Monday, February 13, 2017

E/E/S: a model for decision-making and growth

I have had the fortune to know a number of very talented executives who have build significant careers in the non-profit sector.  Ranging from global broad ranging foundations, to national health issue/disease state organizations, to local groups working on providing food to those in need, I have been inspired by the work of these individuals and have learned a number of lessons from this “non-profit world” that I have tried to model in my private sector reality. The “E/S/S” model is one of those lessons that I have applies personally and have shared with friends and clients.

The “E/E/S” model comes from a no-profit environment that is a grant provider to various organizations working within identified sectors.  As they review and evaluate potential projects/grants, they use the “E/E/S” model or filter to help them differentiate between competing grant applications.  The following is a brief description of the fundamentals of the model:

E: Efficacy:  noun, the ability to produce a desired or intended result.”
The first step in the model is to assess and validate the “efficacy” of a project / proposal.  Does the actual idea produce the “desired result” against the problem statement at hand?  At this step, you aren’t trying to understand costs, or ease if execution, purely the impact of the idea/proposal being recommended.

E: Efficiency:  noun, “achieving maximum productivity with minimum wasted effort or expense.”
The second step is to assess the “efficiency” or productivity of the idea/proposal.  This is where hard costs, timing, opportunity costs and other factors are assessed in order to understand the relative project “impact/$” or the relative “ROI” of one project vs. benchmark or vis a vis competing ideas/proposals.

S: Scalability:  noun, the capacity to be changed in size or scale.”
Finally the “filter” of scalability comes into play.  For a global foundation, a project/proposal might have high levels of “efficacy” and efficiency” but has limits to its ability to scale broadly across the world due to idiosyncrasies of the test market or other barriers to expand the project into other countries/markets/applications.

In one form or another, I have had examples of this model deployed to help make crucial decisions across a number of non-profit organizations.  You can imagine this model being deployed to assess grant proposals, funding ideas, or deployment projects based on the unique criteria from each organization.  I want to take a moment and review how this same model can be utilized in “for-profit” private sector settings.

Consider the annual planning cycle, when strategies and tactics are being reviewed and debated as ways to accomplish the required annual objectives.  The “E/S/S” model is a solid consistent tool to use on all alternatives, framing the discussion on each potential initiative and how well it  “stands up” to the “E/E/S” filter:

E: Efficacy: This is a review of the impact of a marketing intuitive, pricing approach, innovation idea, supply chain project, etc.  Does this initiative drive the “impact” that you are looking to achieve and how well does that impact drive against the required annual objectives of the business.  Too often “pet projects” stay alive for the wrong reasons, living from one annual business plan for internal political reasons rather than achieving/exceeding the requirements of impact/efficacy.

E: Efficiency:  It is rare to have a disciplined review of the relative ROI of various elements established as key drivers of an annual business plan.  Linked to the key metrics of “net revenue”, or “EBITDA”, how well/how “efficiently” do various programs /investments drive the plan.  In the landscape of marketing investments, this ROI discussion is too rare, and a discipline of “efficacy” needs to be introduced into the annual marketing plan review.

S: Scalability: Finally, there are often innovation projects or test market initiatives that are productive, but have limited ability to expand or “scale” in order to again drive the required annual objectives of the business.  Pilot project, test ideas, or other “small scale” innovation work is a vital part of many business plans if and only if they can “scale”/expand (if proves successful) in order to accelerate macro results.

Hopefully you can see how this non-profit model can be utilized in a private sector setting.  While I used the annual business plan as a deployable example, numerous others exist.  Give the “E/E/S” model a try, work your way through all three filters as you review options and alternatives in your business and I am confident that you will find it a helpful tool for decision-making and growth.