Strategic Initiatives: Four Tests for What Earns the Label

Ninety initiatives in six months

At a Fortune 500 retailer, business results were faltering and customer service scores were falling. A task force of high-potential leaders was asked to assess what initiatives were doing to frontline store managers. Departments across the company were all launching initiatives at once that needed store managers' attention, in product launches, training, customer service and IT. A full review counted more than 90 distinct initiatives launched in the previous six months, all landing on managers who were also running busy stores ².

Nobody had decided to launch ninety things. Each department had decided to launch a few. Rose Hollister and Michael Watkins, who tell the story, call the first cause of this “impact blindness”: executive teams can be oblivious to the number and cumulative impact of the initiatives they have in progress ².

A strategic initiative, in Robert Kaplan and David Norton's definition, is “a discretionary project or program, of finite duration, designed to close a performance gap” ¹. In practice the label gets stuck on almost anything with a budget and a sponsor. The question this page answers is which pieces of work deserve it.

The thesis: an initiative is strategic only if canceling it would force you to rewrite a strategic choice. By that test, most lists of strategic initiatives are mostly operating work wearing a promotion. The inflation is not harmless. It spreads money, people and senior attention across everything, so the few initiatives the strategy actually depends on get a fraction of what they need.

When everything is strategic, the word stops buying anything.

Why everything gets called strategic

The label is currency. It brings budget, a slot on the leadership agenda and some protection when cuts come. So every sponsor has a reason to claim it, and nobody has a strong reason to refuse it.

Hollister and Watkins list the forces that pile initiatives up ²:

• Impact blindness: no one sees the total load the initiatives place on the people expected to do the work.
• Multiplier effects: each unit sees its own initiatives but not the demands that other units' initiatives place on it.
• Political logrolling: “I will support your initiatives if you support mine,” which keeps signature projects alive.
• Unfunded mandates: goals set without the resources to meet them.
• Band-Aid initiatives, cost myopia and inertia: partial fixes that multiply, head-count cuts that leave the work behind, and no process for stopping anything.

Donald Sull and colleagues' survey of managers shows the same leak from another angle: many middle managers believed they could find resources for attractive opportunities outside their company's stated strategic objectives, and few believed every strategic priority was fully resourced ³. Roger Martin's description of the typical strategic plan explains why: its list of initiatives is constrained only by affordability ⁴. If the only test is whether we can pay for it, the list grows until we can't.

Four tests

Run every item on the list through four questions. The first one carries most of the weight.

Tests 2 and 3 come straight from Kaplan and Norton's definition: discretionary, and of finite duration ¹. In their system, strategic initiatives are short-term projects lasting as long as 12 to 18 months, chosen to achieve strategic objectives, while improvements to ongoing processes are handled in operational planning ¹. Test 1 is the sharper version of “designed to close a performance gap”: not any gap, but a gap the strategy says matters.

Test 1 also requires a strategy precise enough to test against. David Collis and Michael Rukstad quote the kind of complaint that abounds in companies without one: “I try for months to get an initiative off the ground, and then it is shut down because ‘it doesn't fit the strategy.’ Why didn't anyone tell me that at the beginning?” ⁵. If your choices are vague, every initiative passes test 1 and the test is useless. Fix the choices first; the strategic plan template starts there.

Running the tests on a real list

The company below is invented, and so is its list. The shape will look familiar.

Five initiatives, not twenty-three. The two that serve the strategy's actual choices get the engineers who were spread across the brand refresh and the experience program. The wellness program loses nothing but its label.

What to do with the ones that fail

Sorting is half the job. The other half is giving each pile a home with different rules.

• Strategic: each gets a charter, a single owner, ring-fenced money and a slot in the quarterly strategy review. The strategic initiative charter sets out the fields, including the kill criteria.
• Mandatory: fund it fully and early, track it in a separate portfolio, report it by exception. It needs management attention, not strategic debate.
• Operating improvements: move into unit operating plans and budgets, where the unit head owns the trade-offs.
• Stopped: close them out explicitly, with a date and a note of what was learned, and tell the people who worked on them.

Hollister and Watkins add three rules worth adopting whole: put a sunset clause on every initiative, with an end date for its funding and head count; require each initiative to reapply for funding in the next yearly planning round; and communicate strongly that stopping an initiative does not mean it was a failure or lacked merit ². The third rule matters most. If stopping looks like punishment, sponsors will fight every stop, and the list grows back by next year.

Count the load, not the list

Five strategic initiatives can still be too many. The load falls unevenly, and it multiplies across units. Hollister and Watkins give the arithmetic: in an organization of five units, if each unit launches three initiatives and each initiative needs resources from two other units, frontline managers in each unit are effectively juggling nine initiatives, not three ².

So before approving the portfolio, add up what it asks of each team. For every strategic initiative, list the teams it needs and the share of their time. Then total by team. The teams that appear in four or five initiatives are the real constraint on the strategy, and the place to cut or sequence. The strategy execution page explains why these cross-unit commitments are where most strategies break.

Kaplan and Norton's structural answer is to fund the strategic portfolio from its own pool, which they call strategic expenditures, kept separate from the operating and capital budgets that run current operations ¹. The separation does two things: it stops strategic money from being quietly absorbed by operations, and it makes the total visible, so the leadership team can see what the strategy actually costs.

The politics of the label

At portfolio scale the tests are easy and the conversations are hard. Three patterns show up.

• The cross-unit orphan. An initiative that needs three units, owned by one, stalls on promises the other two are not measured on. Kaplan and Norton note that stand-alone cross-unit initiatives often have no clear owner or home, and wither for lack of resources and accountability; their fix is a senior executive owning each strategic theme and its whole portfolio of initiatives ¹.
• The signature project. Some initiatives belong to a senior executive's identity, and logrolling keeps them alive ². Hollister and Watkins note that leaders with their own pockets of funding can keep such projects moving even after funding has officially been cut ². The defense is procedural: one list, one set of tests, applied to every initiative in front of the whole leadership team, with the results published.
• The slow exit. A large majority of managers in Sull's survey said their companies fail to exit declining businesses or kill unsuccessful initiatives quickly enough ³. Every strategic initiative should therefore face the tests again each year, not just at launch.

Who applies the tests matters as much as the tests. Sponsors grading their own initiatives will pass them. A small group, usually the head of strategy with the CFO, should run the first pass and bring the disputed cases to the leadership team, where the trade-offs are argued in the open.

The case for a long list

The fair objection runs like this. Calling work strategic motivates the people doing it, and demoting it tells a team their year does not matter. Besides, operational work can be the strategy: for a company competing on cost, the efficiency program is the strategy, so a test that pushes operations aside gets it backward.

The second point is right, and the tests already handle it. Test 1 does not ask what kind of work an initiative is. It asks whether a strategic choice depends on it. If the strategy is to be the low-cost provider, the cost program passes test 1 easily, while a brand campaign may fail it. The tests sort by link to the choices, not by type of work.

The first point is about recognition, and it argues for honesty, not inflation. Operating improvements and mandatory projects deserve to be named, funded and celebrated for what they are. Spreading the strategic label across all of them does the opposite of motivating: it guarantees that some of the work called strategic will be underfunded, which is how teams learn the label means nothing.

Before the next planning round

1. Get a true countList every initiative under way across the company, including those launched by functions directly to the front line, as Hollister and Watkins recommend ².
2. Run the four testsCancellation, discretion, finish line, trade-off. A small group runs the first pass; the leadership team settles disputes.
3. Sort into four homesStrategic, mandatory, operating improvement, stop.
4. Count the load by teamTotal what the strategic and mandatory portfolios ask of each team, and cut or sequence where a team is overloaded.
5. Charter and fund the survivorsEach strategic initiative gets a charter, an owner, ring-fenced money and kill criteria.
6. Set sunset datesEvery initiative gets an end date for its funding, and must reapply in the next round.

Monday morning: take your current list and ask test 1 of each item, out loud, in one sitting. Write the strategic choice next to each initiative. The blanks are your first agenda.

A short list of strategic initiatives is not a sign of low ambition. It is the opposite: proof that the strategy made choices sharp enough to say which work it cannot do without. Everything else still matters. It just is not what the strategy is betting on.

Questions

What is a strategic initiative?

Kaplan and Norton define a strategic initiative as a discretionary project or program, of finite duration, designed to close a performance gap. A practical test adds one condition: canceling it would force you to rewrite one of the strategy's choices. Work that would happen anyway, or that no strategic choice depends on, may be important but is better managed as operations.

What are examples of strategic initiatives?

Examples depend on the strategy. For a company choosing to win through independent agents, a portal that lets agents quote in minutes is strategic. For a low-cost competitor, a cost program can be. A system replacement forced by a vendor's end of support, a regulatory reporting change or an employee wellness program are usually not strategic, though they may be essential.

How many strategic initiatives should a company have?

There is no fixed number, but the binding limit is capacity, not ideas. Count what the portfolio asks of each team, including demands that cross units, and stop adding when key teams are fully committed. Initiatives that need resources from several units multiply the load: three initiatives per unit can mean nine for each unit's managers.

How do you prioritize strategic initiatives?

First sort them: ask whether a strategic choice depends on each one, whether it is discretionary, whether it ends with something lasting, and what it displaces. Then fund the survivors from a separate pool, give each a charter and kill criteria, add up the load on each team, and require every initiative to reapply for funding in the next planning round.

Where to go next

• Strategic Initiative Charter: Template and How to Write One
• Strategy Execution: Where It Breaks Between the Offsite and Monday
• Kill Criteria
• Stage-Gate Process
• Opportunity Cost