How to decide if a business issue is worth solving

With finite resources and numerous problems to fix, organizations can become inefficient without clear direction. It’s the CEO’s job to provide that direction for the use of limited resources.

But with issues, opportunities, and initiatives popping up all the time, it’s not always easy to prioritize. Companies face issues in supply chain, marketing, product, quality, and entering new markets, to name a few. So how can a leader know which issues are most worth addressing?

As a business unit leader for Fortune 500 companies, I saw many scenarios where the leadership team needed to decide between competing priorities. Over time, I developed a series of questions to guide this decision-making—a rubric that I keep coming back to with my teams and with clients around the world.

These three revealing questions help clarify which business issues to address first and which aren’t worth the precious resources. While not a total replacement for a thorough analysis, they offer a framework leaders can use to compare and evaluate various issues and opportunities.

1. DOES ADDRESSING THE ISSUE ENABLE OUR STRATEGY?

To ensure leaders focus scarce resources on activities that help the business achieve its long-term goals, the first question to ask involves suitability. Does addressing the issue suit the company’s big-picture strategy? Or said another way, is the issue a direct obstacle to the larger business objectives?

Innovation projects are one area where the answers can get a bit murky. Many teams tend to take on just about any innovation project as a means to growth. But by using strategic considerations as criteria for screening and selecting projects, a team can be sure they only address issues that truly deliver against the strategic needs of the company.

Imagine that a food production company is currently unable to package its product for the consumer market. On the surface, this may seem like a business issue worth addressing. But if the company’s strategy is to focus on expanding in the food service market (e.g., via new food service channels or geographic markets), then chasing a new consumer packaging capability would be a waste of resources.

2. WHAT IS THE POTENTIAL IMPACT?

Once the leadership team has determined that addressing the issue enables the company’s strategy, they need to consider exactly how much progress it helps them achieve. Each business issue, once fixed or addressed, provides a positive business outcome—but how significant is the impact?

Perhaps the most obvious and traditional way to compare the impact of potential projects is to assign monetary values to different outcomes. By estimating these at the profit level, leaders can make sure they’re comparing different project types more accurately.

I once led a business unit strategy discussion inside of a large consumer goods company where I worked. The leadership team was debating whether to take one of our fast-growing brands into new expansion categories (as opportunity in the current category was diminishing) or to reduce costs by reformulating our core product. The human resources available were limited, so the business needed to focus its efforts.

On the surface, expanding into new domains is one of the most effective ways to drive incremental growth. However, our initial analysis showed that reformulating the product would have a significant impact on profit—more than the profit we would have generated by entering a highly competitive domain. We ultimately made reformulation our priority, saving expansion work for a future discussion.

3. HOW FEASIBLE IS IT TO SOLVE?

Feasibility can be judged in a few different ways—and that’s ok. Each project is different. Solving some issues may require monetary investments, while others demand investments of time (people). For this reason, it helps to either translate human investments into monetary equivalents or use a simple scoring method (e.g., 1-5) to judge feasibility.

One time, I was leading a corporate strategy discussion where the executive team was weighing their investment options. The company had a flagship brand that had already maxed out its domestic market potential, leading the team to consider international expansion. At the same time, an infant, niche brand the company had recently acquired was losing traction in its existing market.

The debate was whether to expand the flagship brand into the European market or to put marketing resources toward helping the acquired brand gain market share. Ultimately, we decided that it was more feasible to expand the flagship brand into Europe. This approach would have a higher chance of success compared to the niche brand fighting for share against much larger, entrenched competitors.

USING ALL THREE QUESTIONS TO EVALUATE BUSINESS ISSUES

Once you decide a business issue meets your initial strategy test, you can estimate its impact and feasibility. Clearly, your first priority should be to focus on the higher-impact, higher-feasibility initiatives. These are “no brainers” for any company and result in meaningful, immediate impact.

Second on the priority list come the higher-impact, lower-feasibility issues. The results of these long-term investments may not be immediate, but they will be worth the investment over time.

After that, many businesses would do well to cull away everything else. Lower-impact, high-feasibility initiatives may seem like easy wins, but they often result in little business value. Instead, they eat away at resources that you are better off investing in the long-term, higher-impact opportunities.

Early on, you may not have perfect information—only initial estimates. But don’t let ambiguity deter you from making choices based on the information you have. You can make a lot of progress without perfect information. And where necessary, you can do follow-up research to inform your final decisions.

Kevin Namaky, CEO at Gurulocity Brand Management Institute, training for Fortune 500 brands, lecturer at IU-Kelley, instructor for the AMA.