There is a strong correlation between a companies financial returns and their planning horizon.1 Effective strategy considers the future! If you know me or read my writing you know that I resonate strongly with this concept.
In recent months I have read several blogs which proclaim that strategic planning is dead. While these titles are somewhat over-sensationalized (see The Problem with 7 Step and 3 Things), I believe that the concept is correct. Strategy as we know it is dead and this is a very good thing because it is being replaced with something better. This is supported by a recent study which examined three different strategy models and their corresponding success rates (see Figure 1). The results are as follows:
1. Ad Hoc – Success Rate: 46% | Tagline: Hand-to-mouth strategy | Definition: This style develops and implements strategy as the organization wishes and there is no defined planning horizon.
2. Traditional – Success Rate: 53% | Tagline: Your father’s strategy | Definition: This is the best understood as the current strategic planning model which typically develops strategy for the next 3-5 years (though most actually plan within the 1-3 year horizon).
3. Agility – Success Rate: 85% | Tagline: Strategy which makes uncertainty part of the plan | Definition: Strategy is evaluated and regularly re-evaluated in the context of a rapidly changing environment. Effective organizations actively study the future in order to compete in the present and have strategic cycles which are longer than 5 years.
This study reveals that effective organizations apply long-term agility-based thinking to conundrums, something that planning and control sciences were unable to do.3 Pierre Wack, a forerunner of the agility movement, once stated, “In our times of rapid change and discontinuity, crisis of perception – the inability to see a novel reality emerging by being locked in obsolete assumptions – has become the main cause of strategic failure”3
If we live in an unchanging environment, then traditional planning methodologies work. However, very few people that I speak with believe that they operate in a stable environment. The need to develop agility is supported by the fact that over 85% of executives noted that their strategy formulation failures were rooted in the lack of understanding of future trends.1 Figure 6 reveals how foresight tools are being used to develop agility.
Strategic planning may not be dead but I believe that it has morphed. Research reveals that effective organizations use planning time frames which are greater that five years. This requires that we shift from a strategic mindset of control to one of agility. Foresight and tools which foster future agility are becoming the new normal for effective strategy development and execution.
Do you work in an organization that needs to extend your planning horizon? Contact me to schedule a free assessment of your strategic planning processes (firstname.lastname@example.org).
Jeff Suderman is a consultant and professor who works in the field of organizational development. He partners with clients to improve leadership, teamwork, organizational alignment, strategy and their FutureReadiness. He resides in Palm Desert, California. Twitter: @jlsuderman
1 A.T. Kearney (2014). The state of strategy today. Retrieved from http://www.atkearney.com/strategy/futureproof-strategy/detail/-/asset_publisher/A6BMR7XFiteh/content/the-state-of-strategy-today-topic-overview/10192
2 This concept was derived from a personal conversation with my teacher and mentor, Dr. Jay Gary
3 Pierre Wack (1984). The gentle art of re-perceiving. Unpublished manuscript. Harvard Business School.