Synchronized and Streamlined Processes  583
In addition, once projects have gotten underway, companies tend to delay 
stopping them even if those projects aren’t going to earn attractive returns. 
What’s more, some companies don’t even measure the expected return once 
the project has started. Several techniques can help here.
First, we’ve found that some companies provide flexibility by allocating 
less than their entire spending pool during the budgeting process. They’ll hold 
back 5 or 10 percent at the corporate level for opportunities that may arise 
during the year. These may be from new ideas that shouldn’t be delayed or 
in response to competitive actions and customer demands that have changed.
Second, companies should use a stage-gating process for releasing spend-
ing for projects. This flips on its head the common practice of not actively 
looking to stop projects once they’ve started. With stage gating, managers 
aren’t allowed at the start to spend all that’s allocated to a project; instead, 
they must obtain periodic approvals to continue moving forward. The ben-
efit of stage gating is that projects unlikely to succeed can be killed earlier, 
thereby freeing up resources that can be allocated elsewhere. Similarly, some 
projects should be conditionally approved. Say a project is included in the 
budget for the year, but spending won’t start until October. That project could 
be reviewed in, say, August or September to make sure its present value is still 
positive and aligned with strategy.
In hewing to the benefits of allocating resources at the most granular level 
possible, management should also require business units to ask for approval 
to shift spending from one project to another. At too many companies, once a 
budget has been approved, the business unit can move around money in ways 
that may not be aligned with longer-term strategic objectives.
One company successfully combined several of these tactics. Management 
set up monthly meetings of an investment committee to deal with in-year allo-
cation issues. The committee did not review every project at each meeting, but 
it established an agenda for approving or denying a variety of allocation pro-
posals. Proposals involved advancing stage-gated projects and provisionally 
approved projects, requests for funds for unbudgeted projects, and requests to 
shift spending within a business unit from one project to another.
Another common shortcoming of many companies lies in the quality of 
business cases advanced to support investments. Some companies’ decision 
processes even lack business cases altogether. It’s surprising how frequently 
CFOs complain about this situation. In some companies, many investment 
proposals don’t even measure the value impact of the investment, on the 
grounds that the project either is deemed “strategic” or is related to safety or 
regulatory needs.
We believe that almost every project should have a business case with a 
quantified present value and risk assessment, even if the value is a rough esti-
mate. At one company, managers argued that they couldn’t quantify the value 
of projects to improve customer service, because the projects would serve only 

584  Strategic Management: Mindsets and Behaviors
to maintain, not increase, revenues. Their fallacy was the improper definition 
of the base case as no change in revenue forecasts. But what would actually 
happen if they didn’t improve customer service? Would revenues decline? 
How quickly? Would the customers they would lose be marginal ones or prof-
itable ones? After they posed and answered these questions and incorporated 
the insights into their analysis, the managers could quantify the value impact 
of these projects and rank them against other projects.
Closing Thoughts
Executives squander good corporate strategy when they can’t overcome the 
organizational barriers, behavioral biases, weak processes, and plain lack of 
courage needed to turn ideas into value-creating actions. Strategic manage-
ment requires combining strong analytics capabilities with the mindsets, 
behaviors, and operating guidelines that link strategy to value and inform 
and motivate managers toward long-term value creation. A prime goal for 
forward-looking executives should be making a solid connection between 
strategic goals and resource allocation. The list of best practices is long and 
can be daunting, but executives can begin by focusing on those that are easi-
est and likely to have the biggest impact on their performance. Adding new 
refinements over time will move any company closer to the goal of managing 
strategically for the long term.