The crisp winter air can bring forth happy holiday visions: dancing sugarplums and hanging mistletoe. Yet for a few hardy souls the vision is of something altogether different: thick decks of strategic planning slides. Long-term strategic planning season is about to commence at many companies. Deck the halls!
While endless meetings in drab conference rooms can quickly squelch the holiday spirit, the process actually has the potential to be energizing and liberating. Bringing key staff together to peer into the future and unite behind a plan can help teams rise above day-to-day differences and embrace a common purpose. This year, large companies have record levels of cash on hand (a 50-year high), so the challenge for many firms will be how to spend funds wisely given big uncertainties about the economy, rapid changes in many industries, and a frequently disappointing track record of embracing new forms of growth. This is possible.
Innovation is the obvious answer to worries about how to grow organically, yet strategic planning and innovation tend not to mix. Too often, strategic plans are really financial plans with a thin veneer of competitive analysis on top. Views of competitors are inherently backward-looking, and financial projections assume a degree of certainty which is unrealistic in the current economy. To avoid downside surprises and to convey the clarity that many expect of strategic plans, the process biases thinking toward small initiatves that risk little, but which also offer scant rewards.
Imagine an alternative. When a Venture Capitalist plans how to spend money, he begins with a portfolio plan. How much will be invested in which types of businesses, at what levels, and with what degree of risk? Some funding will often be reserved for small, highly-speculative early stage investments in lonely fields, while other money may go to less risky mezzanine financing for hot companies in fast-emerging industries. The VC will also create several investment theses — what big opportunities will changes in the next 5–7 years create? Then he will think through how to develop options for exploiting those opportunities. He has not created a military-style plan for marching into battle (which, by the way, is a fiction of civilians — the military is the first to acknowledge that good plans focus on options and contingencies rather than assume certain execution). Rather he has created scenarios for industry evolution, small bets to open up room for future big investments, ways to learn more about key inflection points, and a plan that is actionable immediately.
Given that VCs are the world’s experts in generating growth from new sources, corporate planners should leverage their accumulated wisdom in adopting these disciplines. They can also benefit from a further benefit of this process unique to larger firms — it is terrific at creating collective buy-in. The way to grow is not through re-visiting the Ghosts of Strategic Plans Past. By acting more like the world’s best planners for uncertain situations, companies can create rigorous and exciting plans for their futures.
Story by Steve Wunker.
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