Opportunity Valuation Gives Direction to Strategic Planning
In corporate strategic planning and, let’s face it, in life itself we
have to choose our battles. As much as we try to stretch our limited
resources, the fact remains that they’re still limited. In our strategic planning approach,
we call the process of choosing our battles “opportunity valuation.”
And by the way, choosing our battles isn’t a negative; it merely refers
to the fact that we must select the opportunities (targeted outcomes)
that will earn our limited energy and resources. In our proprietary
planning process, known as Plan4SM, opportunity valuation
combats the behavior of many organizations that bite off more than they
can chew and suffer for it. Opportunity valuation provides a structure
for measuring the relative value of potential outcomes so the
organization can move forward with confidence and realism.
How do we measure the value of our strategic opportunities?
In Plan4, opportunity valuation is accomplished using proprietary mathematical models designed to correctly and objectively calculate the value of each identified opportunity. The mathematical model selected for the organization is matched to the organization’s cultural aspect.
One simple mathematical technique is to use Relative Valuation (RV). RV places all potential outcomes on level playing field to select the ones to go into the corporate strategic plan. RV looks at two simple but important variables:
Importance (I) – On a scale of 1-10, what is the importance of the key outcome to the organization?
Satisfaction (S) – On a scale of 1-10, what is the organization’s satisfaction level with the current situation?
The formula for determining relative value is:
RV = (I X 2) – S
Once you calculate the RV for each considered outcome (i.e. expanding abroad, investing in R&D, or any number of other potential strategic objectives), the opportunities can be ranked to determine the highest opportunities relative to one another.
There are many other mathematical formulas along the lines of RV, and some much more complex, which can help organizations accomplish opportunity valuation. It is important to note is that opportunity valuation feeds right into the next step in our strategic planning process. This next step is referred to as, “Priority and Justification” and refers to the process of actually selecting among the potential outcomes.
Read about priority and justification in our next blog post.
Read about the Plan4 strategic planning process here.
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Learn More Does this leave you curious about Method Frameworks and the effectiveness of your own planning process? Plan4SM is our proprietary business planning process that involves an integrated set of actions designed to help companies gain sustainable advantage. Download our brochure to learn more about Method Frameworks and our services or download our Plan4 Planning Process Overview.
You can contact Method Frameworks at 877-317-5264 (877-31PLAN4) or follow this link to request a meeting with a planning consultant. Check our articles and blog often at www.methodframeworks.com to get many more planning tips and information about our Plan4 process.