Strategic initiatives: why companies look for new markets only when it is already late

Dima V. Nechyporenko · 9 min read

Over 18 years in strategy and business development I have worked in companies in Ukraine, the UAE, Canada and the EU. Almost always, the difference between the companies that survive a sharp downturn and the ones that do not is set three years before the downturn, not during it. The tool that creates that difference is called strategic initiatives.

One caveat up front: this is not an academic review. It is my own view, built from what I have seen inside companies and what I use in client work.

Why do clients call only when the ship is already listing?

A typical situation: an owner or a managing director calls and says they urgently need to enter a new market. The reasons vary a lot. Often it is a decline in the home market, the loss of a large client, or a regulatory change that took away part of the revenue. Sometimes nothing dramatic has happened at all, growth has simply stalled and nobody inside agrees on why. What they share is something else: the decision to look for new directions is made only after the problem has become visible.

The question in those conversations sounds almost word for word the same: what alternatives do we have and where can we go. The problem is that this answer is not found in two weeks. You can only already have it.

Companies that look at their own development systematically keep that answer in a drawer.

What is a strategic initiative?

Taking the classic definitions, the Balanced Scorecard Institute describes a strategic initiative as the specific activities undertaken to achieve a strategic goal, including the plans and milestones. Practical methodologies add four attributes: a measurable outcome, a defined deadline, allocated resources and a named owner.

I prefer the working definition I use with clients.

A strategic initiative is a hypothesis about where the market is heading in a 3-5 year horizon, and the company deliberately puts money, people and time behind it today.

This is the key difference from an ordinary project. A project has a known outcome: we know what we are building, and the only questions are timeline and budget. An initiative tests an assumption. We do not know for certain that the market will be there. We believe it will, and we buy ourselves the right to arrive first rather than seventh.

Can an initiative exist separately from company strategy?

No, and I consider this a matter of principle. A strategic initiative cannot contradict the overall strategy of the company. It is a component of that strategy, one of the ways to deliver where the company has deliberately decided to go. If an initiative pulls resources in the opposite direction from the stated strategy, it is no longer an initiative, it is an internal fight over budget that will end in nothing.

That is why initiatives are born and approved at the annual strategy sessions of the top team. The overall business strategy goes on the table first, and only against it does the team discuss which initiatives to take into the next cycle, which to close and how much resource to assign. The classic definitions say the same thing: an initiative is the bridge between strategy and everyday work.

How do strategic initiatives work inside a company?

When I worked as a strategy director, the mechanics looked roughly like this, and they repeat across countries and industries:

1. Trend analysis. Where the industry is heading, what is changing in regulation, technology, supply chains and the structure of demand.
2. Building hypotheses. A few specific statements about the future. Not “the market will grow”, but “in two years the bulk of orders in this segment will flow through general contractors rather than end clients”.
3. Allocating resources. Business development and internal development resources go behind the selected hypotheses. Somebody starts attending the relevant events, talking to potential partners, running a pilot, modelling the economics.
4. Approval at board level. Initiatives go through the board, receive a budget and a status. This is not an enthusiast’s hobby, it is a line in the company plan.

What usually becomes a strategic initiative?

• launching a new service or product;
• adapting an existing product for a different segment, a different regulatory regime or a different price tier;
• entering a new geographic market;
• a new sales channel, or a partner or distribution model instead of direct sales;
• vertical integration, when the company takes over a step it used to buy.

In my experience, entering a new market is the most common initiative and also the one companies are latest with. I wrote separately about what the first stage of that work looks like in the piece on market entry discovery.

Does every initiative have to pay off?

No. Some strategic initiatives never turn into a business. The market turns out smaller than it looked, a competitor gets there first, the economics do not add up. Closing an initiative and recording why is a normal outcome, not a defeat.

That, to my mind, is the whole point. Initiatives are a portfolio of hypotheses about tomorrow. A company that permanently runs two or three of them stays in constant search of opportunity and, more importantly, has ready options when something goes wrong in the core business.

A word on numbers. Consulting material regularly quotes that 70 percent of strategies fail. The academic review by Cândido and Santos in the Journal of Management & Organization found that published estimates range from 7 to 90 percent and that most rest on weak or absent evidence. Popular guides add a figure of 40 percent. So I would not base a decision on any of them. The point is not the failure statistics, it is that a company with no live initiative has exactly one development scenario and no spare.

What turns an initiative into real work rather than a line in the minutes?

This is the most important part, and it is where most attempts break. A familiar picture: in a meeting somebody says a direction looks promising, the boss agrees, someone is asked to “have a look at it”. Then nothing happens.

Without an execution plan and a reporting plan, take it from my experience, it will not work. Not because people are bad, but because day to day operations always win the competition for time.

Do you need a strategy department for this?

No. A common mistake in mid-sized business is assuming that strategic initiatives require a dedicated strategy director or strategy manager. In a company of 50 or 150 people that role usually does not exist, and that is no reason to do nothing.

The owner of an initiative can perfectly well be a head of department running it alongside their main function. What matters is that time is allocated and that the initiative is not the seventh priority.

Strategic development is in principle a top management function in every part of the business. Commercial director, technical director, head of production: each of them should be thinking beyond the current year. It is part of the role, not extra load.

Where should a mid-sized company start?

If you are reading this and thinking you do not have the resources, here is the lower bound worth starting from:

• two or three initiatives at a time, no more;
• one owner for each;
• a quarterly review of ninety minutes where each owner shows progress and conclusions;
• a small budget for research, travel and pilots;
• an annual review: what we close, what we scale, which new hypothesis we take.

This does not take extraordinary effort. It takes an investment of time and some money, but compare it with the cost of one month of falling revenue in the core market when there are no alternatives.

The bottom line

Strategic initiatives do not protect you from black swans. You cannot foresee everything, and I know of no company that has. But they answer the question “where can we go” at the moment you first sense that something is off, rather than six months after it has gone badly.

The gap between those two moments is often the gap between a controlled change of course and a rescue operation.