Not all initiatives required to execute a strategy can be designed upfront. Strategy implementation is constrained by the actual available opportunities to realize strategic initiatives, such as M&A projects, internationalization projects, R&D projects, etc. How do senior managers recognize high potential of projects and compose a portfolio? Based on a case study and interviews with senior executives at Rambøll, a leading engineering firm with over 10,000 employees globally, we examined how senior executives select opportunities, when they still know very little about the strategy and the potential related initiatives. Instead of finding the best, senior managers sought to reject the worse.
Executives don’t select the best, they reject opportunities by using three categories of knock-outs criteria:
Type 1: clear cut criteria, that is, things that you can answer with a clear yes or no. For example, no tolerance for corruption. If the bid requires bribery or other dubious practices, they will not do it.
Type 2: ambiguous criteria, where there is still some room for interpretation and judgement.
Type 3: Combinatory, as the name say, a combination of criteria. For example, we take unlimited liability orders but only with a client and partners we know well, a legal context we have significant experience, and if we can cover relevant risks with an insurance.
We found that these criteria were behind 52 clever questions that senior managers asks themselves and others when screening for opportunities. As Porter already argued in the 80s, strategy is about what NOT to do. How to do it? Instead of being stuck by a paralysis by analysis, not moving forward, having too many options, reject the worse. This actually allows you to be fairly brutal in an intelligent way very early, and use your time and resources with the most viable options.