This is the first year in PEN’s 34-year history without a budget. Probably like many of you reading this, our normal process is a board planning retreat every October, followed by the creation and approval of a plan and budget in November-December. But last November-December was literally the height of the pandemic in the US, and my board – in all its wisdom – suggested that we not waste time and resource in producing a budget that would undoubtedly be out of date within weeks (if not days) from its creation. Instead, we created a plan with four main strategic goals, along with several budget scenarios depending on how 2021 unfolded. We’ve had to adjust a couple of times, so having a less rigid plan/budget has allowed us to be more responsive, more flexible. (In fact, “going back” to the old way of planning and budgeting may be difficult to do, now that we’ve seen the power of rapid planning.)
As things seem to be settling down a little, most organizations are beginning to look forward (hence the theme of our annual conference this fall: Back to the Future!). But here’s the thing: I’m not sure any of us knows what comes next…
In many ways, we all want to get back to normal – back to what was comfortable, what was predictable and more easily managed. But – even if the pace of change (thankfully) has slowed since the beginning of the pandemic – so many things continue to change and evolve. In truth, some things may never get “back to normal” (for example, how and where we work – those model changes may last forever).
So as organizations begin to contemplate their next strategic or annual planning cycle this summer – and as we all contemplate what’s next, as we begin to emerge from the pandemic – this month’s column explores how strategic planning itself needs to shift. No longer will the three-day planning retreat at the lake that produces an elaborate (but oftentimes rigid) strategic plan be effective. Organizations – regardless of size and type – will be faced with accelerating change and ever-shifting environments for the foreseeable future. As a result, some of the principles of planning remain the same, but many need to change as well.
Let me start with what I believe stays the same: planning is still all about setting a course for the future. It involves reflecting on the current state of things and scanning the environment to anticipate future strategies that create new value for customers/stakeholders, solve emerging problems, and/or address strategic challenges. It still should consider levels of acceptable enterprise risk, and it is still about making choices on how to allocate limited resources against a range of possible initiatives, models, products/services, markets served, and other strategic priorities. Planning still needs to consider customer and market needs, technological changes, innovations, potential blind spots, and the organization’s ecosystem of customers, competitors, partners, and suppliers.
While the above definition of planning – and some of its key principles – stay the same, here are five things I believe need shifting as we plan our way post-COVID:
- Preserve What’s Important. As Bill Conerly in a recent Forbes article surmised: unless you operate cruise ships or design brick and mortar stores for commodity products, most organizations’ missions (defined as your overall function; what you’re trying to accomplish; why you exist) probably haven’t changed all that much. In the context of planning, it is important to reflect on that mission, testing its relevance and identifying what may have shifted in your business model this last year. The same can be said of your organization’s core values – those guiding principles and behaviors that embody how your organization and its people are expected to operate. Your mission and values are relatively enduring: they usually sustain through changes in your environment or circumstances. But they should be revisited on occasion, and they should continue to be used as guidelines for decision making, should facilitate organizational focus and alignment, and should anchor your organization’s culture. When planning for the future, take stock in what’s still important today.
- (Re)Examine your Fundamental Business Model. Dev Patnaik, et al, in a January Harvard Business Review article (Creating a Post-COVID Business Plan) suggests that organizations should answer three fundamental questions as part of their planning process:
- How does your organization really make money? – identify and explore what truly differentiates your organization from others (and for what customers, or funders, are willing to pay). This probably hasn’t changed, but its importance has increased.
- Who do you depend on to drive your business? – identify your most important customers/stakeholders and their needs. Again, not new, but increasingly critical.
- What will people’s behaviors look like after the pandemic? – this question is about trying to predict which customer behaviors will shift back to “the way they were” (Patnaik calls them “sustained behaviors”) versus those that will return but with fundamental changes (“transformed behaviors” – think of airport security post-9/11) versus those that simply will not return or will be replaced by alternatives (“collapsed behaviors” – think of businesses selling liquids outside of airport security post-9/11). Of course, this requires a looking into that proverbial crystal ball, but with market research, ongoing customer dialogue, and predictive analytics, planning for “where the puck is going” rather than where it is today is increasingly important. Furthermore, while Patnaik suggests we need to explore the behavior changes of our customers, I believe we need to do the same with our workforce, as models of work continue to shift (for example, the recent realization that a segment of workers actually prefer remote or hybrid work options).
- Prioritize. This is not a new concept in planning, but it’s probably more critical now than ever as organizations are challenged to optimize resources and focus on the “right things” – those things that are truly valued by customers and that leverage the organization’s core competencies. Planning now requires organizations to develop thoughtful decision-making criteria that help leaders identify and filter specific strategies, considering what’s truly important to the organization and those it serves. Those criteria might consider a specific strategy’s alignment with organizational mission, vision, and values; the extent to which the strategy advances customer value; the impact a strategy has on other stakeholders (including unintended consequences, risks, and so forth); the degree to which a strategy leverages an organization’s core competencies (in other words: focus on what you do best, and eliminate marginal activities). The pandemic has brought to light the importance of staying laser focused only on what brings value.
- Make Planning Dynamic. The pandemic reminded us that circumstances can change quickly and constantly (we’ve also had reminders from weather disasters, cyber breaches, supply chain disruptions, and other shocks to the system). Today, planning processes should consider a range of possible situations and your organization’s response to each of those scenarios (“if this happens, then we do that”). The value of scenario planning isn’t just in the resulting plans, but in the thinking that goes into creating them: scenario planning encourages organizations to think about the range of possibilities (who would have predicted a global pandemic that shut down nearly every industry almost overnight?!), but also the possible responses to each – the risks, desired or undesired outcomes of each scenario, the best pathway forward. And it shouldn’t be a one-shot exercise. J. Peter Scoblic in HBR says: “Today the use of scenarios is widespread. But all too often, organizations conduct just a single exercise and then set whatever they learn from it on the shelf. If companies want to make effective strategy in the face of uncertainty, they need to set up a process of constant exploration – one that allows top managers to build permanent but flexible bridges between their actions in the present and their thinking about the future. What’s necessary, in short, is not just imagination but the institutionalization of imagination. That is the essence of strategic foresight.”
- Balance Short- and Longer-Term. Which brings me to my last point: good planning processes have always considered both short-term and long-term time horizons, but I submit that those time horizons themselves shrunk considerably. Except for a few industries that plan in very long timeframes (such as pharmaceuticals, infrastructure-related businesses, maybe space exploration), relevant planning horizons have decreased from five to three to under one year. In fact, more rapid cycles of planning – 90-, 60-, and 30-day plans – are far more common now than even a year or so ago. The trick is to have a long-term vision of the future, but to constantly iterate on how that vision translates to shorter-term action plans, so that resources can be allocated (or shifted), priorities can be adjusted, and implementation plans can be modified as variables change. The ability to recognize and respond when circumstances require a shift in plans is the de facto definition of organizational agility. And organizations now must respond more rapidly than ever. Shift, pivot, adjust, and repeat.
Planning has always been important for organizational success: it’s the process by which leaders better understand the environment in which the organization operates, connecting the reality of today with a vision of the future. It’s also the means by which organizations prioritize, focus, allocate limited resources, and create value for (and balance the needs of) various stakeholders. But after the collective experience we all just endured (or continue to experience), planning takes on a greater role in helping organizations navigate an increasingly uncertain future.
What other insights/tips do you have regarding how strategic planning has shifted? Participate in a discussion on this topic: visit our LinkedIn group to post a comment. And follow me on Twitter @LassiterBrian!
Stay healthy and never stop improving!
Brian S. Lassiter
President, Performance Excellence Network
Catalyst for Success Since 1987!
Photo credit space.com mountainhouse.com, johnlund.com