Many industries thrive on a constant flow of new ideas.  Advertising executives, graphic designers, authors—all rely on perpetual idea generation.  

But they also depend on a process that culls down those ideas. “Filtering” ensures that they are able to shift from idea generation to execution mode with the ideas they deem most promising or appealing to their clients.

Idea Overload

Are investment advisors any different? RIAs and financial advisors have an incredibly vast set of resources to help them generate “ideas.”  I am always amazed at the number of white papers, blogs, newsletters, conferences, outsourcers, consultants, service providers and technology vendors that provide ideas to help entrepreneurial advisors grow, protect and optimize their businesses.

For the vast majority of advisory firms, the near-term risk is not a lack of ideas but being overwhelmed by too many.

Recall how exhilarating it was the last time you walked out of a conference with a head full of exciting ideas, each holding incredible potential to help your firm in the areas of sales, marketing, technology, compliance or operations.

How many of those ideas made the trip back from [insert sunny locale] to implementation? Did you suffer from “idea overload”?

Filter Failure

Where these firms stumble is in the filtering and prioritizing ideas, which in my opinion represents the single largest deterrent to execution.

To paraphrase New York University professor Clay Shirky, the problem isn’t “idea overload”, it’s “filter failure.” 

There are few things more crippling to a business than too many ideas with no good way to filter or prioritize them.  They all seem to carry equal importance, appear equally critical to become the firm the principals wish it to be, and all carry the promise of becoming the elixir that will cure what currently ails them (e.g. lack of growth, poor efficiency, inability to devote more time to clients).

There is one thing that I can say with utmost certainty: They are all not equally critical for your firm today.

Design your filter

One method of filtering ideas is to employ a quantitative scoring approach to determine which deserve an allocation of your finite resources, which can wait and which deserve a pass all together.

Starting with an exhaustive list of strategic initiatives (e.g. hire a new advisor, implement a social media strategy, update marketing materials, create an operations manual), a scoring approach involves asking members of your team to score each based certain factors.  These factors may include:

·      Relative importance to your firm

·      Relative potential impact to your firm

·      Relative expense/time required for implementation

You may use a simple “1” to “10” scale across each initiative and factor, with “10” being most important, relative to other options.  The key here is to be as objective as possible and avoid any biases that may come into play.  To this end, it is best to include everyone on your team that performs activities that impact the day-to-day management of your firm.

How important is it?

When assessing the relative importance of potential initiatives, consider how critical each is to achieving short-term goals or long-term objectives.  Will this initiative spawn growth?  Will it improve our efficiency? Is it a “need” or is it a “desire”?

This is a very important step in prioritization and a good example of why it is important to be as inclusive as possible when surveying your team.  Personal biases and individual incentives will understandably come through so it is very important that you do not limit this exercise solely to your firm’s leaders.  Your firm’s most crucial pain points may reside in activities that are conducted away from your primary decision makers.

Project or idea prioritization is typically performed at the end of a strategic planning exercise because everyone will be scoring based on a mutually-shared set of short-term goals and long-term priorities.  Everyone wants to grow.  Everyone wants to improve efficiency.  Everyone wants to become more profitable.  But strategy is about choice and sequencing.  If you try to keep all three of these balls in the air at once, you will end up dropping all three.

What will its impact be?

Think of relative impact as the “benefit” side of this “cost/benefit” analysis.  To assess the relative impact of each initiative, contemplate the “end state” of implementing the initiative, the probability of successful implementation and the aggregate amount of benefit that would result from implementation.

To score and rank benefits, consider both the cash flow and time benefits that would accrue to your firm.   This means quantifying the value of time for each of your resources.  While not an easy exercise, determining what a “day” is worth for your staff will allow you to make more effective strategic decisions.

What will it cost?

Expense and time factors represent the “costs” in this cost/benefit analysis. A good place to start is with a solid understanding of your “inventory” of your resources.  Can you afford it?  Which members of your team would be necessary to implement? Do they have the time available? Do you have external resources (partners) that could contribute to the project?

Determining the availability of these resources will be particularly challenging because it involves trade-offs. Deploying finite resources like time and money may have a near-term negative impact on principal compensation and revenue-generating activities.  (“You can afford an additional $10,000 technology spend if principals are willing to reduce their incentive pay.”) If there is reasonable certainty that the project has a positive long-term return on investment (ROI), principals should be willing to do so.  I say “reasonably certain” because any investment (including those you make in your business) with a positive return involves risk.

Even with the quantitative method I refer to here, there’s no question that your scoring will entail a great deal of estimation and assumptions.  But that’s okay.  Like many things in business, the process carries much more importance than the precision.  When you compare an estimate-ridden action plan to inaction caused by “idea overload”, you will come out ahead every time.

For advisors that seek to grow the enterprise value of their firms (as opposed to maximizing near-term cash flows), reinvesting resources is the key to making progress towards the ultimate vision for your firm. By employing a reliable, objective process to filtering through all the ideas that proven successful to successful for other firms, you can improve clarity and confidence in prioritizing and clear the way for successful execution.