(0:00) If you can't be super clear on the problem you're trying to solve, and if that problem isn't a major constraint in the organization, maybe that goal isn't worth pursuing. (0:10) Welcome to Business Strategy, where we talk about how to craft winning strategies, how to implement them, and build highly profitable and iconic companies along the way. I hope you enjoy and subscribe.

(0:22) Goals, schmoles, who needs them? Well, you'll need them if you're a business leader and you want to benefit from higher profits and cash flow. (0:30) But there's the right way to approach strategy and goal setting, and then there's the wrong way. And I've done both. (0:36) So today I'm going to walk you through the five steps that I take when setting strategic goals in an organization. My name is Steve Coughran. (0:43) I'm the founder of Coltivar.

(0:45) I've spent the last 15 years of my life turning around and growing organizations by following these five steps to goal setting, and it's made all the difference in the world. (0:54) You can apply these principles in your business right now, immediately, and realize a greater upside. So let's go ahead and jump in. (1:01) Number one, when it comes to setting goals, you have to identify a problem. And this is where a lot of organizations go astray because they believe it's the end of the year.

(1:11) So they should have some type of goal, especially for the upcoming year, or they should have a series of goals. (1:16) And if they don't have these goals, they feel kind of weird. So they just come up with some goals, or they come up with a laundry list of things to do in the following year. (1:24) Now, this is a big problem. I was talking with an executive years ago, and he was telling me about their approach to strategy, right? (1:30) No shame, no harm, no foul if this is what you do.

(1:33) But this organization would get their team together once a year for a strategic offsite. They'd rent out this auditorium, (1:40) and then they would come up with a laundry list of things they were going to do in the following year for each function, for each department, and for each business unit. (1:49) And guess what? They came up with over 80 items on the list to do in the following year. Talk about a scattered focus.

(1:56) And guess what? The business struggled. They didn't focus on the right things, and then, therefore, they ended up talking to us because they needed help with their turnaround. (2:05) So don't let this happen to you. When it comes to setting strategic goals in your organization, the number one thing you need to start with is defining the problem you're trying to solve with your goals.

(2:16) At Coltivar, we call this the strategic problem for the number one obstacle that stands in the way of your company achieving its potential and driving greater growth. (2:27) So that's the first step: identify your strategic problem, the number one obstacle, the number one constraint that's holding your organization back. (2:35) Now, we believe in the theory of constraints at Coltivar, and we use this to turn around and grow companies.

(2:41) In other words, every organization has constraints, and they will only grow up to that constraint. They'll bump up against it until they fix it. (2:49) And then once they fix it, guess what? Another constraint will pop up. And if the organization is focusing on solving constraints, then they're going to grow a lot faster and be way more profitable than their counterparts, right?

(3:02) So that's step number one: define the problem that the goal is trying to solve. (3:08) And this follows the scientific method. That's why I like science when it comes to setting goals rather than business. (3:14) Because there are a ton of business books out there, podcasts, and YouTube videos that say pretty much the same thing but lead business leaders astray.

(3:23) Instead, I like to follow the scientific method where you start with a problem, create a hypothesis on how to solve the problem, and then go out there and run experiments. (3:33) Once you run the experiments, you make adjustments, and you repeat this process over and over again. (3:39) This is what I'm going to lead into with the next three steps. And then at the end, I'm going to reveal the number one thing, the most important thing you can do to achieve your biggest goals. So stay tuned.

(3:49) All right, so number two, once you have your problem defined, it's time to get into clarifying the initiative that you're going to pursue. (3:56) Now, initiatives do four things when it comes to strategy. (3:59) Number one, they help you to overcome your strategic problem. (4:02) That's what we're talking about right now. Number two, they help you to enhance the customer experience.

(4:06) Number three, they help to foster innovation. And number four, they help to build competitive advantages. (4:12) Now, if you are running your business, right? And if you have a strategy, and if you have initiatives defined, or maybe you call them objectives or priorities, (4:19) if they don't do one of those four things, perhaps you're focusing on the wrong thing.

(4:26) So that goes back to number one. Like when it comes to setting a goal, if you can't be super clear on the problem you're trying to solve, and if that problem isn't a major constraint in the organization, (4:36) maybe that goal isn't worth pursuing. So oftentimes when I'm working with leaders, I help them to reduce the number of goals that they have on their plate because they're often all over the place.

(4:48) So when it comes to initiatives, I recommend having no more than five. Usually, the best rule of thumb is to pursue only one to three initiatives at a time. (4:57) Because the more initiatives you pursue, the more spread out you're going to be, and you won't have the focus that's required to really push that initiative forward.

(5:06) So you define an initiative that will help you to overcome your strategic problem. (5:11) I'm going to give you examples for all of these here in just one minute. So that's step number two. (5:15) Number three, you move on to defining the actions that you will take in order to push the initiative forward.

(5:23) And then if you push that initiative forward, guess what? You're going to solve the problem. (5:27) So the actions are the baby steps that you will take to advance the initiative. (5:30) In other words, it's the input that goes into advancing the goal.

(5:34) So I'm going to give you some examples of good actions and bad actions, but this is probably one of the bigger issues that I see leaders struggling with. (5:45) Because we as type A entrepreneurs, at least I can speak for myself, I'm all about just getting stuff done. (5:52) I'm very ambitious. And oftentimes I just like to grind.

(5:56) So there's this temptation to just add things and add things and add things to my plate. (6:02) And I find this is true with my clients. When I look at their strategy and drill down into their actions, I find that they're pursuing too many actions. (6:08) Especially actions that aren't really going to move the needle.

(6:15) So when I evaluate actions, I often ask, what is the size of the prize? (6:21) In other words, if you are successful at accomplishing this one action, what's the output? (6:27) Which leads into number four.

(6:30) Number four is the output or the result. So when you're pursuing the actions in step number three, you also have to ask yourself, what is the desired output? (6:38) If those actions are successfully completed. So this goes back to the scientific method.

(6:44) Let me just pause here real quick on part number four. Your actions are your hypotheses for how you believe you can best advance your initiatives, right? (6:54) And remember those initiatives do those four things to solve the problem, right? So that's where the scientific method comes in.

(7:01) So you have your problem, and then you have your hypotheses. Those are your actions. Those are the baby steps you believe will have the greatest impact on advancing those initiatives. (7:12) And then the key result, the output, is what comes after you run your experiments.

(7:17) So I refer to steps two, three, and four at Coltivar as IARs: initiatives, actions, and results, right? (7:24) Those are the components of setting strategic goals, but we're not done yet because number five is most critical.

(7:32) Now, there's a phrase out there that is: what gets measured gets managed. (7:36) So in business, just by measuring performance, performance will naturally improve. That's why it's so important to have key performance indicators, key results, and success measures across your organization. (7:47) KPIs, key performance indicators, sit at the top of the organization.

(7:53) Next, you have key results. Those help you to measure the effectiveness of your actions in advancing the initiative. (8:00) And then success measures sit at the bottom of the organization where every single employee understands exactly what does success look like in their role.

(8:09) So number five, in order for a goal to be successful, you have to measure it. And you have to have some mechanism to measure it, that key result. (8:18) At Coltivar, we have this platform that we use that ties everything together. This is where a company can have their strategy, their strategy dashboard, their blueprint right there in front of them, next to their KPIs, next to their success measures, next to their IARs, all in one spot. (8:34) That's our tech platform.

(8:38) Now, if you are not a client of Coltivar, that's okay. You can also track things through Excel, Microsoft BI, or Domo, or a variety of other data analytic platforms. (8:47) Just make it a habit where you're looking at your numbers in a visualized way so you can take action on whatever you're measuring, okay? (8:55) Because I've seen organizations, and they have these beautiful KPI dashboards. They look at them and then they're like, "Hmm, okay, that's interesting."

(9:02) But they don't do anything about them. So that's the key, is that you have to have a mechanism to bring all this together and then you have to make adjustments along the way, okay? (9:13) So that comes through measuring.

(9:15) So those are the five steps that I take. Number one, I get super clear on the problem. (9:17) Number two, I define an initiative that will help me to overcome that problem. (9:22) Then I define the baby steps, the actions.

(9:25) And then the key result, that's number four. (9:27) And then number five, I make adjustments by measuring all this stuff on one singular platform. (9:31) This has made all the difference in the world, just having this system.

(9:37) It's all about having a system to build, measure, learn, and adjust. That's the whole system. (9:42) All right, so let me give you an example of how this plays out in the real world.

(9:47) Let's say a company is struggling with declining revenue. Churn is high because customers prefer competitors over the company. (9:55) So that's the problem that they're trying to solve. So therefore, you can see it's very valuable to have strategic goals to overcome this problem. If not, it's just going to persist. (10:03) It's going to be a constraint to the business or it will put the business into bankruptcy.

(10:07) We don't want that. All right, so that's the problem. Number two is we have to define an initiative. (10:13) Initiative is long-term in nature. Usually, they take about three to five years to complete. (10:18) They're very broad for a reason because, remember, they're intended to solve those four things that we talked about before.

(10:24) Okay, so this company has defined its initiative as it will reinvent its customer experience to surprise and delight customers moving forward. (10:31) All right, so its entire operating model will eliminate friction along the way, and it will deliver a personalized and unique customer experience to the end user. (10:40) And that's how they're going to reverse their customer churn.

(10:44) So as you can see, you define a problem. Then you have your initiative to help you to overcome your problem. (10:52) And then you'll move on to step number three, where you'll hypothesize the best actions to take in order to advance that initiative forward.

(11:01) All right, so for this company, they've identified three actions. Number one, they're going to create a bonus offer to give away anytime they sell their products and services. (11:09) So they're going to give this bonus to their customers when they close the deal. (11:14) Number two, they're going to redo their website.

(11:17) And number three, they're going to invest in a better CRM system, a customer relationship management system, so they can start tracking data and delivering a more personalized experience to the end user. (11:27) Let's come back to these three actions because I want to move on to step four and give you the example of the key result.

(11:39) All right, so the result that the company defined, the output based on their inputs, is to reduce churn from 25% down to 15% in six months. (11:49) So see how that result is quantifiable and has a timeline. Those are two important ingredients in step number four.

(12:02) And then number five, we get into adjustments, which brings us back into evaluating those actions in step three. (12:08) All right, so let's imagine the company goes and executes those actions. Remember the first action was the bonus offer.

(12:13) So they create this bonus offer. They roll it out, and guess what? They're measuring churn, and churn goes from 25% to 25%. (12:24) Dang it, it didn't move the needle. Okay, that's fine. So let's move on to action number two, which is redoing the website.

(12:31) So the company redoes the website. They eliminate friction. They make it so much easier for customers to do business. (12:38) They can access their quotes, check on their orders, and they get a nice little icon of a truck that shows them when their delivery is going to happen.

(12:46) All of these things combined on the website drive a better customer experience, and churn drops from 25% down to 22%. (12:54) Okay, that's a small win, but every incremental win will get the company to where they need to go. (13:00) And then the last action is investing in the CRM.

(13:04) So let's just imagine that the company successfully invested in the CRM and they're starting to use data from that CRM to deliver a more personalized experience. (13:14) And as they do that, guess what? Churn drops even further from 22% down to 17%. (13:20) Okay, they're almost there, but those actions are working.

(13:24) And then the company from here can just build, measure, learn, and adjust. So they hypothesize, what can we do next to drop churn even lower, down to 15% or beyond, right? (13:35) So that's how this whole process works.

(13:37) Those are the five steps. I'm going to run through them one more time for you, and then we'll be done. (13:41) So number one, define the problem. If a goal doesn't have a clearly stated problem, maybe it's not worth pursuing.

(13:48) Number two, define an initiative. An initiative helps to do four things: overcome the strategic problem, enhance the customer experience, foster innovation, and build competitive advantages. (14:02) Okay, so that's step number two, define the initiative.

(14:04) Then I move on to step number three, where I get really clear on the action steps to be taken in order to advance the initiative. (14:11) Remember, these are the hypotheses of what I believe will deliver the greatest impact and advance that initiative forward.

(14:19) Then we move on to step number four, where we define the result. This is the output that we desire from the inputs, from the actions. (14:26) Then lastly, step number five, we make adjustments along the way because we are measuring progress and monitoring the strategy all in one place.

(14:36) These are the five steps that I take over and over again to turn around and grow companies, and you can do the exact same thing in your organization. (14:43) I promise you, it'll make all the difference in the world. If you need help with this or want to talk about strategy for your business, I'm always open to connecting.

(14:51) You can find me at Coltivar.com. If you found value in this, please be sure to share. (14:57) And until next time, take care of yourself. Cheers.