THE EVOLUTION OF STRATEGY PLANNING
Times have changed. The last 20 years have brought as much change as the previous 50 years combined. Reduced ability to see far into the future, speed and disruption are core drivers for why strategic planning methods are changing.
Ongoing uncertainty is making long-term forecasting more difficult. As such, companies are moving from long-term outlooks and annual planning cycles to shorter quarterly cycles focused on triggering short-term outcomes. Additionally, the rate at which a business needs to grow annually in order to stay competitive is rising. Regardless of industry benchmarks for growth, the speed of innovation and digital transformation are increasing each year and putting pressure on growth rates.
The traditional approach of linear growth is no longer enough to stay viable, let alone thrive in today’s fast-paced marketplace wherein disruption is pressuring existing businesses to growth faster. These realities of increased uncertainty and yet equally increasing pressure on growth rates converge in today’s business context and call for a different approach to planning.
Enter Transformational Strategy Planning. The purpose of this paper is to explore the considerations you can make to know whether Transformational Strategy Planning is right for your organization and to discuss the implications and benefits of adopting a Transformational Strategy Planning approach.
But first, let’s look at why these changes are occurring and the impact of ongoing uncertainty, increasing speed and volatility.
V.U.C.A. MEETS COVID-19
Prior to the pandemic, speed and uncertainty were both on the rise. And if these changes weren’t enough, the COVID-19 pandemic has accelerated change even further throwing enormous volatility into the mix. Some experts say [1] as much as 10 years of change have occurred in 2020 due to COVID-19. Before, this context of change was being referred to by experts as “Living in a VUCA world” wherein V.U.C.A. stands for volatility, uncertainty, complexity and ambiguity. This evolving context is turning into revolutionary change in the midst of COVID-19, where the increasing forces of “velocity” and “uncertainty” greatly limit the amount of distance we can see and predict into the future. Complexity continues to increase, and the lack of predictable future conditions adds to the amount of ambiguity being experienced by business. One answer to these changes is to reduce planning cycles from annual to quarterly. But before you start shortening your planning cycles, let’s take a look at some of the differences between traditional planning and Transformational Planning.
TRADITIONAL VS. TRANSFORMATIONAL STRATEGY PLANNING
In traditional strategy planning the focus is about achieving growth in market share and profit while driving towards fulfilling a company’s mission. Strategic planning maps out the goals, strategies and tactics in annual cycles so as to drive focus for the organization in line with fiscal accounting. Additionally, Key Performance Metrics are made explicit and assigned to management to track progress and reward performance. Milestones are often envisioned to help track and measure progress against plan and throughout an annual timeline. And to manage execution, business hold quarterly business reviews to discuss progress, obstacles and adjustments.
In Transformational Strategy Planning, the focus is on transformation and sustainability of the business, not only on achieving profit and market share goals. By focusing on sustainability, Transformational Strategy Planning builds resilience and adaptability into the business while growing profit and market share. As such, goals for growth still matter but are articulated as a desired future state with clear statements of objectives and key results being sought.
Key shifts that occur with Transformational Planning
From a Focus on Profit and Market Share to Growth and Sustainability: Business will continue to care about profit and market share, however, leveraging a growth mindset and exponential thinking, business focuses on the growth of revenue, profit and market share and the conditions required to be sustain such growth.
From Annual to Quarterly Strategy Planning Cycles: One of the most drastic shifts from traditional planning to Transformational Strategy Planning is moving from annual cycles of strategic focus to quarterly cycles of direction setting and adjustment in response to a dynamic and fast-moving market and business context. Transformational Strategy Planning is deigned and optimize to more effectively respond to complex scenarios and shifts in forward occurring trends. As such, it is ideal for dealing with quarterly cycles.
From lagging to leading indicators: Transformational Strategy Planning looks to leading indicators that predict market movement instead of looking back to lagging indicators that reflect an output from the past. As such, Transformational Strategy Planning defines thresholds for performance and impact instead of rigid targets.
Thresholds and Triggers: Because of this focus on leading indicators, planning moves according to pre-determined trigger events that indicate a new phase of operation and strategy may be required. The impact of these shifts puts the business on a faster and more rigorous execution review rhythm that can occur as often as weekly instead of quarterly.
Transformational Thinking combines the potential derived from a growth mindset with the stretch provided by exponential forecasting to drive new levels of business growth. Essentially, Transformational Thinking = Growth Mindset + Exponential Forecasting.
The impact of these shifts is a business operating more in the present moment, making more frequent adjustments in shorter cycles wherein visibility into the future is limited by market circumstances. Business is more responsive and flexible and adapts much faster to change while building resilience and sustainability into its operating model.
IMPLEMENTING TRANSFORMATIONAL STRATEGY PLANNING: A CULTURAL SHIFTT
Moving from a traditional annual cycle approach to strategic planning to Transformational Strategy Planning is much more than a change in process and timing. It requires a change in mindsets and behaviors in order to work.
Moving to Transformational Strategy Planning is shifting your culture. People will require to believe and think differently about strategy planning. This includes making many of the mental shifts thus far discussed such as planning from a growth mindset, leveraging exponential thinking to stretch strategy, moving from believing in reacting to lagging indicators to believing in responding to leading indicators and from believing that we adapt to change that will occur in the future to believing we will sustain our business by driving transformation.
These are just a few of the mindsets and behaviors that will need to change in order to adopt Transformational Strategy Planning. More will be uncovered as you make the journey to this new short-term focused approach.
If you find that Transformational Strategy Planning is right for your business, then you will want to consider what it will take leadership, teams and the company as a whole to make this shift. The implications are not trivial, and yet the impact is well worth the journey.
Leadership will need to be completely bought into and on board with the shift and methods to come. They should be the first to learn and adopt the underlying philosophy and approach, being clear on its differences from traditional planning. Leadership should determine together that their business and industry need such an approach due to its market context. Finally, leaders will need to understand that moving to a Transformational Strategy Planning approach is as much a cultural shift as it is a process shift and will therefore require that they lead changes in mindsets and behaviors of all involved.
Teams become key components of the strategy planning process. They are called upon quarterly to review and adjust strategy as triggers drive change. Their focus on implementation and execution will be constant with an eye on thresholds being encountered within various indicators of the market’s response to your business strategy. Like leaders, teams will need to learn and adopt new ways of planning and managing execution. Their need for collaboration will deepen further and trust becomes an essential component to be developed in an ongoing manner in order to support the level of collaboration and effectiveness required.
Finally, a company shifting to Transformational Strategy Planning will need to make space for the shift to occur at all levels, and support leaders with the resources required to make the shift. The value proposition for achieving the shift is high. Companies who adopt Transformational Strategy Planning build the ability to adapt to change, be resilient, and move faster than their competitors.
CONCLUSION
Transformational Strategy Planning is a new method for business planning that meets the needs of today's V.U.C.A. world. With a shorter-term high growth focus, Transformational Strategy Planning moves from planning annually to planning that is quarterly based and responds to internal and external triggers to drive activity towards longer-term desired outcomes. Once adopted, Transformational Strategy Planning allows leaders to be equipped to move strategically ahead of the marketplace. Teams are operating within the present moment and have become part of the strategy planning process. The company as a whole can transform itself as needed and not just keep up with change but lead it within their industry.
Reference Materials:
· [1] Katrign Geilins, Associate Professor, University of North Carolina.
· [2] The New Way to Plan and Manage Business Results (cited from Erica Olsen’s AgileStrategy: video).
· Planning Doesn’t Have to Be the Enemy of Agile by Alessandro Di Fiore (HBR).
· Setting OKRs isn't the Win, Results Are by Workboard.
· Objective and Key Results by OKRs.
· Authoring OKRs by Workboard.
· Setting OKRs that Work by OnStrategy.
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