Each year, strategic planning teams at multinational companies review competitor revenues, read through press releases, compare their own company’s performance to their peer set and then work with their management teams to create annual strategic plans for the next year and reiterate a five year plan. It is an annual ritual which consumes anywhere between two to four months of time spent coordinating meetings, preparing documents and gathering information. It is well-intentioned, informative and useful for executives who need to evaluate and communicate their company’s achievements and performance. However, in an increasingly digital business landscape, this exercise falls short in terms of delivering fresh ideas, uncovering nascent trends and instigating quick action.
Here we examine four blind spots of the five year strategic planning process and how strategists can create and execute better plans.
Vision vs. Strategy. Five year plans exist because banks and investors need to see a long term forecast. These stakeholders need reassurance that their investments will still be safe and produce a reasonable ROI. But companies confuse a long term vision with strategy. Vision statements provide a long term, forward looking, aspiration which prompts a company to keep pushing ahead. Visions can and should be long term goals which look out over a five or even 10 year horizon. Vision statements should be accompanied by financial forecasts that show a base, best and worst case estimates. Strategy is the means which companies will achieve their aspirations. Resources and employee headcount may need to shift from one business unit to another, regional priorities will change as economies grow or slow down, and products may need to be sunset or launched depending on innovation and market shifts. Strategic plans address these shifting priorities. In a digital landscape where products have shortened life cycles, companies should consider shorter strategic planning cycles ranging anywhere from 12 to 24 months. It is unrealistic to think that a strategic plan written in 2011 will have meaningful recommendations now in 2016.
Nascent Trends. Strategic plans tend to focus on large competitors that own significant market share, regulations which might increase sales opportunities and large growing markets which provide room to expand. But they miss the important nascent trends which could also impact their business sharply. Emerging digital technologies which haven't become mainstream, startups with new business models and influential voices which create market movement sometimes don’t receive the attention and emphasis they should. These trends can creep up on a business, putting large companies into a reactionary scramble. Strategy teams should proactively begin monitoring important signals, startups and new technologies each quarter. Naturally some of these will be false positives, but they will provide a greater field of visibility into the market. More importantly, strategists should form hypotheses and future scenarios to help management understand how these signals and trends could impact their business over the next 12 months.
Small Clients. Companies are rightly more attuned to the needs of large clients. Those clients who spend frequently and in large amounts are part of the company’s key accounts group and are regularly discussed in strategy sessions and sales meetings. They will generally remain with a company over the long haul because their wants and needs are heard and addressed. But cloud technology, mobile business models and data analytics enable any competitor to prey on the smaller and under served segments of a company’s client base. Ignoring these clients can come at a hefty price when they grow and have greater spending power. Strategists should undertake specific surveys, polls and other insights gathering projects to understand these under served client segments and how to win with them. These insights should become a regular topic in strategic planning discussions. Going a step further, companies might even consider inviting a sample of such clients to share their views at regular monthly meetings with executives.
90 Day Action Plans. Most strategists know the old quote from Henry Ford, "Strategy without execution is hallucination.” Yet, most large companies are guilty of such hallucinations every year. Strategic plans that cast a five year look into the future provide a sense of calm. They coax management teams into thinking that there is still time to put the plan into action. The thinking goes that if there is a five year horizon, why not put off the investment a few more months, rethink the situation and perhaps launch execution the following quarter or calendar year. The reality is faster, more agile players will execute quickly, build new products, refine them and ultimately win. In shortening the planning cycle to two years, strategists should also consider designing 90 day action plans which map out what needs to be executed along with investment and resource requirements. The benefit of such 90 days plans is a greater sense of urgency and an immediate translation from plan to execution. Every 90 days, progress should be reviewed and the next 90 day plan should begin. Of course this requires leadership to make decisions faster and this comes with more risk, but this is exactly the point.
Strategy teams have long considered their work to be about data collection, analysis, plans and presentations. The profession has attracted the brightest business minds, most sophisticated thinkers and talented analysts. But as we enter the digital era, the role of the strategist is changing. Strategists will need to adapt to grow beyond their advisory role and become futurists, project managers and even operators. In the digital age, only the agile will survive.
