A Better Way for Startups to Prioritize Their Projects
Startups that find a way to focus on the few things that matter are typically the ones that succeed. Time is the most scarce and costly resource in a young cash-constrained business, and the largest drain on it is doing unnecessary work. This is compounded by the fact that work without meaning also leads to significant declines in employee motivation, self-worth, and enthusiasm, which results in work quality and employee retention problems.
Why Prioritization is Difficult for Startups
Focus is a function of how well a company and its leadership is able to prioritize what they do, and more importantly what they will not do. But to have an effective prioritization process, companies need to have a clear understanding of what actions and results will have the biggest material impact on their business, customers, and vision.
Prioritization is especially crucial for startups, where employees are often asked to do more with less and where a heavy emphasis is placed on operating efficiently under tight resource constraints. Unfortunately, the need for effective prioritization doesn’t make achieving it any easier.
Most startups have an extremely hard time with prioritization. After all, they’re regularly presented with multiple priorities, and most of the time they lack the history and experience to know which initiatives will generate what results. To complicate things, since their agility is often their competitive advantage in the market, they typically face pressure to simply “move fast and break things,” making decisions with lots of uncertainty left unresolved.
That’s one thing if you have access to unlimited time and resources, otherwise, you need an intelligent way of determining what to focus on.
Given these dynamics, management teams need to think long and hard about what their vision, goals, and success means, and figure out what metric(s) they should use to gauge what should and should not be prioritized in their organizations.
— Robert Siegel, General Partner, XSeed Capital
How Management Teams Should Think About Project Prioritization
A proven framework for thinking about the question of prioritization is in terms of marginal impact as it relates to achieving key goals and fulfilling a vision. These measurements provide a relative measurement of comparison to evaluate initiatives and opportunities.
The most difficult part of this framework is identifying the key impact measurement(s) and what accuracy level is necessary to get confident about a decision.
It’s important not to create a bottleneck in the decision-making process and slow the company down. Finding the right balance of turnaround time, resource commitment, and accuracy is key to developing a sustainable prioritization process.
The last thing you want to do is go into analysis paralysis. Analysis should support decision-making not disable it!
OpenView Labs as a Case Study: Using Impact to Evaluate Projects
At OpenView, one of our core objectives is to help our portfolio execs build great companies. We help realize this vision by maximizing the impact we have on the portfolio. Consequently, one of our goals is to make sure we are taking on high-impact projects and initiatives.
Sometimes it is hard to decipher between projects and initiatives to determine which ones have the biggest potential of being high impact versus those that do not. This can be particularly difficult when evaluating bigger-picture research and strategy engagements where the goal is to help define long-term strategy or act on a longer term vision.
What we have learned is that being able to define success in terms of an outcome metric is a great proxy for how well-aligned a project is with the company’s vision and corporate goals.
In doing so, we also get a sense from the stakeholders what they see as the potential impact. That provides us with a good barometer to gauge one project versus another.
The OpenView Research & Analytics Team has started to track the impact of each project we take on, so, moving forward, we have will benchmarks we can use for estimating potential impact of future projects.
Having these types of conversations around what success really looks like will help you align your team around an end outcome. It’s also a necessary step to increase your ability to identify and prioritize high-impact projects vs. other work that could distract you.
Portfolio company X came to the Research & Analytics Team asking us to help them identify a target segment. The management team realized that their customers were not created equal and that the acquisition process and costs were very different. They knew taking advantage of their early mover advantage and picking up new logos as quickly as possible was key to their success.
Consequently, the two most important measures of impact for them were change in sales length and win rate. The company’s previous experience selling into the target segment provided a good idea of what the relative benefit of the strategy could be.
We defined the success metrics as follows:
To reach a prioritization score, we essentially take the potential impact of a project and divide it by the effort required to complete it. This provides a good sense of ROI that can be compared against other like projects.
Buyer Insights Research
Portfolio company Z came to the Research & Analytics Team asking us to research the needs of a senior IT buyer so that they could re-work their messaging.
The key stakeholder let us know that their conversion rates had really suffered with this buyer, and they expected a more targeted message would result in a 15% boost in opportunity conversion rates. This would indicate the potential impact of optimizing messaging with another segment, as well.
We defined the success metrics as follows:
We can then calculate ROI and compare it against other projects in relative terms.
Leveraging an impact framework when prioritizing initiatives and projects will ensure you are being objective in your decision. This is not to say that errors in priorities will not be made. That is far from the truth, but minimizing the biases present will lead to fewer prioritization mistakes.
Next week, I will share a list of the different metrics we think about using when measuring impact for Research & Analytics projects here at OpenView, plus tips for helping you develop a similar measurement process for your own company.
Photo by: Robert S. Donovan