Why "3" Is A Magic Number: Focus Your Planning
I facilitated a strategic planning session for a Silicon Valley FinTech company. In prepping for the session, I told the firm’s senior leaders that a primary objective would be to identify and align around three key strategic priorities. They asked a logical question: “Why three?” My short answer was: “Because four is too many.”
They pressed me further, arguing that their business requires dozens of different priorities to be addressed on a daily basis in order for them to operate successfully. I agreed, but asked them to step back from their role as day-to-day managers and put on the hat of strategic thinkers tasked with making hard choices for the organization.
I explained that sharp focus is absolutely critical to long-term success, and that this focus must begin with the planning process. I then gave them my top three reasons why focus is essential.
First, it’s the law. Pareto’s Law, that is. Also known as the 80/20 Rule or the Principle of Least Effort, Pareto’s Law says that in most undertakings, 20% of the allocated resources produce 80% of the benefits. The 80/20 Rule has huge implications for strategic planning. I’ve never seen a client situation where the 80/20 Rule did not apply in some manner.
I explained to the senior team that understanding how the 80/20 Rule applies to their own business would enable them to focus their resources on a limited set of activities that will yield the greatest benefits. I went on to predict that achieving the three most critical priorities should outweigh the benefit of pursuing a dozen lesser priorities.
Second, I explained, focus brings energy and coherence to an organization. Focus may be the single most important factor leading to business success. Why? No organization has the time or resource to squander on non-essential, non-core activities, regardless of the stage of development. Moreover, focus unites teams and functions from across the organization around a common mission.
Being a fan of military history, I quoted one of the great military historians, Carl von Clausewitz. After studying Napoleon for many years, Clausewitz observed: “He who defends all borders defends none.” The Canadian Army has its own saying: “You can capture one hill but you cannot capture two hills.” I told the team that effective planning requires understanding what is most important to their customers and investing to excel in those areas. I also quoted Professor Frances Frei from Harvard Business School who says “You’ve got to choose to be bad at some things, because no organization can be good at everything.”
My final point was that focus forces you to de-prioritize or exit non-essential activities. In most enterprises many expenses could be eliminated with minimal negative consequence. In fact, the elimination of non-essential activities serves to energize the organization.
We spent a great deal of time analyzing internal and external factors to get to the priorities that really mattered most and we also focused on the resources that would be required to execute those priorities. But in the end, we all agree that when it comes to planning, three is indeed the magic number.