‘Protect Strategic Expenditures’ say Robert Kaplan and David Norton

Yes of course it’s foolish to kill efforts and investments that are important to medium- to long-term performance, assuming you can survive in the meantime! But during good times, many organisations raced after all kinds of exciting opportunities like children grabbing more sweets than they can eat. Two widespread problems:

1. They could never take all those opportunities, because none ever got the full effort and investment needed. Better in the words of Steve Covey to ‘land one plane at a time’ and build a strong position before shifting effort to the next. Not doing so means many organisations now have a load of half-baked initiatives, most of which never should have started and never will be finished – our old friend ‘initiative overload’.
2. The optimism of good times means many ‘strategic’ investments never were as attractive as they seemed. Even if they might have made sense in strong market conditions, they are now dogs – and someone should have asked about that possibility in the first place.

  So … the reality is that many ‘strategic investments’ should be killed [and should never have started]. Often, a better term for these is ‘CEO’s pet projects’. In the project described in my strategic recovery post, much of the trouble had been caused by just such a pampered pet, and the CEO eventually came to see it had to be put down. Meanwhile, an important IT investment to radically improve processing accuracy and cut costs was about to be cut, but we got it reprieved.

Alibaba.com started in 1998, offering  eBay-like trading services to smaller Chinese firms who wanted to grow business globally but found existing options too expensive. In spite of the apparent potential from serving either consumers or larger firms, Alibaba maintained this focus on SMEs, and limited itself at first to simply connecting buyers and sellers. Having initially not charged for the service the company started selling advertising space and research reports to users in 2000, but revenues were still just $1million. It started charging for its core service in 2001, but its well-known quality kept membership climbing, passing 1 million in 2002.
From this focused start, however, the company was able easily to extend its activities in several directions, first establishing a within-China service in the local language, but then making a major thrust to develop business-to-consumer (B2C) and consumer-to-consumer (C2C) services, taking eBay head-on. By 2007 the group was serving 24 million users and had effectively sealed victory over eBay, who exited the market.