Monday, January 13, 2014

What’s Your Business Investment Strategy?

Now that we’ve kicked off a new year have you given thought to developing or updating your business investment strategy to supplement your strategic plan?  Your business investment strategy is your plan for deciding how and what to invest in to meet your long-term goals.  It's a natural extension of the original company vision you outlined when you wrote your first business plan.  Knowing your long-term goals will help you decide where to invest your funds.  For example, if you're hoping to create a recognizable brand, your investment strategy will be heavily focused on ramping up your marketing department. 
There are a myriad of growth strategies you can invest in.  Do you want to develop a new product that complements your existing product in the same category?  Do you want to enter a new category in a new market?  Do you want to expand territorially?  Do you want to expand into a related business?  Do you want to diversify and invest in many types of businesses?  Do you want to pursue a merger or an acquisition?

Whatever direction you choose, it's critical that you support the initiative with the proper resources.  More often than not, that means human resources.

If you want to be innovative, you have to have the human capital to do this.  New ideas are not created by artificial intelligence; they're created by human intelligence.

It's tricky to set a strategy for when it's time to add new staff, however. The fact is, virtually all organizations are resource constrained. You don't have the finances to staff as much as you'd like, and a lot of time you don't have a choice to add staff until after you need them.  Still, I would rather have a backlog of customer orders rather than the opposite.

The flipside is even trickier.  Your investment strategy should also indicate how you will reduce resources when times are tough.  The key question to understand is how much will it cost you to replace an employee, especially if you have to replace that person in three months when customer demand returns.

Ultimately, you can't forecast when market conditions will change or how new technology will affect your existing market. (Look no further than the demise of Polaroid as a cautionary example.)

As such, you can really never quite finish your business investment strategy.  You have to tweak it as you go.  You've got to have some sort of process set up that regularly evaluates what you're doing, where you are, and what you need to do.  You can't just do this every year or every couple of years—you have to constantly be evaluating.


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Kevin Minton
Chief Executive Boards International

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