areas next year, but I think a CEO who manages to hold the line on establishing only these two overarching priorities has the best chance of executing the year optimally. Of course, the annual plan must clearly maintain the operational imperatives of the business: quality, sales, service etc. and table stakes like people, culture and talent. But after dealing with these items, there is realistically only room to throw efforts behind two big things. Think of them as the two best levers you can pull to drive the business forward.
This limit, surprisingly, is not a question of resources or capital. It is a question of the cadence of the business. Most big things take a quarter to plan, a quarter to execute, a quarter to measure initial impact and then a quarter to optimize and make real. That is the year.
The thing about things
New Things – new products, new approaches, new systems, new anything are harder because ... well, they are new. Examples of new things are: launching a self-provisioned version of your product to lower customer acquisition costs, overhauling the ideal customer profile to reduce sales cycle time, acquiring an asset or company etc. These are all consuming, multi- disciplinary endeavours. They don’t typically generate return in the first year so impact is hard to measure. And they will never generate return if the execution in year-one is not extremely solid. So in an environment where everyone needs to see results yesterday, New Things is dangerous work. At the same time, it’s the kind of work that great companies are built on.
Investing more in an Existing Thing is comparatively easier and should generate tangible returns faster. Examples of existing things are: scaling your sales team, expanding your API, expanding the partner channels, etc. These are lower risk ways to drive growth. Your teams have a frame of reference for the work and it’s not as controversial or emotionally taxing as New Things. So investing in an Existing Thing is a critical addition to any annual plan. Perhaps you can fill a plan investing only in existing things, but if your imperative is to grow, you need to do both; and that will likely limit you to one of each.
Don’t run a great process only to lose the year
As I stated at the outset, leaders are under great pressure from both above and below to prioritize multiple things. As a result, even the best run planning process will yield between five and ten top level priorities. None of your stakeholders, including your board are likely to champion the idea of moving forward with only two. Everyone wants the company to somehow execute on multiple fronts simultaneously. Some businesses can pull this off. But for most, I argue that more than two main priorities will translate into unfocused, compromised execution of everything. Compromised execution will lead to demoralized teams, unhappy investors, and needlessly frustrated senior staff. It comes down to the CEO to drive this critical principle and take the heat for it, up front and for everyone’s sake. It’s planning season; don’t lose the year before it even starts.
