If the past five years of economic history have taught us anything, it is that the existing rulebook needs to be thrown out. Governments have slashed interest rates to near zero, and central banks have embarked on ambitious and controversial quantitative easing schemes. In spite of these bold, unprecedented moves, consumer demand around the world remains stubbornly weak.
As a result, markets everywhere are unsteady; uncertainty is rife. But this uncertainty masks the fact that there are growth opportunities aplenty for those who are fast enough – they may just no longer be where they existed in the past. Leaders in organisations have got to sharpen up their acts when it comes to strategy and planning if they are going to be agile enough to succeed.
Planning to fail, or failing to plan?
A Bain & Company paper published in January 2016 has laid bare the flaws in many businesses’ approach to strategic planning. Barely a third of the executives it surveyed agreed their planning processes delivered a strong strategy, while over a half decried both ineffective processes and a poor resulting strategy.
One of the reasons for this, the Bain researchers found, is the way many companies treat strategic planning and budgeting as effectively the same thing. Though understandable, this is a mistake: leaders that confuse the two tend to find themselves strategising inside a box when they should be thinking outside of it, and allocating resources based on past performance rather than future opportunity. In the current macroeconomic environment, such approaches are ill-considered, possibly reckless.
Time to separate church and state
Leaders of organisations of all sizes have to separate the big conversations over strategy and direction – the ‘church’ – from necessarily detailed discussion of the numbers – the ‘state’. That is not to say that data should play no role in strategy whatsoever – far from it. The ability to very quickly explore what-if scenarios spanning a wide range of variables is absolutely vital. But planning and modelling are far more effective at qualifying strategy if the articles of faith around the strategy are agreed beforehand.
Executives therefore need to work smarter, strategising in a genuinely out-of-the-box fashion, but then shifting very quickly to modelling and scenario planning to test their assumptions. In our experience truly agile leaders do four things very well:
1. They are unstoppable in their planning - The authors of the Bain report put it rather succinctly: ‘don’t let the earth’s rotation around the sun determine when you make decisions’. One characteristic of successful organisations is their plans are constantly evolving as circumstances around them change. For the leaders driving this, the nearer to real-time the planning and unfolding of strategy can become, the more unstoppable the business will be.
2. Planning and strategy are collaborative rather than centralised. The executive suite isn’t best placed to make all the decisions on its own. Our own experience helping large organisations around the world with all aspects of forecasting and planning tells us that ongoing collaboration – across disciplines and teams, and up and down the hierarchy – will make the resulting strategy all the stronger. An isolated leader will not win in the long run.
3. They can switch quickly from strategy to implementation. Leaders need to turn the broad strategy into deliverable milestones and goals, and get these out to the broader business – fast. The longer the lapse between strategising and implementation, the greater the risks of being overtaken by events.
4. They are data-driven, but not data-dominated – executives need detailed models and simulations to qualify their assumptions and explore possible futures. Here, business data in all its forms, from HR and supply chain to sales and finance, is vital for scenario planning. However, its role should be to support rather than dominate the broader conversations around strategy.
With the global outlook looking murky, leaders in businesses of all sizes need to act now to ensure they can move ahead of events as they occur: nobody wants to be caught over-exposed if and when circumstances turn against them. While executives can’t change the prevailing wind in the economy, there is plenty they can do to ensure their organisations are best placed to gain the greatest mileage – however it blows.
Ian Stone is managing director UK & Ireland at cloud planning platform Anaplan.