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Lack of Exit Strategy for Failed Projects

Introductory

Most projects experience a gradual decline instead of experiencing a complete collapse at once. The main reason for this issue stems from the absence of any plan to handle projects which fail to meet their goals. Leadership causes projects to extend their duration and raises expenses while making teams focus on unproductive work because there are no defined limits to control their behavior. The article provides CEOs and CFOs and founders with a method to establish exit policies at startup and execute them without conflicts.

The cost of drifting projects

The cost of drift continues to be substantial because it exists outside of public knowledge. Teams keep busy. Reports stay green. The runway shortens while customer trust disappears and investors should focus on alternative investment opportunities. GCC companies face a problem when their capital programs and digital initiatives operate at the same time because one stalled project can use up SAR millions and essential personnel for multiple quarters.

The implementation of waste reduction measures does not require organizations to achieve perfect forecasting accuracy. The process needs established exit protocols and scheduled review periods and staff members who will activate the rules when they become active.

Define exit before entry

Set “kill criteria” in the charter

Create 3–5 essential performance indicators which have quantifiable measurement criteria. Use simple language. Examples:

  • Adoption: 1,000 weekly active users by Week 12.
  • Unit economics: CAC ≤ SAR 200; payback ≤ 9 months.
  • Time: MVP live by March 31.
  • Quality: ≤ 2 Sev-1 incidents per month post-launch.
  • Budget: total spend cap SAR 5m.

The policy needs to specify that students who miss two classes in a stage must pause their studies but students who miss three classes will need to exit the program. The system resolves all conflicts which develop when people experience strong emotions.

The funding should support the development of stages which lead to specific results instead of focusing on individual tasks.

The payment system needs to distribute funds through stages which link to achievement results instead of following a task-based schedule. No milestone, no funds. Make the gate simple: Did we hit the adoption, margin, and date metrics for this stage? If yes, unlock the next tranche. If not, execute the exit playbook. The system maintains cash reserves while showing supplier and organizational staff member commitment from the business.

Run a pre-mortem in Week 2

Ask, “It’s Q4 and this failed—why?” List the top five reasons. Assign an owner and a leading indicator for each (e.g., “pilot conversion rate < 15% by Week 6”). Review these indicators every two weeks. You prevent failure by looking for it early.

Operate the exit—cleanly and fast

Create a decision forum and cadence.

Decisions die in vague forums. The organization needs to schedule a 45-minute “Stop/Continue” meeting which should include one executive who possesses CEO or CFO level decision-making authority. The team needs to create a single-page gate brief which should include present metrics and forecast data along with risk assessment and specific requirements. The bar requires all projects to follow identical standards of quality.

Build a five-step exit playbook

  1. Communicate fast. The team needs to discover news information before stakeholders and vendors learn about it. Be clear on reasons and next steps.
  2. Transition people. The skills of high-performing employees need continuous application so they should receive new assignments within seven days.
  3. Salvage assets. The team should store reusable code and designs and data and vendor credits in a single repository that all members can access.
  4. Close contracts cleanly. The company needs to execute termination clauses and retrieve all assets while finishing all required liability settlement processes.
  5. Capture learning. Publish a one-page “What we’d do differently.” Share it in the next portfolio review.

The exit process needs to operate as a managed descent system instead of producing a destructive impact. A calm, repeatable process reduces fear and makes future exits easier.

Protect customers and brand

The company needs to create a sunset plan which will show customers when they can expect service interruptions to occur. The company needs to offer customers migration choices together with credit or refund options. The support system needs to remain accessible for a specific time frame which should be 90 days. The system upholds trust because it operates within controlled industries and government-backed initiatives throughout the GCC countries.

Counter the biases that keep failures alive

Appoint a “red team”

Select two leaders who were not included in the initial presentation. Their work involved business viability assessment and belief verification before making stop or exit decisions at each evaluation stage. Rotate this team each quarter to keep it independent.

Fix incentives and scorecards

People will launch any product when bonuses depend solely on launch success. The incentive system needs to connect its reward structure to particular business performance indicators which include adoption rates and margin levels and NPS scores and honest stop completion. Organizations need to identify their successful teams that finish projects early before they can redirect resources to work on different projects. The organization runs a workplace system which views interruptions as indicators of failure instead of understanding them as indicators of weakness.

A basic template will become accessible for your use when you attend the meeting tomorrow.

The following thresholds should be applied to SAR 10m digital products and SAR 200m capital projects.

Stage 0 — Problem fit (4–6 weeks)

  • Evidence: The research included 10 customer interviews for each segment and confirmed the top three pain points.
  • Go: clear value prop, quantified ROI model.
  • Kill: no paying sponsor; unclear user; no must-have pain.

Stage 1 — MVP (8–12 weeks)

  • Go: The MVP system will achieve 100 live users and establish one pilot site while the CAC model succeeds through either revenue achievement or quantifiable cost savings.
  • Kill: miss two of the three; >20% timeline slip; quality outside thresholds.

Stage 2 — Scale (12–24 weeks)

  • Go: WAU > 1,000 or 3 sites live; payback ≤ 9 months; NPS ≥ +30.
  • Kill: miss adoption and payback; budget overrun exceeds 20% and Sev-1 incidents continue to rise.

Exit actions (within 14 days)

  • The team relocated to new positions while all assets received documentation and vendors were shut down and essential knowledge was distributed to all staff members.

This template works for tech builds in Riyadh as well as engineering packages in a giga-project. The numbers require adjustment instead of changing the academic field.

The leadership takeaway

Leadership compensation serves as a financial resource which enables projects to continue operating. Our organization directs funding toward successful initiatives while ending support for non-performing projects. Create exit rules at the beginning of your work process. Review them on a fixed cadence. When they trigger, exit with respect and speed. Your best people and your best cash will move to the work that deserves them.

References:

References:

Internal Links

https://3msbusiness.cloud/the-high-cost-of-poor-communication-understanding-the-impact-of-strategy-misalignment/

https://3msbusiness.cloud/the-dangers-of-short-term-thinking-in-long-term-strategy/

External Links

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The High Cost of Poor Communication: Understanding the Impact of Strategy Misalignment

Failure to Communicate Strategy Clearly

Failure to communicate strategy clearly is not a “soft” issue. The execution tax requires businesses to make daily payments through delayed decision-making and continuous work and loss of skilled workers. Leaders who do not effectively communicate strategy enable their teams to develop their own interpretations about their work. The process of guessing results in business drift and waste while causing organizations to lose potential revenue.

The real cost of fuzzy strategy

Most employees don’t truly get the plan. Big internal communications research found that 56% of leaders confirmed employees grasp the organization’s strategic direction and its vision and purpose but only 47% confirmed staff members understand their work’s value to the organization. (Gallagher)

Engagement drops when clarity drops. The United States reached its lowest employee engagement point since 2014 when 31% of workers stayed engaged during 2024 which resulted in slower operations and worse customer service. Clear strategy is a lever you control. (Gallup.com)

The practice of communication needs people to learn specific skills instead of depending on public meetings for its operation. The HBR provides direct advice to transform complex decisions into simple language which should be distributed through multiple communication channels while providing employees with concrete actions to take. (Harvard Business Review)

What “unclear” looks like on the ground

You’ll identify three distinct patterns.

  1. Competing priorities. Teams dedicate their efforts to move forward with projects that do not fulfill organizational objectives. They move, but not together.
  2. Decisions stall. A lack of common direction between teams leads to longer approval processes and increased risks and delayed project timelines.
  3. “Exec-speak” wins. The strategy needs slides to be successfully repeated by others. If they can’t say it, they can’t do it.

McKinsey’s view aligns: strategy creates potential; mobilization captures it. Champions focus their work on removing delivery barriers instead of developing complex strategic plans. (McKinsey & Company)

The organization maintains a core operational pattern which delivers strategic information to all its stakeholder groups.

Use this weekly cadence. It’s small, boring, and it works.

1) Boil strategy down to “3 choices.” The document should contain three essential elements which include the customers you will acquire and the problems you will resolve and the capabilities you will develop (along with your limitations). The information needs to be presented in a way that new employees can understand. Use it in onboarding and sales. (Template: [Internal Link 1].)

2) Translate choices into two layers of action.

The system requires three to five quarterly bets which need to produce measurable results such as onboarding time reduction by 40% during Q2.

  • Weekly moves: the smallest actions that advance each bet. Name owners. Track in public.

3) Build a rolling comms loop.

  • Monday: CEO note—what matters this week and why.
  • Wednesday: AMAs or floor walks; answer the same three questions: What changed?What’s next?What will we stop?

The operator will show the strategy through a 5-minute video presentation which will take place on Friday.

4) Make managers the message. Every manager should receive a 10-minute “strategy huddle” kit which includes a one-pager and three proof points and one customer story. Reward managers who convert organizational strategy into operational plans which their teams can execute. (Manager kit: [Internal Link 2].)

5) Close the loop with evidence. Every betting decision needs to be linked to customer behavior or financial market indicators. The company achieved SAR 420 savings per customer through support touchpoints after reducing onboarding time from 12 days to 7 days. The results need to show their connection to margin and churn performance instead of using vanity metrics.

The HBR playbook recommends organizations to use repetition with storytelling and action-oriented paths instead of depending on slogans. Use it as your checklist. (Harvard Business Review)

GCC context: transformation raises the clarity bar.

The GCC leaders have started multiple fast-paced transformation programs which they are executing at an unprecedented speed. Middle East CEOs maintain positive views about business growth but their operations encounter major obstacles from artificial intelligence and shifting market trends which force them to concentrate on essential choices instead of generating excessive data. Make your strategy translation local: policies, partners, and capabilities on Saudi timelines and budgets. (PwC)

Organizations need to establish a “strategy change note” process for funding and scope adjustments which requires immediate documentation of all modifications within 72 hours. The document requires three core sections to explain modifications along with their causes and operational effects on frontline activities. The fast development of trust through consistent behavior works well in markets that experience significant change.

How to know you communicate strategy clearly

The board needs to track these four vital signals throughout each month.

1) Strategy recall rate. In random 60-second spot checks, ask employees to state the three choices. The system needs to achieve at least 80% accuracy in recognizing all its functions. Use pulse tools to sample at scale.

2) Line-of-sight score. Ask: “I know how my work advances our strategy.”Target ≥85% “agree/strongly agree.”The risk level of your organization depends on how far headquarters operations stretch from field operations.

3) Decision latency. Organizations need to monitor the time span which passes between submitting proposals and making go/no-go decisions for their strategic bets. Aim to cut it by 30–50%. The system needs more data to establish when latency starts increasing.

4) Rework rate and duplicate work. The analysis needs to evaluate planned work duration against actual work duration to determine which projects ended because their objectives no longer aligned. The team shows full comprehension through their Falling rework metric results.

Gallup’s research shows engagement and performance move when leaders set clear expectations and maintain meaningful, frequent conversations. Your strategy rhythm is how you do that. (Gallup.com)

Scripts you can steal

  • All-hands opener (30 seconds): “Our strategy consists of three essential elements which include winning certain games and solving particular problems and developing specific capabilities. This quarter we’re betting on [A, B, C]. The assignment for this week includes [X, Y, Z]. You can determine your work contribution by asking your manager or by sharing your question in the AMA channel at present.
  • Manager huddle (10 minutes): The presentation includes one slide about the three available options and separate slides for each bet which show customer effects and each team member gets one minute to explain their weekly decision and the team conducts one blocker round.

The one-page change note contains the following information:

The document includes information about what changes need to occur and their current timing and specific areas to stop and measurement methods and ownership responsibilities and assessment timelines. Share within 72 hours.

If you remember one thing

Don’t write a bigger plan. Build a smaller system. The company needs to deliver its strategy to all staff members through their managers each week while showing evidence of achieved results. People who can repeat the strategy will execute it which leads to SAR-denominated financial returns.

References:

Internal Links

https://3msbusiness.cloud/the-dangers-of-short-term-thinking-in-long-term-strategy/

https://3msbusiness.cloud/turnaround-strategy-stabilize-simplify-scale/

External Links

  • External 1 — Harvard Business Review, How to Communicate Your Company’s Strategy Effectively (2022) (Harvard Business Review)
  • External 2 — Gallagher, State of the Sector 2022/23 (2023) (Gallagher)
  • External 3 — Gallup, Employee engagement sinks to a 10-year low (2025) (Gallup.com)
  • External 4 — McKinsey, How strategy champions win (2025) (McKinsey & Company)
  • External 5 — PwC, 28th CEO Survey: Middle East findings (2025) (PwC)

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The Unmeasured Cost of Discounts: Understanding the Hidden Impacts

The Unmeasured Cost of Discounts: Understanding the Hidden Impacts

Discounts appear to be harmless at first glance. The system allows stock movement and customer service while giving sales teams real-time success data. The actual price of discounts proves to be substantial and enduring although it remains unquantifiable. The reduction of prices leads to changes in your profit margins and brand image and future market demand. When you perform the task without measurement you become completely unaware of what you are doing.

We need to create a straightforward method for cost visibility through basic mathematical calculations and straightforward guidelines which CEOs and CFOs can easily understand.

The perception of discounts as more expensive than their actual value remains a common phenomenon that affects many consumers.

A 10% discount seems insignificant to me. It isn’t. If your gross margin is 40%, a 10% price cut requires +33% more volume just to earn the same gross profit. Your business requires a 50% volume increase to reach a 30% margin level. Most promotions don’t deliver that lift. Therefore, the unmeasured cost of discounts is often a silent margin leak.

The discounts customers receive cause them to reset their internal reference prices. The initial lower price point creates an unfair perception of full price for buyers. Your standard promotional activities create market expectations about upcoming price cuts. The present small price reductions will reduce the company’s ability to set future prices.

The margin math, in one minute

  • List price = 100; cost = 60; margin = 40.

The price reduction of 10% results in a final price of 90 while maintaining a margin of 30.

The original gross profit of 40 requires a volume increase to 1.33 times the current level.

This is the basic engine behind the unmeasured cost of discounts. You should evaluate your decision again if you cannot measure any performance improvements.

What you don’t see on the P&L (at first)

There are second-order costs that rarely show up in the campaign report:

The additional orders create excessive workload for fulfillment operations and call center services and return processing systems. Overtime and error rates go up.

  • Mix dilution occurs when discounts attract customers to purchase lower-margin products or distribution channels which results in reduced profit per order.

The second major issue is cannibalization which means that you are moving up sales without increasing the total market demand. The upcoming month appears to have a gentle outlook.

  • Customer quality: Deep-discount buyers often churn faster and have lower lifetime value (LTV).

The unmeasured cost of discounts keeps increasing because these costs emerge after the first discount calculation.

Reality check

The retail and e-commerce sectors have experienced rapid growth. The costs of logistics operations remain elevated while promotional efforts encounter growing market competition. The period of e.g. back-to-school season leads to increased discounting but the final delivery expenses will reduce the benefits when customers purchase fewer items. The documentation of VAT treatment for discounts needs to be accurate because any errors will reduce the net realized margin after making compliance adjustments.

Executives need to understand that they should track incremental gross profit after delivery and returns and VAT effects instead of focusing solely on top-line sales when they use seasonal discounting to reach their targets.

How to measure discounts properly

You cannot manage what you don’t measure. Create a basic shared scorecard for this purpose.

Define “incremental” before you launch

  • Baseline: expected sales without the discount.

The sales performance consists of two components which show sales results above the baseline (units and revenue).

The net gross profit results from subtracting all costs from total revenue including discounts and COGS and logistics expenses and projected return amounts.

Track mix, not just units

  • Margin by SKU (Stock Keeping Unit) and channel.
  • Attachment rate (did the discount pull in full-margin add-ons?).
  • New vs. existing customers, and their 90-day LTV.

Protect price integrity

  • Cap discount depth and frequency by segment.
  • Use targeted offers (loyalty tiers, bundles) instead of site-wide cuts.

The price should remain constant while preventing sudden price swings between sale and regular prices.

Add these fields to your BI dashboard and require a post-mortem within 14 days. The company needs to stop all promotional activities which produce less than enough gross profit to meet their expenses during promotional times.

What to do instead of broad discounts

Demand can be shifted through alternative methods which prevent organizations from bearing the complete expense of untracked discount costs.

The company should keep its headline prices constant while providing more value through package deals and warranty and service extensions. The reference price remains protected through this method.

The company needs to create special offers that give students and new customers temporary price reductions but keep standard rates for all other customers.

The company needs to establish inventory-led pricing by performing end-of-life SKU reductions through controlled markdowns that require proper documentation.

The company needs to implement non-price strategies for improving delivery speed and stock availability and post-purchase service support. Customers give their money in exchange for guaranteed results.

  • Earned benefits: Points and store credit and future-dated perks are available. These retain value without resetting the cash price today.

The sales incentives should be based on profit rather than revenue. The payment structure for representatives should remain constant when they offer discounted deals because this would lead to increased discount distribution.

A simple executive checklist

Use this before you approve any promotion:

  1. The expected incremental gross profit serves as the main performance indicator instead of revenue in isolation.
  2. We need to determine the volume lift which will enable us to reach breakeven at our present profit margins.
  3. The changes in our reference price will have what impact on our reference price for the upcoming quarter?
  4. The following expenses will increase: fulfillment costs, return costs, support expenses and payment processing fees.
  5. Do we protect premium segments and core SKUs?
  6. How will we exit the promotion without whiplash?
  7. What is the 90-day LTV for new customers acquired?

The last step requires you to document the rule which states that discounts should only be given after creating a test plan and establishing a control group and defining specific profit goals.

The bottom line

Discounts function as operational instruments for businesses yet they do not constitute a complete organizational strategy. The current loss of profit margins through discounts will lead to reduced pricing ability in the future. Measure, cap, and target them. The saved money should be used to improve the value of the business through better service and faster delivery and more reliable operations. The most affordable promise to make becomes achievable when there is no need to reverse it.

References:

Internal Links

https://3msbusiness.cloud/understanding-cost-driver-mapping-uncovering-what-moves-your-margins/

https://3msbusiness.cloud/mastering-activity-based-costing-abc-the-key-to-accurate-cost-allocation-for-your-business/

External Links

  1. McKinsey — Pricing Insights

https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/pricing

  1. Harvard Business Review — Pricing Topic

https://hbr.org/topic/pricing

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Overcoming Weak Differentiation in Crowded Markets

Overcoming Weak Differentiation in Crowded Markets

Introductory

A full pipeline with unchanging win rates shows that you do not have a demand problem. You have a sameness problem.

In crowded markets, most companies converge on the same features, the same channels, the same “value prop” slide. The price function remains as the only operational control mechanism. Margins fall. CAC rises. The process of customer loss takes place without any visible signs.

This isn’t solved by a new tagline. The operating system of differentiation enables businesses to select their approach to market and product development and pricing and delivery and value demonstration which makes it impossible for competitors to replicate the entire bundle.

The following guide provides a step-by-step approach for CFOs to escape their current market position.

The Four Signals You’re Commoditizing

  1. The initial stage of the process introduces price pressure. The discount request occurs before the value verification process.
  2. Win/loss reads like a mirror. People in the industry describe you as having a comparable style to X.
  3. Feature chase. The path of development follows a path of equality rather than creating an advantage.
  4. CAC beats expand; LTV doesn’t. The marketing industry dedicates more financial resources to bring back existing customers.

When two or more of your points strike a chord with the audience you must compete at the basic level of what everyone else is offering.

The “5D” Differentiation Stack (Pick 2–3 to Win, Not 1)

Most teams focus on one aspect of development which typically involves feature development. The competitive advantage of durable differentiation emerges from multiple elements which prevent any competitor from duplicating them at the same time.

The solution needs to handle the complete “job to be done” process from initial steps through to final completion rather than focusing on one feature at a time. Optimize for time-to-value and failure recovery, not demo flair.

The company provides fast delivery services together with easy setup procedures and performance assurance to its customers. Service-level innovation is a moat.

The system contains data resources and models which boost their performance as the system grows.

The company benefits from a distribution advantage through its go-to-market edge which includes ecosystem partnerships and embedded channels and product-led motion that creates compound effects.

The Definition (Category edge) represents a clear perspective which transforms both the problem and purchasing criteria to work in your advantage.

The winners create systems with two to three edges which competitors cannot replicate without destroying their own model.

How to Find Your Edge (Fast)

1) The value should be determined based on the job requirements rather than the features of the product.

Interview 15 recent wins and 15 losses. Ask only: “What did you hire us to do?” and “What made that job hard?” The answers need to be organized according to their respective job roles. Build to the hardest, highest-value jobs first. Remove features which do not enhance the work process.

2) The researcher needs to establish the specific measurement of the important differences.

Develop a Value Evidence Board to present your most important three claims. Each claim about time reduction (e.g. “cut processing time by 40%”) needs documentation of proof artifacts which include benchmark data and customer telemetry information and audited case studies and Service Level Agreements with penalty clauses. No evidence? It’s not a differentiator.

3) Redesign the first 30 minutes.

The process of differentiation needs to produce quantifiable results right away. The time needed to achieve the first value should be reduced. Preload defaults. Add an “auto-configure” path. Your most effective performance should occur during the initial stage of your journey.

4) The price should be moved from the sticker to the structure.

Stop discounting the unit price. Change the unit. Your pricing system should include three options which are outcome-based tiers and value-based metered units and a risk-reversal guarantee. Your pricing strategy needs to show the market what makes your business special.

5) Develop a communication channel which your competitors will not be able to reach.

Examples: embed as the default in a partner’s workflow, launch a free utility that grows into a data moat, or create a certification that becomes a hiring standard. Distribution is a product.

The Differentiation Cadence (90 Days)

Days 1–30 — Diagnose and choose.

  • Run a win/loss jobs audit.

The team needs to create a competitor system teardown that examines their products and delivery methods and data management and distribution channels and market definition.

The selection process demands the choice of two edges for emphasis yet it needs only one edge for de-emphasis.

Days 31–60 — Design and proof.

  • You should start by implementing two initial changes that will help you gain competitive advantage.

The following three proof artifacts support your top claims (benchmark, case, SLA).

The pricing and packaging structure needs to undergo a redesign that aligns with the actual value creation and measurement methods.

Days 61–90 — Broadcast and lock.

The Category POV should present the problem while establishing new measurement criteria and defining specific requirements for the buyer.

The training program needs to instruct sales representatives to demonstrate job results and performance achievements instead of product specifications.

The company requires a distribution program which unites product-led growth with partnership initiatives to enter the market by obtaining certification and listing on marketplaces and integrating apps directly into products.

The Board/CFO Scorecard (What to Track)

The assessment requires us to compare our win rate performance with that of our primary competitors in the industry.

  • Discount depth and variance on competitive deals.
  • Time-to-first-value (median minutes/hours).
  • Attach rate of your edge features (proof that the edge is used).
  • Channel contribution from the new distribution wedge.
  • Gross margin trend post-pricing redesign (evidence pricing reflects value).

Your differentiation will stick if these metrics show improvement during three consecutive quarters.

Your game will find its market through the natural selection process when you establish a market-based category.

A great category story does three things:

  1. The current method generates three major concealed expenses which include time waste and risk and lost growth potential.
  2. The initiative brings a new success metric under your oversight which includes time-to-value and verified outcomes and resilience.
  3. Codifies the buyer’s checklist to privilege your strengths (integration depth, SLA penalties, outcome pricing).

Maintain this narrative throughout your website content and sales materials and onboarding process and investor communication materials. Repetition builds reality.

Hard Truths (That Save Time)

  • If your advantage must be explained, it’s not an advantage yet. Make it felt.

The implementation of your edge results in a decrease of your margin which means a moat does not exist. Fix the model.

A system exists when success does not require heroic execution to achieve it. Bake it into process and price.

Your market requires something different from what already exists in the market. A particular distinction which can be proven through evidence and applied in practice should be established for this concept. Your business should develop an advantage which competitors cannot duplicate while maintaining their operational integrity. Then make that difference impossible to miss in the first 30 minutes.

You can get rid of background noise while keeping your premium subscription.

References

Internal Links:

https://3msbusiness.cloud/the-challenges-of-short-term-thinking-in-innovation/

https://3msbusiness.cloud/why-most-innovation-initiatives-fail-and-how-to-avoid-it/

External Links:

McKinsey & Company — “The new B2B growth equation.”2023. https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/the-new-b2b-growth-equation

Harvard Business Review — “Customer Loyalty Is Overrated.”2020. The article “Customer Loyalty Is Overrated” appears on the Harvard Business Review website at https://hbr.org/2020/01/customer-loyalty-is-overrated.

FCLTGlobal — “Measuring Long-Term Value Creation.”2021–2024. https://www.fcltglobal.org/research/

Saudi Vision 2030 — “National Industrial Strategy (Vision Realization Programs).”2022–ongoing. https://www.vision2030.gov.sa/

 

 

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The Dangers of Short-Term Thinking in Long-Term Strategy

The Dangers of Short-Term Thinking in Long-Term Strategy

Introductory

Your company runs its operations mainly through its calendar system instead of its strategic plans.

Businesses need to determine their pricing strategies at the end of every quarter. The system begins its resource requests by using projected data for its operations. Board decks rewrite priorities. The result? Short-term achievements which provide immediate satisfaction will eventually lead to long-term costs that slow down development.

This isn’t a moral failing. It’s a system problem. Leaders choose short-term gains through incentives and operating cadences and investor communication because these elements require them to deliver immediate results despite their knowledge of superior long-term results. Left alone, the urgent eats the important.

A step-by-step guide exists to restore equilibrium between short-term goals and long-term objectives which will help you achieve your quarter targets without harming your decade-long vision.

The financial impact of short-term thinking has quantifiable effects that businesses can measure.

Short-term thinking exists as an easily recognizable phenomenon. You can see it in four places:

  1. Capex drift. The expenses for maintenance operations and basic operations maintenance have increased but new capital expenditures for growth have stopped. The company shows declining cash flow in the future but EBITDA remains strong.
  2. Commercial discounting. Teams pull deals forward with price cuts. Revenue sticks. Gross margin doesn’t.
  3. Talent mix. Senior hires replace capability bets. Contractors rise. R&D cycles shorten. You save OpEx; you lose optionality.
  4. Portfolio sameness. Bets cluster around the core. New S-curves receive no “shots on goal”.

Your dashboards should display only one metric at a time because showing multiple metrics leads to optimizing the scoreboard instead of the actual game.

Why It Happens (Even to Great Teams)

The current compensation system provides employees with annual performance bonuses and option vesting schedules that lead to short-term performance results.

  • Disclosure pressure: Quarterly guidance becomes a cage. You control the story but not the financial aspects.

The board dedicates 80% of its time to the previous quarter but devotes only 20% to the upcoming decade.

  • Metric mix: You track P&L, but not leading indicators like cycle time, innovation throughput, or NPS-to-LTV lift.

The system needs transformation to achieve new behavioral patterns from people.

The 3-Clock Operating Model

The company should operate under three time-based systems which were established during the design phase.

  • Clock 1 (12 weeks): Execution. The main performance indicators consist of pipeline quality and cash conversion and unit economics and working capital turns.
  • Clock 2 (12–24 months): Scaling. The company needs to expand its product-market reach and increase capacity while moving platforms and establish its position in the market category.
  • Clock 3 (5–10 years): Optionality. The report presents new S-curves and frontier technologies and market entry strategies and moats which produce compound effects.

Each clock operates independently with its own set of objectives and financial allocations and management structure. Never let one meeting cover all three. The process of switching between different tasks leads to the death of long-term strategic planning.

Six Moves to Rebalance Now

1. Rewrite incentives for time horizon.

The system needs payment to operate its efficiency management system and execute plans. The current decade requires investment to achieve three essential goals: fast innovation development and long-lasting customer value and high talent concentration. The company needs to establish performance targets spanning three years which will connect to TSR and two additional non-monetary performance indicators (on-time product releases and essential personnel retention).

2. Publish capital allocation rules.

The pre-commitment to ranges should be set at X% for core, Y% for scale-up and Z% for options. The divestment process needs to follow established hurdle rates rather than political factors. Your external communication about compounding value will draw in investors who focus on this investment approach.

3. Set a “no-surprise” guidance policy.

The company needs to create a wide performance band for each year which includes particular targets for the long-term period (e.g., “We will maintain R&D expenses at 12–14% of revenue throughout the cycle”). Your long-term strategy will take precedence over your short-term quarterly results in the market.

4. Institutionalize Strategy Days.

Two board meetings per year cover only Clock 3. No operational decks. The company should focus on developing three main areas which include scenarios, moat health, platform bets and talent bench for upcoming business ventures. The team needs to perform pre-reads to examine both decision memos and kill-lists that contain zombie projects.

5. Set up a Long-Term Scorecard.

Alongside GAAP/IFRS, show:

o          The number of new features released each quarter which users adopted at least 30% of the time.

o          Customer equity (NPS trend × LTV/CAC trajectory).

The time span from when a company decides to launch a product until it reaches store shelves constitutes the capacity lead time.

o          Optionality index (share of capex on S-curve bets with defined learning milestones).

The long-term value increases through compounding when these factors become better even though a single quarter may not produce results.

  1. Time protection requires governance systems instead of depending on willpower.

The students should dedicate their time to specific days for each clock as follows: Clock 1 gets Mon/Tue and Clock 2 gets Wed and Clock 3 gets Thu. Guard it with EA and COO support. Make exceptions rare and explicit.

A Simple 90-Day Plan

Days 1–30: Diagnose.

Run a “time-horizon audit.”The actual destination of last year’s dollars and leadership hours and board agenda minutes remains unknown. Segment P&L and capex by clocks. Three major obstacles need to be addressed which include low-yield discounts and an overloaded roadmap and stalled market entry.

Days 31–60: Decide.

Approve capital allocation rules and the long-term scorecard. Choose two bets to increase their value and two projects to terminate. The executive incentive system needs a total redesign to establish two performance metrics which serve as predictive indicators.

Days 61–90: Do.

Publish guidance guardrails. Host your first Strategy Day. Launch a monthly options review for Clock 3 with binary “advance/kill” calls. Explain to the Street which metrics you will track along with your reasons for doing so.

The process of investor communication requires a strategic approach to maintain clarity during discussions.

Most investors aren’t anti-long-term; they’re anti-surprise. Give them a clean story:

  • Where compounding comes from. Network effects? Switching costs? Learning curve?
  • How you will fund it through cycles. Clear ranges for reinvestment and leverage.
  • What you will not cut. The “untouchables” that protect the flywheel.
  • When you’ll change your mind. Objective tripwires that trigger pivots.

This builds credibility. Credibility lowers your cost of capital. Lower cost of capital buys time.

The Founder/CFO Edge

The founders will defend the mission. The position of CFO grants access to protect financial information. Your collective work will establish a system that develops leadership through short-term accomplishments. The best companies do both:

They finished the quarter by winning all their matches.

The path they establish will inevitably result in the approaching decade.

Not by heroic effort. By design.

References

https://3msbusiness.cloud/the-challenges-of-short-term-thinking-in-innovation/

https://3msbusiness.cloud/the-pitfalls-of-ignoring-customer-willingness-to-pay-in-innovation-strategy/

FCLTGlobal — “Research on Long-Term Value Creation.”2020–2025. https://www.fcltglobal.org/research/

Saudi Vision 2030 — “Vision 2030 (Economic Transformation Agenda).”2016–ongoing (accessed 2025). https://www.vision2030.gov.sa/

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Understanding Unrealistic Pricing Ambitions in Business

Introductory

The standard functions as a practical rule which prevents businesses from using “+X%” pricing models while allowing them to implement value-based pricing adjustments. Accept (N) or (A–B). The assessment includes tests and math sections as well as corridors and KSA/GCC guardrails.

Accept: (N) or (A–B)

Why this exists

The statement “Let’s add 10% this quarter” seems powerful at first but it usually results in lost credibility and decreased volume and permanent damage to profit margins. The concept of ambition functions independently from pricing strategy because business decisions stem from value and demand signals and competitive market conditions. The policy in Unrealistic Pricing Ambitions defines price changes as requiring data support and operational feasibility and legal compliance. The post-inflation market creates difficulties because customers have different price sensitivity levels while competitors quickly adjust their prices and customers remember previous instances of receiving poor value for their money. Our standard demands that companies stay away from slide-deck pricing methods while they conduct systematic test-and-learn approaches for all KSA/GCC market operations.

Scope

Applies to all list prices, fees, surcharges, discount ladders, and deal policies across enterprise, distributor, and retail channels in KSA/GCC. The plan introduces new product pricing which will be applied to all current stock-keeping units (SKUs).

Acceptance criteria (pick one)

  • N — Not acceptable: Ambition-led proposal (e.g., “target +12%”) with no quantified value, elasticity, or corridor, or no executable rollout plan.
  • A–B — Acceptable (with conditions): The proposal contains evidence-based data that includes EVC quantification and elasticity assessment and competitive corridor definition and complete unit economics calculations and execution strategy with performance monitoring systems.

The five tests (must pass for A–B)

  1. Value evidence (EVC) shows the financial outcomes of an investment compared to alternative uses of the same funds. Proposed price ≤ EVC by segment.
  2. Elasticity signal: Provide a defensible elasticity (tests, win/loss, mix-shift, or small-scale pilots). Price-volume trade-off must net positive at Base / −3pp / −5pp volume scenarios. https://3msbusiness.cloud/ignoring-price-elasticity-pnl-leaks/
  3. Businesses must create documented offer corridors or demonstrate premium value through measurable differentiators to achieve competitive sanity. Note expected countermoves and any KSA/GCC competition-law considerations. https://3msbusiness.cloud/pricing-architecture/
  4. Cost & contribution math: Use realized price after rebates/discounts. Show how contribution margin changes and breakeven volume shifts and cash flow effects throughout each month. https://3msbusiness.cloud/the-price-waterfall-where-margin-quietly-disappears/
  5. The execution capacity needs to validate all quote-tool rules and deal-desk guardrails and sales playcards and customer communications and monitoring systems. Anything missing = N.

Automatic N red flags

  • Round-number hikes (+5%, +10%, etc.) with no EVC or elasticity.

The price was determined by working backward from the revenue targets.

The implementation of one-size-fits-all price increases results in equal price changes for all market segments and all product SKUs.

The company will resolve discount problems while keeping the present share price system in place.

The research fails to examine how KSA/GCC market conduct functions through legal systems that use signaling and corridor coordination and below-cost foreclosure methods.

The math (what you must show)

  • Elasticity profit check:

Q1=Q0⋅(1+ϵ⋅ΔPP0),ΔProfit=(P1−C)Q1−(P0−C)Q0Q_1 = Q_0 \cdot \left(1 + \epsilon \cdot \frac{\Delta P}{P_0}\right), \quad \Delta \text{Profit} = (P_1 – C)Q_1 – (P_0 – C)Q_0

Approve only if ΔProfit>0\Delta \text{Profit} > 0 in Base and remains ≥0 in −3pp and −5pp volume stress.

  • EVC guardrail:

EVC=PriceNBA+(Savings+Revenue Uplift−Switching Cost)\text{EVC} = \text{Price}_{\text{NBA}} + (\text{Savings} + \text{Revenue Uplift} – \text{Switching Cost})

The proposed price should remain under the EVC threshold which applies to this market segment.

  • Corridor logic:

The system will display differentiators for each product when P1P_1 exceeds the corridor value but it will explain the reasoning behind the discount strategy when P1P_1 falls below the corridor value by showing penetration and lifetime value calculations and setting rules to limit discount exposure.

Operating procedure

  1. Create the INTERNAL—Pricing Brief document by adding the EVC and elasticity and corridor and waterfall exhibits to it.
  2. Review board: Pricing + Finance + Legal (GAC lens for KSA). The document contains three main sections which analyze risks and outline customer communication strategies and predict how competitors will react.
  3. The first step involves testing the new design through A/B testing or regional deployment with specific success criteria to determine if it should proceed to full implementation.
  4. Instrument tracking: Weekly: price realization, mix, win rate, churn, competitor moves.
  5. The project needs to restart from the beginning according to the kill/iterate rules when realization falls under 70% after four weeks or when the gross margin difference becomes less than 0.5 percentage points.

What “good” looks like (A–B example)

The EVC presents SAR 1,400 per year in customer savings compared to other options yet the proposed +6% (SAR +18/month) only captures less than 15% of the total value.

  • Elasticity: −0.8 from recent discount test. Base volume −4%, profit +SAR 1.1m; stress at −7% volume still +SAR 0.3m.

The competition provides SAR 110–130 pricing but our company charges 124 SAR with uptime and SLA as separate paid features.

The system functions through three main features which include active sales playcards that operate within quote rules and communication approval systems and weekly realization and churn data display on the dashboard.

Common pitfalls (and counters)

The initial revenue goals of a project transform into price targets during its execution which leads to ambition creep. The system requires a mechanism to block proposals which fail to meet the five fundamental requirements.

  • Copy-paste uplifts: The same percentage increase applies to all SKUs. The counter strategy involves dividing products into segments based on their value and elasticity levels to protect high-value SKUs and develop different solutions for underperforming products.

The approach of focusing only on costs does not establish pricing authority. The counterargument focuses on the willingness to pay and alternative options.

  • Legal blind spots: Aggressive moves without GAC review. Legal needs to review all high-risk plays before the game to stop coordination problems and the team must explain their thought process behind these choices.

The sales team receives the “+8%” message but they end up giving away too many discounts. Counter: Tools contain guardrails which include approvals and measured realization and tools with guardrails.

Decision tree (quick use)

  • Ambition-led with no evidence → N
  • Evidence-led and all five tests pass → A–B
  • Uncertain → Pilot for 2–4 weeks with instrumentation, then decide.

External reading (≤5 years; includes GCC/KSA)

The McKinsey website delivers information about pricing approaches for 2024 disinflationary times through their article “How to navigate pricing during disinflationary times (2024).” (McKinsey & Company)

BCG — Solving the Pricing Puzzle in Inflationary Times (2023): https://www.bcg.com/publications/2023/solving-the-pricing-puzzle-in-inflationary-times  (BCG)

Global Competition Review — Saudi Arabia levies rare predatory pricing fine (2023): https://globalcompetitionreview.com/article/saudi-arabia-levies-rare-predatory-pricing-fine

(Global Competition Review)

Strategy& Middle East — GCC insights (2025): https://www.strategyand.pwc.com/m1/en/thought-leadership-strategy/reports.html(PwC)

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Leadership Bias Against Risk Is Stalling Innovation

Leadership Bias Against Risk-Taking

Many leadership teams shy from smart risks and stall innovation. Here’s how to reframe risk as learning, design safer bets, and build a culture that moves.

The quiet killer of momentum

If your roadmap feels safe but stale, you may be facing leadership bias against risk-taking. It rarely shows up as “no.” It shows up as more analysis, perfect pilots, and let’s revisit next quarter. Over time, the portfolio tilts to incremental bets, experiments slow, and your best people stop pitching bold ideas.

This isn’t a moral failing. It’s a system problem: incentives, governance, and heuristics nudge leaders to protect today’s P&L over tomorrow’s options. Research links fear-based leadership to cultures that stifle innovation and trust—exactly when uncertainty demands experiments, not paralysis. (MDPI)

What it looks like (symptoms you can spot quickly)

  • Single-track business cases: All upside is forced into one forecast; no option value; no “learn then decide.”
  • Perfection before pilots: Experiments are treated like launches, not learning vehicles.
  • Late-stage vetoes: Risk questions come at Gate 4, not Day 1, so sunk-cost bias locks in.
  • Punitive post-mortems: People get blamed for variance, not rewarded for clean, fast learnings.
  • Regional reality check (GCC/KSA): Many GCC firms still skew transactional on culture and low on transformational leadership, which dampens risk appetite—even as national agendas push for bold innovation. (GCC Board Directors Institute)

Why leaders hesitate (and why that’s fixable)

  • Loss aversion & career risk: Personal downside of a visible “failed” bet > diffuse upside of a portfolio win.
  • Governance gaps: Boards demand protection first; managers comply.
  • Signal value of risk: Ironically, studies show people often rate risk-takers as more leader-like—especially in competitive contexts—yet organizations still punish prudent risk. The result is mixed signals and timid behavior. (Frontiers)
  • Macro context: In KSA, Vision 2030 explicitly calls for transformation and innovation—so the system wants risk-smart leaders, not risk-averse ones. Aligning culture and mechanisms with that intent is the work. (Saudi Vision 2030)

The cost of playing too safe

  • Time-to-learn balloons: Months to green-light a test that could run in days.
  • Portfolio drift: 90%+ core bets, starving adjacent/transformational options.
  • Opportunity decay: Markets move; competitors learn; your option value expires.
  • Talent flight: Builders leave when “no” is the norm.
    GCC data shows R&D intensity still trails global averages—one reason to convert fear of failure into systems for fast learning. (PwC)

How to unstick leadership bias (playbook you can run this quarter)

  1. Separate explore vs. exploit money.
    Create a protected option budget for discovery sprints (e.g., 5–10% of R&D). It’s judged on learning velocity, not revenue.
  2. Adopt “learn→decide” gates.
    Rewrite Stage Gates to ask: What uncertainty did we retire this cycle? What’s the cheapest test next? Make Gate 1 the home of risk framing, not Gate 4.
  3. Price learning, not perfection.
    Cap discovery tests (e.g., ≤ SAR 75k and ≤ 4 weeks). Use smoke tests, concierge pilots, and A/Bs to trade precision for speed.
  4. Use option math in business cases.
    Show downside floor (loss limit), upside tail, and the value of information you’ll buy with each sprint. That reframes “risk” as priced uncertainty.

https://3msbusiness.cloud/strategic-innovation-thinking-beyond-the-obvious/

  1. Board-level risk appetite statement.
    Get explicit about acceptable loss per experiment, aggregate exposure, and kill rules. Publish the statement to reduce fear-based vetoes. https://3msbusiness.cloud/why-most-innovation-initiatives-fail-and-how-to-avoid-it/
  2. Psychological safety = leadership KPI.
    Tie leader bonuses to behaviors that enable candor, dissent, and learning (skip-level AMAs, blameless reviews). Fear-based behaviors tank this KPI—and innovation with it. (MDPI)

GCC/KSA lens: make the system match the ambition

  • Culture shift at scale: Regional surveys flag a gap between stated and lived culture; many firms default to transactional norms that mute initiative. Close that gap through mechanism changes (budgets, gates, KPIs), not posters. (GCC Board Directors Institute)
  • National momentum: Vision 2030’s diversification push rewards firms that learn faster than peers—especially in non-oil sectors. Tune your governance to that tempo. (Saudi Vision 2030)
  • Invest where it counts: RDI investment and protected learning budgets compound capability; today’s lower regional R&D intensity is a chance to leapfrog with smarter portfolio design. (PwC)

One-page checklist (print and run)

  • Does this proposal state what we’ll learn in 4 weeks and what decision that triggers?
  • Is there a loss limit (SAR & time) and a kill rule?
  • Are we using the cheapest test that can retire the riskiest assumption?
  • Is this funded from the option budget, not core?
  • Will the post-mortem be blameless and public?

Sources & further reading (≤5 years)

  • GCC BDI & Nasdaq: Building Strong Corporate Cultures in the GCC (2024). (GCC Board Directors Institute)
  • PwC Middle East: Advancing research and innovation capabilities across the GCC (2024). (PwC)
  • Kingdom of Saudi Arabia: Vision 2030 Annual Report (2025). (Saudi Vision 2030)
  • MDPI (Administrative Sciences): Understanding and Mitigating Leadership Fear-Based Behaviors (2024). (MDPI)
  • Frontiers in Psychology: Risk-taking and leader endorsement (2025). (Frontiers)

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The Challenges of Short-Term Thinking in Innovation

The Challenges of Short-Term Thinking in Innovation

Short-Term Focus Over Long-Term Innovation

Leadership teams start their days by avoiding statements which would destroy future prospects. The combination of dashboards and incentive systems and approval procedures drives teams to maximize their 90-day performance while neglecting their 900-day goals. The outcome produces a portfolio that focuses on small improvements while strategic initiatives remain stagnant and the organization mistakes speed for actual advancement. The guide demonstrates how to identify short-term thinking while using Jobs-to-Be-Done (JTBD) and Christensen’s portfolio framework to make better decisions and establish a 90-day operational cycle which supports current financial needs and future business development.

Internal references include:

https://3msbusiness.store/where-to-begin-when-building-a-culture-of-innovation/

https://3msbusiness.store/how-to-create-an-innovation-strategy-that-works-for-sme-growth/

https://3msbusiness.store/what-startups-can-learn-from-apples-innovation-playbook/

Short-term thinking persists because of specific factors which make it difficult to detect.

Metric myopia. The practice of measurement leads to management activities while simple metrics receive excessive management attention. The current financial performance of revenue and margin stands out clearly but new product indicators remain difficult to interpret.

Incentive gravity. The payment structure of annual bonuses and quarterly targets motivates teams to maximize short-term optimization. The rational approach of teams leads them to select Efficiency and Sustaining work that aligns with near-term goals despite leadership emphasis on innovation.

Gate creep. The evaluation process through stage-gate reviews requires search-stage teams to present TAM and 3-year NPV data at their current stage. The evaluation process on spreadsheets leads to project termination instead of market-based failures.

Narrative bias. Leaders must deal with actual outside demands which include analyst requests and funding requirements and board performance expectations. The main drawback of delayed learning becomes more severe because it leads to increasing uncertainty that accumulates over time.

Christensen & JTBD lens.

A resilient portfolio requires all three elements of Sustaining to maintain current customers and Efficiency to save money and Disruptive to discover new customer needs and growth opportunities. The JTBD framework transforms abstract long-term objectives into specific testable assumptions that focus on customer task fulfillment.

Quick diagnostics: 10 minutes to baseline

The distribution of innovation spending across Disruptive and Sustaining and Efficiency initiatives during the previous 12 months should be evaluated. Your organization lacks sufficient investment in future growth because Disruptive initiatives receive less than 10% of innovation funding while you need to grow.

The average duration from idea generation to obtaining real-world signals through paid pilots or LOIs or pre-orders exceeds thirty days. Your learning process faces a delay because your current approach takes more than thirty days to produce meaningful results.

The frequency of gate meetings showing ROI precision without WTP evidence indicates evidence asymmetry. The costs receive more attention than the value which remains theoretical.

The number of projects that use budget funds without producing new customer signals exceeds sixty days.

A product leader should be able to approve tests under US$25k that last less than thirty days without needing to submit a complete annual-plan change request.

Internal references include [Internal link: Innovation Stage-Gate Checklist] and [Internal link: Risk Appetite Calibration Tool].

What “good” looks like

The portfolio structure includes three distinct lanes with specific performance targets.

The Disruptive segment (10–20%) includes numerous small experiments that test new customer needs which are not currently served. The success criteria include both learning speed and customer willingness to pay.

The Sustaining segment (50–60%) focuses on improving core offerings for existing customers while its success metrics include market share expansion and revenue per user growth.

The Efficiency segment (20–30%) supports the other two segments by providing funding which leads to cash savings and shorter project cycles.

The financial approach to options involves treating exploration funds as convertible options which receive funding increases based on evidence rather than committee decisions.

The first two stages of search governance require teams to demonstrate which assumptions they have validated instead of presenting three-year NPV projections.

Leaders establish psychological safety through null result acceptance and test reversibility and response time commitments.

A 90-day strategy exists to break free from short-term thinking constraints

The first thirty days of the plan require revealing portfolio facts while safeguarding search activities.

The current portfolio distribution should be disclosed by Finance and PMO teams (Owner). The distribution of innovation spending across D/S/E categories should be shown for the previous 12 months. The organization should establish a minimum Disruptive funding requirement which should represent at least 12% of total innovation operational expenses.

The CFO should oversee the Search Budget which operates as a protected fund. The system allows pre-approval of customer experiments under US$25k with less than 30 days duration without requiring additional approval when they meet established criteria.

The first stage of the process (Owner: Product/R&D) needs a complete rewrite. The first stage of the business case should include the job to be done followed by riskiest assumptions and test plan and decisive signal (paid pilot rate).The PMO should implement “zombie audits” as an owner to force projects without new signals to either graduate or pivot or stop after sixty days.

Days 31–60 — Make learning fast, cheap, and visible

The Product team should operate the Fast-test factory to launch 5–7 real-customer tests which include concierge MVPs and pre-orders and price probes and demand-curve tests. The first WTP signal should appear within 21 days of starting the test.

The PMO should maintain an Evidence ledger that tracks tests along with their learning costs and results and future assumptions. The system should honor all high-integrity project terminations.

The CFO should work as a financial partner to monitor Cost-to-Learn metrics and establish specific graduation criteria that include three successive signals for automatic test budget increases.

The ELT should establish Decision SLAs for leadership approval processes which include 48-hour response times for reversible tests that stay within established boundaries.

The organization should establish permanent capacity during the period from Days 61 to 90.

The ELT should redistribute funds to support the Disruptive floor while eliminating at least two unproductive projects.

The HR department should update performance review systems to include metrics for learning speed and evidence quality and option value generation.

The Product team must include customer-in artifacts which demand WTP evidence through screenshots and LOIs and invoices at each gate.

The CEO and Comms team should create a monthly document called “Bets & Lessons” to present to the company which demonstrates how current achievements support future development opportunities and accepts occasional minor setbacks.

The following meeting systems create rewards for long-term success.

The meeting starts with two sections that show assumptions for learning and existing evidence. Every dollar allocation needs to minimize the most dangerous unknowns.

The Rule of 10 states that tests which are reversible and cost less than $10k and take less than 10 days and use less than 10% of team time will automatically receive approval.

The team should conduct a pre-mortem analysis followed by a commitment phase which includes five minutes of failure prediction then test locking and measurement before deciding.

Paid pilots together with pre-orders and usage thresholds produce better results than both intuition and HiPPOs.

The session concludes with the ledger entry of results followed by documentation of changes and identification of the following assumption to prevent continuous disputes.

Internal references include the Concierge MVP Playbook and the Portfolio Review Cadence and the Leadership Decision SLA Template.

The following performance indicators demonstrate your organization’s progress toward breaking free from short-term thinking.

The percentage of innovation spending dedicated to Disruptive initiatives should reach 12% or higher within the first 90 days.

The average time needed to obtain the first signal from new bets should not exceed 21 days.

The evidence-based kill rate for search stage projects should range between 30% and 50%.

The cost of learning about each assumption should decrease from one quarter to the next.

The number of zombie projects should decrease by 50% before Day 90.

The number of stage-gate rework cycles should decrease by 30% during the first 90 days.

FAQ (for the “we can’t miss the quarter” concern)

We must protect our current financial performance.

Don’t. The funds for Disruptive tests should come from Efficiency gains while conducting small reversible tests that are protected from interference. The information you acquire at a low cost helps you prevent major late-stage financial losses.

Investors will react negatively to our business decisions.

Investors react negatively to unexpected events. A consistent pattern of small option bets with transparent learning outcomes reduces the risk of guidance errors while creating a believable long-term business strategy.

Our business sector operates at such a fast pace that we cannot develop long-term plans.

The need for options becomes more important because of this situation. The organization should focus on developing flexible portfolios and systems which convert unpredictable situations into business advantages instead of creating rigid five-year plans.

Sources & further reading

The WIPO Global Innovation Index (annual) provides country profiles and input/output pillars to help organizations determine their best long-term innovation investment opportunities. https://www.wipo.int/global-innovation-index/en/

The GEM Kingdom of Saudi Arabia National Report 2022/23 provides essential information about KSA’s entrepreneurial landscape and ecosystem development and business challenges which helps organizations create long-term strategic plans for the region. https://www.mbsc.edu.sa/wp-content/uploads/2023/05/GEM-KSA-National-Report-2022_23_EN.pdf

The official Vision 2030 portal for KSA provides information about national development priorities including industrial transformation and digitalization and research and development programs which impact long-term investment strategies. https://www.vision2030.gov.sa/

The OECD provides resources from 2023 to 2025 which focus on long-term investment and productivity to support patient capital and innovation at both policy and firm levels. https://www.oecd.org/finance/long-term-investment/

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Ignoring Price Elasticity Insights

Ignoring Price Elasticity Insights

The most dangerous approach to manage your P&L involves disregarding price elasticity data.

Your pricing strategy becomes dangerous when you use gut feelings and cost-plus methods without considering elasticity data. The GCC market requires immediate price elasticity analysis because demand patterns shift based on policy changes and competitive dynamics which leads to unexpected revenue drops and decreased profit margins and incorrect planning data. The solution requires immediate action rather than academic research. The solution requires measurable and practical implementation which begins immediately this week.

The concept of elasticity requires one page to understand and finance professionals in finance need to understand its significance.

The Price Elasticity of Demand (PED) measures how customers change their purchasing quantity when you modify product prices.

The calculation for PED equals the percentage change in quantity demanded divided by the percentage change in price.

The price elasticity of demand exceeds 1 which means small price adjustments lead to significant changes in product volume.

The price elasticity of demand remains below 1 which indicates that customers show minimal response to price changes.

The analysis of cross-price elasticity (CPE) reveals how your market demand shifts when competitors modify their pricing structure. The analysis of PED/CPE enables you to transform price choices into specific P&L projections which replace uncertain assumptions with quantifiable results. External: HBR — A Refresher on Price Elasticity. HBR — A Refresher on Price Elasticity

The following four risk assessment methods will indicate problems when elasticity analysis is omitted from your strategy

1) Revenue volatility

The demand for elastic SKUs will decrease twice as quickly when prices increase and the resulting volume loss will exceed initial projections. The failure to adjust prices on inelastic SKUs results in a self-imposed revenue limitation. The top line becomes unpredictable when you fail to consider elasticity which damages your ability to make accurate forecasts. Simon-Kucher — Master Price Elasticity

2) Margin erosion

The two main discount-related problems occur when elastic products receive excessive discounts without proper controls and when inelastic products receive insufficient pricing because of cost-plus methods. The combination of these two factors leads to reduced contribution margins at times when businesses need stronger unit economics because of rising input costs and foreign exchange volatility. A systematic approach to elasticity helps businesses set specific discount ranges for elastic products and enables them to raise prices on products with stable demand. Simon-Kucher

3) Forecast and inventory risk

The use of straight demand lines in planning models results in their breakdown. The demand response to price changes differs between market segments and distribution channels and time periods so incorrect elasticity analysis leads to stockouts during promotions and excess inventory after price increases. The first impact of this situation reaches finance through increased working capital requirements and longer cash conversion periods and reduced covenant compliance space.

4) Competitive exposure (substitution risk)

A small price reduction from competitors through CPE will lead to an immediate shift in customer traffic. The risk level increases when customers can easily compare prices through digital channels. The absence of CPE data in your dashboard leads to delayed reactions which result in spending months recovering lost volume through untargeted discount promotions.

Elasticity analysis serves as more than a theoretical concept in GCC markets

The Gulf region has experienced multiple price reform initiatives across its energy sector and utility and transportation industries. Research indicates Saudi Arabian energy demand exhibits short-term price inelastic behavior according to numerous studies. The absence of free pricing does not exist but value-based price increases tend to perform better than fear-based discounts and forecasting models need to account for minimal short-term price sensitivity.  KAPSARC — Tapping into Saudi Arabia’s energy demand

Consumer behavior and market competition lead to increasing elasticities when policy changes occur because people learn to adapt and new options become available. Elasticity should be viewed as a dynamic factor which changes over time instead of remaining static. The IMF demonstrates through GCC energy pricing analysis that policy reforms create new market incentives which produce changes in customer purchasing behavior that affects both revenue streams and operational costs. IMF

A simple business scenario demonstrates a common situation

The Riyadh consumer electronics distributor wanted to implement a 6% price increase for their products to offset rising freight costs and currency fluctuations. The sales team recommended implementing a universal promotional offer. The team performed a rapid elasticity assessment.

Premium accessories demonstrated inelastic demand patterns because their PED values ranged between 0.3 and 0.5.

The entry-level peripherals demonstrated elastic behavior because their PED values ranged between 1.4 and 1.7.

The CPE analysis revealed two products had high substitution risk because marketplace sellers operated with aggressive pricing strategies.

Premium products received a +5% price increase because of their low PED while elastic products maintained their current prices and entry-level items received a limited bundle protection. The 90-day results showed revenue growth of 3.2% and gross margin expansion of 140 basis points while inventory turns remained constant. The pricing strategy based on elasticity knowledge avoided channel conflicts and prevented any need for emergency promotional activities.

A company should implement elasticity operationalization methods that prevent the transformation into a data science laboratory.

1) Measure what matters

The company should conduct controlled price tests that increase or -5% to -10% on two SKUs each month to track demand changes.

The Gabor-Granger and Van Westendorp survey tools serve as initial market signals for new offers before market validation.

The company should calculate PED values separately for each SKU family and channel segment and customer group. The data shows that no single elasticity curve works for all products.

2) Wire elasticity into planning

Your driver-based model requires PED integration to automatically calculate volume and revenue and contribution changes when prices adjust.

The inventory management system should use elasticity data to determine purchase quantities because elastic products need promotional stock reserves but inelastic products can operate with reduced stock levels.

The cash flow simulation helps organizations determine Revenue-at-Risk and Margin-at-Risk amounts before obtaining price approval.

3) Guardrails and governance

The implementation of price fences for elastic SKUs through bundle promotions and off-peak discounts and loyalty programs enables volume growth without requiring general price reductions.

All list price adjustments exceeding 5% need documented elasticity estimates and substitution analysis before approval.

The category team performs monthly elasticity assessments for all categories but conducts detailed evaluations of their top 20 SKUs every quarter.

4) Competitive and cross-elasticity

Create a substitution map for your leading categories to determine how rivals compare based on their CPE values and feature compatibility and distribution channels.

Your bundle adjustment strategy will activate when a high-CPE competitor lowers their prices by 5% instead of performing price matching that would harm your margins.

Your team needs to monitor these specific KPIs throughout each week.

The PED value should be tracked for each SKU segment and its corresponding segment.

The method for measuring price elasticity involves analyzing historical price and quantity data through regression analysis followed by controlled test validation.

The top substitute items need to have their cross-price elasticity (CPE) measured.

The model requires competitor price index inclusion for measuring CPE while monitoring their price changes to detect share movements.

The RaR calculation for price changes equals the sum of absolute quantity changes multiplied by product prices from elastic SKUs.

The calculation of MaR requires the summation of GM changes resulting from price adjustments that use PED values.

The price-sensitive forecast error rate equals the absolute difference between actual and forecasted values divided by the forecast amount with price change indicators.

The elasticity-adjusted Promo ROI calculation uses the formula (Incremental GM – Promo cost) / Promo cost to determine the return on investment while accounting for product cannibalization.

A pricing strategy exists for immediate implementation during this week.

The first step involves selecting five products based on sales data analysis and professional judgment to determine their elastic or inelastic behavior.

The first A/B price test should be conducted with a 5% price variation on an elastic product candidate while controlling exposure to measure both positive and negative effects.

The analysis demonstrates how a 5% list price change affects inelastic families through a 0.3-0.6 PED model which shows resulting GM effects.

Create two price fences which combine bundle offers with loyalty tiers to protect volume while preventing universal price reductions for elastic products.

Create a one-slide dashboard that displays PED and CPE values and RaR/MaR metrics for the top-10 SKUs which should be updated monthly.

Six-Week Outcome: Commercial Teams Maintain Active Elasticity Databases for Each SKU Family

The financial department uses PED and CPE data to enhance their driver-based forecasting system and cash management planning.

The category teams develop price adjustment plans which include risk assessments and substitution strategies for their proposals.

The combination of price fences and discount reduction and stable unit margin levels occurs when competitors make price changes.

The bottom line

The practice of disregarding price elasticity data represents a dangerous approach rather than a cautious one. Your pricing decisions https://3msbusiness.cloud/pricing-architecture/ will become incorrect and you will pursue your original business plan during the brief period. The long-term effect of ignoring price elasticity will make customers wait for discounts while competitors select your unresponsive product segments for profit.

The first step to begin your pricing journey starts with a Pricing & Risk Diagnostic appointment https://3msbusiness.cloud/the-price-waterfall-where-margin-quietly-disappears/.

Our team will assess PED/CPE for your leading categories and integrate them into your forecasting system to create a 90-day pricing strategy that decreases price volatility and boosts profitability within a four-week period.

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The Pitfalls of Ignoring Customer Willingness to Pay in Innovation Strategy

The Pitfalls of Ignoring Customer Willingness to Pay in Innovation Strategy

Your current innovation efforts produce features which customers refuse to pay for.

Your current pricing strategy would result in zero customer purchases if you launched your new product today. The market education approach you use to predict sales indicates you might be overlooking the fundamental problem of customer willingness to pay. The failure to understand customer willingness to pay leads to the stagnation of innovative products. Innovation leads to profitable growth when you understand customer willingness to pay but it results in publicity without financial gains when you ignore it. This guide provides senior leaders and founders and CEOs with methods to identify WTP risks early and conduct fast WTP tests to develop an innovation system that delivers valuable products customers will fund. (WTP = the maximum a customer will pay for a specific offer.) Harvard Business School Online

Fast takeaways

The price of a product determines its final form. Your product lacks value when customers refuse to make payments.

The job-to-be-done framework provides better insights than traditional demographic analysis. Your design process should focus on the tasks customers need your help with. Christensen Institute, Harvard Business School

The measurement of WTP should be your priority. The correct methods for determining WTP include Van Westendorp and Gabor-Granger and conjoint analysis instead of depending on feelings. Conjointly, Attest

Segment your customers based on their willingness to pay. Customers should determine their payment level through their willingness to pay for specific services. Harvard Business Review

The process of adjusting prices should be ongoing. Value-based pricing outperforms cost-plus pricing and competitor price duplication according to MIT Sloan Management Review.

Great ideas perish when organizations fail to consider customer willingness to pay.

The failure of innovation occurs when the offer fails to match the price and target market segment. Teams create advanced features for budget customers but fail to allocate sufficient resources for premium customers who would pay more for essential outcomes. The outcome leads to price reductions and extended sales periods and costly educational programs that consume financial resources. The measurement of WTP exists as a quantifiable value which changes over time. Your price-value story needs to adapt to market changes because they occur naturally. Retailers and platforms use price testing and segmentation and personalization to determine WTP because this approach delivers results. Harvard Business Review, MIT Sloan Management Review

The following indicators signal that you are disregarding customer willingness to pay:

  • Demo love, deal apathy. People praise the product yet push for deep discounts.
  • CAC creeping up. The price-value alignment is poor so you must purchase customers.
  • Discount ladder dependence. The AE playbooks depend on “save the deal” discount strategies.
  • Tier leakage. The majority of customers select the entry-level package yet they use advanced features that cost more.
  • Roadmap bloat. The addition of new features serves to validate pricing rather than delivering a single essential solution.
  • Vanity metrics. The number of trials and visits appears positive but revenue and gross margin performance remains unsatisfactory.

Three yellow indicators should prompt you to stop feature deployment and conduct pricing research during this week. Systematic pricing methods outperform pricing intuition because they are not optional. MIT Sloan Management Review

A fast and trustworthy method exists to evaluate customer willingness to pay.

1) Begin your analysis with Jobs to Be Done (JTBD).

People use solutions to advance their progress in three main areas which include functional needs and social and emotional requirements. Define the job with precision before identifying essential customer outcomes that lead to payment rewards. The application of JTBD leads to better success rates because you create solutions that match what customers will pay for. Christensen Institute

2) Select research tools that match your current business development level.

The Van Westendorp method provides fast pricing insights through four questions that help determine acceptable price ranges. The method provides initial market direction. Attest

Gabor-Granger directly assesses customer demand at specific price points to create demand curve estimates. Conjointly

The conjoint analysis method allows users to evaluate how customers weigh different features against prices to determine attribute values for creating product packages. Conjointly

3) Validate in the wild.

The testing process requires actual promotional offers that include time-limited price deals and product bundles and restricted access options. Customers should determine their willingness to pay through self-segmentation between good-better-best options. Harvard Business Review

4) Price to value, not cost.

The cost-plus method provides simplicity yet produces incorrect results. The practice of matching prices to competitors represents a lack of effort. Value-based pricing establishes prices based on how customers perceive value and the expenses they must replace. MIT Sloan Management Review

Internal link: The article Understanding Customer Truth: Leveraging Jobs-to-be-Done to Identify Demand Before Building.

https://3msbusiness.cloud/customer-truth-jobs-to-be-done/

Organizations need to develop an innovation system which honors customer willingness to pay.

The product development process should include price as a fundamental element.

The price-setting process for products should be shared between Product Managers and financial experts. The epic documentation requires three essential elements which include target customer segments and their jobs and their willingness-to-pay ranges supported by survey data or testing results or market research analogs.

Institutionalize learning.

The innovation process includes three-month sprints which require teams to develop one testable value enhancement and one packaging modification and one pricing experiment for each cycle.

Stage-gate funding.

The funding process should follow a step-by-step progression from Discover to Validate to Build to Scale with WTP evidence requirements that include achieving 20% conversion at target prices. The system prevents organizations from wasting resources on failed projects. MIT Sloan Management Review

Cross-functional rituals.

The weekly 45-minute review includes JTBD insights and price tests and win/loss notes and a basic dashboard that shows win rate and ARPU and gross margin and CAC/payback metrics.

Ethical personalization.

The practice of offering customized bundles and packages instead of hidden pricing structures remains acceptable when your industry standards and regulatory requirements permit it. (Personalized pricing exists; weigh trust carefully.) Harvard Business Review

B2B SaaS operates as a mini-case study.

The workflow SaaS platform encountered major discounting problems while its payback period reached nine months. The company shifted its focus from adding AI features to finding price-value alignment for their products. The team conducted Van Westendorp surveys with 300 participants followed by Gabor-Granger and conjoint analysis with two different ICP groups. Operations leaders placed greater importance on uptime and audit trail functionality than dashboard features and they would pay 25-35% more for guaranteed service level agreements. The team created new pricing tiers based on reliability features and restricted advanced analytics access while increasing list prices by 12%. The company achieved a 9-point increase in win rate and reduced average discounts from 18% to 8% while shortening CAC payback to 6.5 months and maintaining the same engineering budget for improved gross margin.

Consumer services operate as the second mini-case study.

The wellness center operated under a single pricing system for all customers. The number of trials increased yet the revenue numbers remained unchanged. The company discovered through JTBD interviews that customers performed two main activities: seeking expert coaching before events and wanting affordable maintenance services. The company introduced premium coaching services with human consultation guarantees and basic self-service options for customers. The company used price fences to create bundles which included priority booking and exclusive classes. Customers chose their preferred service level based on their willingness to pay while the low-tier matched their budget needs and premium services delivered the outcomes enthusiasts sought. The revenue per member increased by 17% through strategic pricing without requiring forceful upselling methods. The key takeaway demonstrates that WTP should determine product packaging instead of forcing all customers to use the same pricing structure.

New technologies should be implemented while maintaining focus on the core mission

AI systems can help businesses detect and answer WTP signals more efficiently when they receive appropriate input questions.

The combination of GA4 and Search Console and ad platform data enables businesses to track user queries and segment identification and purchase intention detection.

The testing of offers includes changing bundle names and value statements and price restrictions to measure conversion rates and ARPU across different customer groups.

The system identifies accounts that show price-sensitive behavior through downgrade exploration and usage reduction so it can test retention offers without universal price reductions.

The system tracks competitor product releases and customer feedback to modify WTP assumptions during monthly assessments. The price of a product should be determined by customer value rather than production costs. MIT Sloan Management Review

The following 90-day action plan contains specific steps which you should implement immediately

  1. Write the job. Each ICP requires a single statement which describes the situation and the required solution and the desired outcome.
  2. Define outcomes & metrics. What proves the job is done? (Time saved, uptime, ROI.)
  3. Map price hypotheses. The team should create WTP range estimates for each ICP segment and each pricing level.
  4. Run research. The research sequence begins with Van Westendorp surveys followed by Gabor-Granger or conjoint analysis for more detailed results. Attest, Conjointly
  5. Repackage. The team should organize good-better-best options with distinct boundaries and clear explanations of value. Harvard Business Review
  6. Validate live. The system requires price tests to run with clean cohorts and a predetermined kill date.
  7. Install guardrails. The system includes three essential features which include gross-margin floors and CAC/payback caps and discount authorization limits. MIT Sloan Management Review
  8. Codify the ritual. The company conducts a weekly price-value assessment while creating a monthly document to determine tier and price adjustments and roadmap development.

The following examples show how innovators successfully matched their offerings to customer willingness to pay.

Airlines use their cabin tiers to offer economy and premium and business classes which provide different job experiences for passengers who value them at different levels. (Self-segmentation by value.) Harvard Business Review

The software suite offers modular pricing tiers which block premium features from lower-paying users but enable budget-conscious customers to access entry-level options. The conjoint method determines which features should be placed in each tier. Conjointly

Retailers use A/B testing and personalized offers to determine micro-segment WTP while maintaining customer trust through careful application of these methods. Harvard Business Review

TL;DR

The failure to consider customer willingness to pay creates an innovation barrier. Your innovation process begins with JTBD to create solutions that deliver meaningful value to customers. The measurement of WTP requires Van Westendorp or Gabor-Granger or conjoint analysis followed by tier packaging that enables customers to choose based on value. The pricing strategy should focus on delivering value to customers rather than using cost data or competitor prices and must undergo live testing. The system requires stage-gates along with margin floors and CAC/payback caps for proper governance. The combination of AI systems with analytics tools enables organizations to detect market trends and make swift adjustments. Your innovation engine will operate independently when you implement this approach.

CTA

Identify the point where your price-value narrative fails between tier levels and segment definitions and message delivery and select a WTP test to resolve this issue during the current month.

Hashtags:

#InnovationStrategy #WillingnessToPay #JobsToBeDone #PricingStrategy #ProductLeadership #B2BGrowth #GCCBusiness

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