Budgets are Boring: ... but necessary
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Boring

Budgets are boring. They’re easy to create. Simply take last year’s spending and multiply it by an inflation factor or an across-the-board budget cut percent. Voila, you’ve got a budget.

Easy activities rarely determine an organization’s success. Creating a budget is relatively easy and not mission critical.

Strategy is mission critical. Strategy determines success or failure. Yet leaders spend far less time on strategy than on budgets.

During my 20+ years in consulting, I’ve seen many budgets but few strategic plans.

If you need to excite yourself and your “troops”, there are two steps that must take place before the budget.

Step 1: Strategy
If you’re satisfied with the way things are, then you don’t need a strategy. Just keep do’in what you’ve been do’in.

But if you’re not satisfied with this year’s results, then you’ve got to implement change. What do you change? That’s determined by your strategy.

A strategy is what you intend to do differently to win in the marketplace.

I focus on strategies that fall into one of three categories:

1. Focus on being unique. Define a niche for your existing products or services. Complete the sentence “We are the only organization that _____________.” Author Doug Hall says “If you’re not unique, you’d better be cheap.” Zipcode Honey or Texas Organic Lawncare are examples of niche strategies.

2. Focus on being the best. Provide what your competition does but more efficiently and effectively. If you’re a baker, make sure your cake tastes better than anyone else. If you want to make it unique, fine, but you’ve got to deliver the best quality. Amazon.com and Google are examples of companies whose strategy is to be the best retailer or search engine.

3. Focus on invention. Identify a new customer need and satisfy it with something you invent. Possibly the customer doesn’t even know they have the need. Facebook or Apple are examples of companies whose strategy is to invent social media or smartphones customers didn’t know they wanted.

Step 2: Plan
Define a 1-page plan to implement the new strategy. For an example of a 1-page plan CLICK HERE.

To be successful, a strategy must have a written, doable sequence of activities to achieve a distinct, measurable goal. And to be successful, the plan must be communicated to all employees.

Step 3: Budget
Unfunded plans fail. Create a budget that financially supports implementation of the plan.

A budget is the last step to success, not the first.

It does not require a PhD to predict that technology has and is going to continue to significantly change our corporate and personal life. Peter Diamandis, author of Abundance: the future is better than you think, recently asked readers “What do you believe won’t change over the next two decades?

One thing that won’t change in the next 20 years is the proven sequence of strategy, plan and then budget.

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Tom Pryor
TomPryor@ICMS.net
(817) 475-2945

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